A new foreign policy paradigm

Harish Damodaran | Updated on September 02, 2014 Published on September 02, 2014

Emerging partnerships Narendra Modi and Brazil President Dilma Rousseff at the 6th BRICS Summit in Fortaleza in July.   -  PTI

Business ties, looking beyond West are Modi’s key focus areas

There are two distinct strands in the foreign policy of Prime Minister Narendra Modi’s Government one can discern based on the record of its first 100 days. The first is an overwhelming focus on business and putting India’s economic interests first.

Let’s talk business

In his Independence Day address, Modi gave a clarion call to world powers: “Come, Make in India”. This was a message intended to reach out to the global investor community and projecting India as the place where everybody was invited to manufacture everything from “electrical to electronics”, “automobiles to agro value addition”, “paper or plastic” and “satellite or submarine”.

The strong business content in foreign policy was also evident in the choice of the Head of Government with whom Modi had his first telephone conversation after taking over as Prime Minister (Chinese Premier Li Keqiang) and the country to which he made his first bilateral visit outside the subcontinent (Japan).

The importance of Japan and China for Modi springs primarily from their being potentially large suppliers of long-term capital to India. These are two countries with combined foreign exchange reserves of around $5.3 trillion. For them, India’s massive infrastructure shortages and capital deficit represent an opportunity for investments in industrial parks, smart cities, high-speed rail networks, roads and power projects.

The conscious courting of foreign capital — especially Japanese and Chinese — to build infrastructure and augment the country’s manufacturing base will, however, not be at the expense of India’s core and strategic interests. While the Modi Government will roll out the red carpet for global investors, there will be clear red lines when it comes to the latter.

This we-mean-business message was delivered most effectively at the World Trade Organization (WTO), where India blocked the adoption of a landmark trade facilitation agreement aimed at simplification of customs procedures by all member-countries. India defied Western criticism to insist that the inking of this deal be clubbed with a “permanent solution” to its concerns over public stockholding of grain for food security purposes and WTO’s flawed farm subsidy computation methodology.

Think beyond West

That links up with the second strand of the Modi government’s foreign policy so far — a move away from the traditionally more ‘West-centric’ approach to international relations.

This again is essentially connected to economic interests. The first two decades of reforms saw India attracting huge fund flows into its capital markets from foreign institutional investors largely based in the West. But Modi’s emphasis now is in making India a destination for foreign direct investment to realise its unfulfilled potential in manufacturing. Such capital is, of course, going to come mainly from Japan and China.

The new foreign policy extending beyond West-centric diplomacy was seen especially at the summit of BRICS nations (Brazil, Russia, India, China, South Africa) in July, where it was decided to establish a New Development Bank and a Contingency Reserve Arrangement. Both these are envisaged as parallel institutions to the World Bank and the International Monetary Fund, which are largely Western-controlled.

That the proposed BRICS-promoted bank would be headquartered in Shanghai — and may well be used by China to further its financial interests and making the yuan a reserve currency to rival the dollar — did not still stop Modi from putting India’s weight fully behind the project.

Look near

But it is not simply BRICS and Look East that has lent a distinct character to the new Government’s foreign policy. As Prime Minister, Modi has made a conscious effort to also actively engage with India’s immediate neighbourhood.

There was obviously more than symbolism to the invitation of the leaders of all South Asian nations to attend the swearing-in ceremony of the Modi Government. The signal that was sought to be sent out was clear: India cares for its neighbours, not the least because its own security is linked to that of theirs.

Besides, there is an inherent absurdity to the country’s bilateral trade with the SAARC countries — with a combined population (exclusive of India) more than that of the US and Europe — amounting to 2.6 per cent of its total exports and imports. Modi has already made visits to Bhutan and Nepal, where his focus has again been on business — boosting hydropower cooperation and constructing highways — without assuming any paternalistic, ‘big brother’ attitude.

But even here, there are red lines to be drawn, based on the principle of non-interference in the internal affairs of one another. In the case of Pakistan, this was breached when its High Commissioner here met with Kashmiri separatist leaders ahead of the Foreign Secretary-level talks between the two countries scheduled last month.

India decided to call off these talks the moment Islamabad “made a spectacle” of India’s efforts to take relations forward. Modi has made it clear that any discussion even on Kashmir will have to be within the bilateral framework of the Shimla Agreement and the Lahore Declaration. Any attempts to include other ‘stakeholders’ — the likes of Hurriyat — or internationalise the Kashmir issue will be stoutly resisted by India.

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Published on September 02, 2014
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