“The conqueror shall think of the circle of states as a wheel – himself as the hub, and his allies, drawn to him by the spokes though separated by intervening territory, as its rim.” – Kautilya, The Arthashastra
A paradigm shift in the nature of India’s foreign policy framework under the Prime Ministership of Narendra Modi has been the focus on – Economic dynamism and Strategic autonomy. The combination of these two policies is the ability of a state to take vital and independent decisions on matters affecting its geopolitical ecosystem. This diplomatic dynamism is a clear signal of India’s rise as a regional as well as a global power.
India is the fastest growing economy in the world, and according to various reports of global political analysts and Think-tanks, the Indian economy is touted to become the next possible superpower on a global level. India has a fair share of political influence in South Asia due to its position as a regional economic giant, a young country with over a billion people, a stable military, a territorially diverse, a policy incubator and a rich cultural heritage with Soft Power initiatives. India has diplomatically stayed away from coercive carrot-and-stick approach. Economic factors play a crucial impact on the formation of an inclusive foreign policy. Protection and promotion of economic interests are vital pillars ensuring national interests in the foreign policy of any country.
The Union Finance Minister of India, Piyush Goyal presented an Interim Budget for 2019-2020, a perfect piece of smart economics and smart politics in the Parliament last week. “Due to a stable and predictable regulatory regime, growing economy and strong fundamentals, India could attract a massive amount of Foreign Direct Investment (FDI) during the last 5 years as much as $239 billion. This period also witnessed a rapid liberalisation of the FDI policy, allowing most FDI to come through the automatic route,” said Piyush Goyal in his budget speech.
India witnessed its best phase of macro-economic stability during this period. India is the fastest growing major economy in the world with an annual average GDP growth during the last five years higher than the growth achieved by any Government since economic reforms began in 1991. From being the 11th largest economy in the world in 2013-14, the Indian economy became the 6th largest in the world. “Besides generating high growth rate, we contained double-digit inflation and restored fiscal balance,” said Finance Minister.
In an increasingly polarised world, economic diplomacy remains a key tool for effective cooperation between countries and regions on the global level. India’s allocation towards economic diplomacy indefatigably crossed the USD 1 billion mark. Narendra Modi Government’s first budget in 2014-15 allocated around INR 12,620 crore to the Ministry of External Affairs (MEA). The overall grant to the MEA has been increased to INR 16,061 crore in 2018-19.
India is already contributing nearly 15% to global growth and considering this rapid growth, there has to be a diplomatic focus on the consequences of this rapid development. With more financial stability, MEA should shift its focus to Regional Comprehensive Economic Partnership (RCEP) and Broad-based Trade and Investment Agreement (BTIA) with the European Union (EU) in 2019. The recent constitutional coup in Sri Lanka, China’s dominating ocean diplomacy and upcoming elections in neighbouring countries, the 2019-20 Budget was a clear sign that India must revisit its approach to economic diplomacy in the Asia Pacific region.
India imported $3 billion-dollar worth of oil and gas from the United States last year. The trade deficit with China is over $63 billion. India is also looking to diversify its trade relations with Russia, which is driven by strong defence ties and big-ticket defence purchases. After the opening of Kartarpur Sahib Corridor, India has ruled out any bilateral engagement with Pakistan till general elections in May 2019.
However, on investments, South Asian states receive the bulk of India’s economic assistance. India’s aid to Eurasia stands at INR 25 crore in 2018. Still, there is low or almost no assistance given to Indian companies investing in strategic infrastructure projects abroad by way of concessional financing or budgetary support. Indian Overseas Direct Investment in developing countries is still not diplomatically routed due to non-availability of proper data to direct resources.
2019 would be the year for India to explore multilateral cooperation deals and mutual assistance agreements with countries like the United States, France, Japan, Australia, etc. which have announced new economic initiatives in the Indo-Pacific and Eurasia.
