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PM Modi’s Tours: Key Piece In A Jigsaw?

As the PM’s multi-nation tours draw to an end and assert India’s diplomatic prowess, foreign affairs experts say a vibrant economy ensures that India is more than a ‘regional prop against China’ for the US

Photo Credit : Bloomberg

Investment is crucial,” said John Key, political thinker and a former Prime Minister of New Zealand, “Because the truth is, you only get jobs and growth in the economy when people invest money, at their own risk, in setting up a business or expanding an existing business.” When that investment is foreign investment, it is usually an outcome of diplomatic prowess.

Prime Minister Narendra Modi has visited 46 countries across six continents so far. He has visited the United States four times, including the times when he participated in the United Nations General Assembly. He was the first Indian Prime Minister to visit Mongolia, the first in 17 years to visit Nepal, the first in 28 years to visit Sri Lanka and the first in 34 years to visit the UAE.

Prime Minister Modi’s foreign policy stance has been to reach out to the unknown, re-establish old ties, revisit existing partners and position Bharat as a credible place to do business in. “New Delhi’s economic diplomacy is about transforming India, by bringing foreign investment into the country’s economic growth so that it creates a win-win equation for both sides,” says Salma Bava, at the School of International Studies at the Jawaharlal Nehru University.

Bava is the recipient of the Order of Merit, Germany and an acknowledged expert on foreign affairs. “Delhi’s new mantra is economic diplomacy,” she says, “to position India at the top of the global economic pyramid.” India is actualising that principle from a position of strength.

In 2014, India’s gross domestic product (GDP) was growing at 6.5 per cent and the Wholesale Price Index- based inflation was riding at six per cent. The Consumer Price Index-based inflation was at 9.4 per cent in 2013-14. Since then, India’s GDP has been galloping at 7.5 per cent and is likely to ride higher with the government of the day being bent on reforms and structural changes. Make in India, Skill India and Startup India have begun to lend a new direction to India’s economic policies.

In 2016, the overarching theme of the Prime Minister’s foreign policy was “connectivity”, especially with the neighbourhood, invoking a grand idea of India as a regional power. So, we saw India actively participating in multilateral forums like BRICS, the East Asia Summit, the G-20 and the strategic regional forum — the Shanghai Cooperation Organisation (SCO). But what were the tangible benefits of the foreign visits?    

According to the latest report of the Union ministry for commerce and industry, foreign direct investment (FDI) inflows hit an all-time high of $60.1 billion in 2016-17. The FDI inflows were at $55.6 billion for the year ending March 2016, which was a record. In 2016-17, the FDI inflows were even higher at $60.08 billion. Reserve Bank of India statistics show India’s foreign exchange reserves at a record high of $372.7 billion, rising almost $1.6 billion in the week ended April 28. The strong inflows of foreign funds have given the rupee a boost.

Prime Minister Modi’s first meeting with United States President, Donald Trump, and his visits to Sri Lanka, Germany, Spain, Russia and Kazakhstan, took place in this backdrop. What has India traded in and what has it achieved?

The Washington Visit

When Modi broke bread with Trump at the White House, he took off from where he had left off when he called on President Barak Obama on 7 June, 2016. In the India-US joint statement, Obama had declared that the two nations were “Enduring Global Partners in the 21st Century”. The leaders affirmed the increasing convergence of their strategic perspectives and emphasised the need to remain closely invested in each other’s security and prosperity.

A lot of water has flown under the bridge since. President Trump’s ‘America First’ policy was a u-turn on several issues, particularly the H1-B work visa that facilitates a steady flow of Indian information technology professionals to the US. Recently, President Trump pulled the US out of the Paris accord and accused India of benefiting in “billions of dollars” from it. But perhaps, Trump’s India rhetoric was only for his electorate, because a deeper engagement with India is surely, compelling.

The Atlantic Council, a top American think tank published a policy paper, describing India as a “key piece in the jigsaw” for the US, “besides countering the growing influence of China.” Says Bharat Gopalaswamy, director of the South Asia Center of the Atlantic Council, “President Trump has to assure India that it is not merely a regional prop to balance Beijing’s power in the region, but a top priority for the US foreign policy.”

Strategically, China is on a determined “march West”, with one destination — the heart of Europe.  So, ties between the US and India need to be strong, apart from those with countries like South Korea, Japan, Vietnam and the ASEAN nations. A joint report by PwC and the Indo- American Chamber of Commerce says, “both countries now aspire to increase bilateral trade to the tune of $500 billion from the current $100 billion plus annually.”

The report also points to the fact that India continues to be the world’s largest arms importer, accounting for 14 per cent of global imports between 2011-2015, with the US among the leading suppliers. “The high rate of economic growth and projections for the coming years indicate that India will continue to be a preferred investment destination,” says FICCI president, Pankaj R. Patel, reflecting on India’s economic progress.

On the first day of his visit on 26 June, President Trump called Prime Minister Modi a “true friend,” and said he looked forward to his stay in the US. The White House indicated that it was rolling out the red carpet for Modi who incidentally, became the first foreign dignitary to attend a working dinner at the White House under the Trump Administration. “Important strategic issues to discuss with a true friend!” Trump posted on his official (@POTUS) Twitter handle, signaling to the world that India would continue to be a key strategic partner of the US.

Beyond The US    
The Prime Minister’s visit to Sri Lanka in mid-May this year was planned at a time when Chinese submarines were docked in Sri Lankan waters in spite of protests by India. Shortly before Modi’s visit, Sri Lanka turned down China’s request to dock one of its submarines at Hambantota Port, which was perhaps, adequate indication of India’s diplomatic prowess.

India has contributed $2.6 billion towards Sri Lanka’s economic cooperation and assistance in various development programmes. Sri Lanka is an important partner and part of India’s Neighbourhood First policy. As China’s economic juggernaut continues to roll in the backdrop of the Belt and Road Initiative, it is more important than ever for India to build durable partnerships with island nations in the region.

On 29 May and 30 May, Modi was in Berlin. Germany is India’s seventh largest foreign investor and engineering, chemicals and services attract the most FDI inflows from there. The roughly 600 Indo-German joint ventures that operate in India, provide employment to around two lakh people and the scope for spurring ahead Indo-German economic collaboration. Bosch, Siemens, BASF and SAP are engaged in research and development (R&D) ventures in India. Mercedes Benz India inaugurated its second manufacturing facility at Chakan in July 2015, under the ‘Make in India’ banner. The plant will double the company’s capacity to 20,000 units per annum.

Modi’s visit to Spain on 30 May and 31 May, were the first by an Indian Prime Minister in three decades. It established old ties and led to parleys on issues like terrorism and cooperation, apart from cementing a civil nuclear deal. The takeaways from the visit were deals for investment in renewable energy and participation of the Spanish defence industry in the ‘Make in India’ initiative. Modi’s visit to Spain was a strategic move to reach out to the third largest economy in the European Union. The renewed Indo-Spanish ties may translate into technology transfers for the defence industry and Spanish ventures in India.

The Prime Minister’s visit to St. Petersburg between 31 May and 2 June, aimed to expand bilateral relations between the two countries in energy cooperation, including nuclear, hydrocarbon, hydel and renewable energy sources and in improving energy efficiency. An outcome of India’s civil nuclear partnership with Russia is the upgrading of the Kudankulam nuclear power project and transforming it into a large energy hub. A major, but less noticed takeaway from the visit was a settlement for Indo-Russian trade in national currencies, to reduce dependence on other currencies.  

A high point of the visit was Russia’s reaffirmation of its support for India’s candidature for a permanent seat in a reformed United Nations Security Council. Proposed and supported by Russia, India’s full membership of the Shanghai Cooperation Organisation (SCO) will considerably enhance the SCO’s capabilities to ensure peace and stability, achieve economic development and prosperity in Eurasia and the Asia-Pacific region, apart from enhancing its international standing. India became a full member of the SCO at Astana, during the Prime Minister’s visit to Kazakhstan on 8 June and 9 June. The SCO grouping includes Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and now, Pakistan.

Salma Bava says, “With Germany, Russia and France, the three critical strategic partners, New Delhi has sought to upgrade existing relations especially given the level of global uncertainty. For India to be counted as a key economic actor, it needs to also showcase that it has a dependable and stable polity where the investment will bring results.”

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Manish Kumar Jha

The author writes on the foreign affairs, diplomacy and international trade and investment. His global coverage spans more than 30 countries worldwide

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