If the economy is the currency that powers international relations, India needs to retune the vectors of engagements. If GDP is the pivotal numeric of global influence, India should be working closer to the fulcrum to get better leverage. And if India being open for business for the world is the aspiration of nations, India must ensure that the pipelines of discourse must include open self-interest at its heart.
The 2020s will see India become the world’s third-largest economy, after the US and China. Even at a slower nominal growth rate of 10% per annum, India will cross Germany in five years and Japan in seven, closing the decade at $7 trillion. At 8% nominal growth rate, it will become the third-largest economy by end of the decade. Even though the nominal GDP growth in the last quarter stood at a poor 6.1%, we believe this is a short-term blip that will change going forward, partly because of a global revival and partly due to domestic changes.
A high and rising GDP can and does change international conversations and diplomatic calculations. In 1998, on a GDP of $421 billion, when India conducted five nuclear test explosions at Pokhran, the US and Japan imposed economic sanctions, China condemned it, while the UK, France and Russia held back. Seven years later, the same US signed the India-US Civil Nuclear Agreement in 2005, when India’s GDP had more than doubled to $940 billion, and the same Japan supported it, along with the UK, France, Russia and Germany. The sullen China, of course, condemned it.
On a GDP of $2.7 trillion, when the Indian Parliament abrogated Article 370, the sole voice that condemned it in the United Nations Security Council was China’s. The outcome: China stood isolated, as the US, the UK, France and Russia said it was an internal matter of India. Even Islamic nations – the relevant ones such as Saudi Arabia and UAE, not the insignificant ones like Turkey and Malaysia – steered clear of needling India.
A high GDP is a necessary condition for global influence. But it is not a sufficient condition. To bring sufficiency, India’s foreign policy, while leaning on it, must power India’s economic policy. A rising economy – the current slowdown is a blip that will get corrected either by the incumbent government or by political change that brings a new one – will create its own pathways. Given that India is a democracy, those pathways will be turbulent, no different from what other major democracies, from the US and the UK to Japan and Germany, are facing today.
As India enters the 2020s with this economic trajectory ahead, there are six areas it must work on over the decade with a greater focus. All relationships are important, but we believe, these super six will hog diplomatic attention in the decade ahead. Within these geographies, India has to negotiate several complexities simultaneously – trade and nationalism, technology and regulation, energy and security. Above all, India must offer public goods to the world, while ending poverty at home.
Clearly, the most important relationship, India-US ties extend wide and deep, from trade and economy to security and defence. Not always has the US been a dependable partner. But in the foreseeable future, the US relationship is here to stay. Be it around the Chinese hegemony in the region or markets, this relationship is crucial for both partners. It will not be always harmonious. The US will want India to open markets; India will seek more spaces for Indians working in the US. The US will want its Boeings to fly India; India will seek balance with Airbus as well. What will strengthen the India-US relationship at the core will be business to business initiatives and citizen to citizen diaspora. These, the establishment must nurture.
The biggest policy challenge in this decade would be to keep Chinese companies such as Huawei and ZTE out of India’s 5G rollout. Between hectic lobbying by companies in the media and the security fraternity that hopes to secure India, we will see several debates going forward. Security will win, Huawei will be out. But the process of getting there will be long drawn and full of challenges. Managing the border will be another challenge. As its terrorist proxy, Pakistan is more or less under control, after the Balakot attack. As a neighbour that shows open and uncontrollable rage against India even as it profits from an adverse trade balance against it, China will be the relationship that will extract the most from India’s diplomats and domestic policymakers. For now, there is no constituency that has a positive view about China in India. But if China reforms its anti-India stance, we hope this will change by the end of the decade.
These two members of the UNSC have been consistent in their relationship with India. both have supported India in most decisions recently, defying China. Across the of history, Russia has provided defence equipment to India, France is joining now. Their support has come within the confines of competitive forces from the US on the one side and India diversifying its defence procurement on the other. Outside this strategic relationship, there is scope to widen and deepen them. With Russia, a deeper engagement on the energy front is possible, if we can design gas routes. With France, following the Framework Agreement on Civil Nuclear Cooperation, this decade should see a greater push to build nuclear power plants.
Given that Bhutan, Maldives and Myanmar are on course, the coming decade should see India step out and repair relationships with Nepal, Bangladesh and Sri Lanka. Being the bigger economy and a more influential nation, India must rethink these relationships and rebuild new bridges over water that has flown. We have needlessly allowed China to fill up the vacuum left behind by our indifference. A little diplomatic humility will go a long way in restoring past goodwill. For none of these countries is it an either-or with India-China. Both can coexist. But if China has more economic and military muscle, India is no lightweight. Besides, what India lacks in muscle, it can more than make up with mind – Aadhaar or payment platforms like UPI (Unified Payments Interface) are soft exports that can be gifted not only to the neighbourhood but to the world, especially nations in Africa and South America, though it seems even the US and the EU could do with India’s help here.
The world’s third- and fourth-largest economies, Japan and Germany are nations that need a deeper engagement. The relationship with Japan is strategic and economic. It is strategic through the fledgling but upcoming Quadrilateral Security Dialogue, and it is economic through investments and trade. A friendly relationship, India and Japan need to strengthen both these trajectories, given that both have a hegemonic China to counter. Germany is a simpler relationship, resting more on trade, investments and technologies such as robotics than strategy or security. As its companies seek investment destinations in the face of rising costs domestically, India should work on making ease of manufacturing in India, and rethink a regulatory infrastructure of laws and regulations that are more welcoming, less threatening.
To reach a $10 trillion GDP, India will need more energy than ever before. Already the world’s third-largest consumer of oil, India’s needs will only rise in the foreseeable future, and West Asia is the geography we rely on. On the other side, the largest number of Indian diaspora is located in this area. Our relationship with the Gulf region, therefore, needs to look at energy imports and services exports that sustain the remittance economy. Because of these, there is a need for deepening the security relationship with the Gulf as well. As a result, in the next decade India should forge a robust cooperative security mechanism, on the lines of the Quad, to ensure that India becomes an active participant in the provision of security in this critical region.
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Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...
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