This piece is part of the series, India@75: Aspirations, Ambitions, and Approaches
Economic diplomacy is broadly defined as the aspect of diplomacy that focuses on international economic relations. In the aftermath of World War II, this has usually meant promoting national trade, investment and technology interests through aggressive bilateral negotiations and pushing the same interests in multilateral institutions, such as the World Trade Organisation and the United Nations Conference on Trade and Development. Foreign assistance programmes were added as an afterthought to the principal objective of pursuing commercial goals.
However, India became something of an outlier in September 1964, when the Indian Union Cabinet decided to establish the Indian Technical and Economic Cooperation Programme (ITEC). India was a newly independent and still impoverished country announcing that it would now provide support to its even poorer friends in Africa and Asia,
arguing that, “it was necessary to establish relations on mutual concern and inter-dependence based not only on commonly held ideals and aspirations but also on solid economic foundations.”
It was this ambitious statement of intent, carrying an unusual blend of altruism and pragmatism, that set the foundations of modern India's economic diplomacy. And it worked. I saw this first-hand during my extensive travels across Africa, hearing stories of prime ministers and ministers who had learned maths and science from Indian teachers; of industrial estates and agriculture schools set up by Indian experts; of national defence colleges established by the National Defence College (NDC); of the vast numbers of civil servants and technical personnel, doctors and nurses, engineers and scientists who had been trained in India under the ITEC. From Addis Ababa and Gaborone to Accra and Windhoek, the goodwill towards India was palpable. The country was considered a helpful and trustworthy friend.
It felt good, but that was about it. Barring a handful of honourable exceptions, India’s aid programmes did not translate into any distinct economic benefits for the country. This started to change sometime around 2005. India rolled out its first lines of credit (LoCs) to Africa, with a modest sum of US$500 million. With soft interest rates that included a grant element of about 30 percent backed by a sovereign guarantee, these LoCs became a catalyst for some of India’s leading companies to crack the difficult markets of a francophone Africa and to successfully execute projects in countries across Asia and Africa. These projects cover key infrastructure sectors like transport connectivity via railways, roads and ports; power generation and distribution; manufacturing industries; and even agriculture and irrigation. As a result, ambitious but often delayed connectivity projects in India’s neighbourhood—ning road, rail and river transport networks along with oil pipelines and power transmission grids—finally started to take shape under the direct supervision of Prime Minister Modi.
On the services side, India was building IT Centres for Excellence, leveraging its satellite capabilities to offer education and health services through the e-VidyaBharti e-ArogyaBharti programmes. The original ITEC programme was expanded to provide 12,000 fully funded training slots in courses ranging from cybersecurity and climate change to entrepreneurship and education. The government also started to offer Buyer’s Credit to the tune of US $1 billion to encourage countries to purchase Indian products. Recognising the importance of climate change, India not only took the lead in establishing the International Solar Alliance but also agreed to provide an LoC of US$1.6 billion to fund solar energy projects in developing countries.
The dramatic expansion of India’s aid programmes under the Development Partnership Administration within the Ministry of External Affairs accompanied an equally vigorous push to the more ‘conventional’ aspects of commercial and multilateral economic diplomacy. India’s diplomatic missions became actively engaged in organising trade shows and “Make in India” events, pursuing market access and contesting non-tariff barriers; wooing MNCs, private equity firms and sovereign funds to invest in the country; and pursuing oil concessions and energy security arrangements. India’s high-profile participation in Dubai Expo 2020 and the imaginative manner in which the India Pavilion has been used to project a New India is an example. At the same time, by actively participating in multilateral institutions, India is signalling its intent to be involved in defining the new rules of the game, instead of remaining a passive spectator to rules framed by others.
The dramatic expansion of India’s aid programmes under the Development Partnership Administration within the Ministry of External Affairs accompanied an equally vigorous push to the more ‘conventional’ aspects of commercial and multilateral economic diplomacy
Nevertheless, in the new decade, India must confront fresh challenges in the domain of economic diplomacy. Protectionist trends are on the rise, and there is a preference for bilateral over multilateral trade arrangements. A growing anti-immigration sentiment in major Western countries poses new hurdles to labour mobility. With artificial intelligence, the Fourth Industrial Revolution, and 5G as the emerging backbone of economic growth, India must retool some of its own economic diplomacy. If data is the new oil, clear and transparent domestic laws and institutions must be developed to inspire confidence in India as a safe destination for data processing. If climate change becomes an existential matter and pandemics such as COVID-19 threaten to send the entire global economy into a tailspin, India must lead the conversations on subjects ranging from resilient infrastructure to global health. It’s active participation in the Quad alongside the US, Japan and Australia will play a key role in addressing issues of climate change and vaccine production as also in the quest for critical minerals, cybersecurity, supply chain resilience, adoption of 5G and other technologies from trustworthy sources, and a host of other emerging challenges.
The positions taken by India on these and other new areas of economic diplomacy will be followed closely, not only by India’s competitors but also by its allies in the developing world who count on India’s advocacy to protect their own vital interests. The upcoming collaboration between the Observer Research Foundation and India’s Foreign Service Institute to design and run a programme on new economic diplomacy signals the growing importance of this emerging discipline. Over the years, it is expected to build significant capacity amongst young Indian and foreign diplomats to engage effectively with these issues in the context of both bilateral and multilateral platforms.
In this new economic diplomacy, it is important to look beyond government actors alone. Some of the best talent lies in the exceptional work being done by India’s leading NGOs in areas such as education, healthcare and financial inclusion. Some of the brightest ideas in these areas come from the numerous social entrepreneurs and start-ups that have taken upon themselves the challenge of disrupting business-as-usual. Many have developed education, healthcare, financial inclusion, and other models that can be scaled up and adapted for other developing countries. Cases in point include the growing demand in several countries for the Pratham model of primary school education, the Jaipur foot, the Barefoot College of Women Solar Energy Technicians, and for IndiaStack to configure Aadhar-like solutions. There are many more waiting in the winds, to take their ideas and expertise beyond India’s shores. Thus, India must now tell its own stories—of the school children in Bangladesh, the amputees in Malawi, the solar grandmothers from Kenya, the IT graduates from Ghana, the nurses from Ethiopia and all the others whose lives have been touched by its ideas and vision.
India is a veritable lighthouse of knowledge and ideas, which can and will make a difference.
In this world of new economic diplomacy, India matters. Instead of lamenting about India’s inability to match Chinese largesse, it is important to play to the country’s formidable strengths and resources. India is a veritable lighthouse of knowledge and ideas, which can and will make a difference.
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