The following article originally appeared in The Hindu on 5 October 2018.
Japan, South Korea, Taiwan and Australia have unveiled
strategies to forge closer economic ties with India
Asia is in a state of flux. China’s Belt and Road
Initiative is reshaping the region’s geography, with roads and railways traversing
Eurasia and new ports dotting the Indian Ocean basin. Beijing’s militarisation
of the South China Sea continues, despite negotiations towards a code of
conduct.
Japan has found itself in an unexpected leadership
position, resuscitating the Trans-Pacific Partnership and concluding a trade
agreement with the European Union. Tokyo is now contemplating constitutional
revisions that would enable it to play a more overt military role.
Amid these unfolding events, another series of
developments risks being overshadowed. Japan, South Korea, Taiwan, and
Australia have all unveiled strategies to diversify their economic
interdependence, away from mainland China and towards Southeast Asia and India.
The motivations appear to be manifold. The most recent is
the ongoing trade and tariff war between the U.S. and China. A longer-term
concern is Beijing’s use of its economic muscle for political purposes, whether
in suspending rare earth metal exports to Japan in 2010 or punishing a major
South Korean corporation for Seoul’s decision to install a missile defence
system in 2017. China’s limited market growth potential and questions of access
and reciprocity are additional considerations.
To this end, Japan’s Free and Open Indo-Pacific strategy
is meant to diversify investments to more promising markets in Southeast Asia,
India, and Africa. For his part, South Korean President Moon Jae-in has
unveiled a New Southern Policy. Mr. Moon said during his visit to New Delhi
that while the policy is focussed on Southeast Asia, it also “makes India
Korea’s key partner for cooperation”. Similarly, Taiwan, a G20-sized economy
whose political status is disputed, has announced a New Southbound Policy with
significant accompanying investments in India by Taiwanese electronics
manufacturers.
Finally, Australia’s government has commissioned an
ambitious India Economic Strategy with the goal of making India its
third-largest investment destination and export destination by 2035. While not
driven by short-term necessities, political concerns are increasingly informing
economic preferences.
Politically, therefore, the stars are aligning in Asia
for the acceleration of India’s economic growth. Investors, increasingly backed
by their governments, are increasingly focussed on the Indian market. But with
more protectionist sentiments taking root, a legacy of poorly-negotiated trade
deals, a general election around the corner, and uneven economic
liberalisation, the likelihood of India taking full advantage of these
opportunities remains slim.