The following article originally appeared in The Hindu on June 3, 2019.
It is common to assess a country’s foreign policy by
examining individual bilateral relationships or specific outcomes. But this
risks missing the forest for the trees. While the broad directions of India’s
foreign relations — with the neighbourhood, Afghanistan, the U.S., China,
Indo-Pacific, Russia, and Europe — have been set over the past several years,
the main factors inhibiting India’s performance are ultimately domestic in
nature. Three stand out.
The first is trade. It often surprises people that
India’s trade-to-GDP ratio is higher than China’s or the U.S.’s. India’s
market, and access to it, remains a valuable lever with other countries. But
much of India’s commerce involves raw materials and low value-added goods, and
is still insufficiently integrated into global supply chains. With global trade
stagnant and the World Trade Organization at a standstill, the only way for
India to seize a larger share of exports is through well-negotiated preferential
trade agreements. India’s past record in this department has been poor, leaving
some sectors exposed to dumping and others unnecessarily cloistered. A smarter
trade agenda will not only create jobs and drive reforms at home, it could
become a potent strategic tool in international affairs.
The second concerns defence. India has the world’s fifth
largest defence budget but is also the world’s second largest arms importer.
Not only does this compromise national security, it means that India cannot
offer an alternative as a defence supplier to countries in its region. Defence
indigenisation will require financing for defence capital expenditure;
assessments of costs, technology transfer capabilities, and export potential
early in the procurement process; and fair competition between the Indian
private and public sectors.
The third concerns overseas project implementation.
India’s outgoing aid budget has been relatively flat, reflecting a scepticism
of grant aid from India’s own experience as a recipient. Instead, it has now
started to explore other financing options. Indian overseas credit has
increased significantly, with over $24 billion extended primarily to South
Asia, Southeast Asia, and Africa. But building on several recent steps will
significantly increase the country’s delivery and regional credibility. These
include better project planning, more attractive and competitive financing
terms, more reliable disbursal of funds, and enhanced coordination and
communication with the private sector for implementation.
Many regional policy challenges would be addressed with
these three major fixes. None will be easy as they will require tackling vested
interests. While the first Modi government made its strategic objectives known
and set out a clear direction, key policy interventions in these three areas
will now be necessary for India to realise its grander objectives.