By: Subhashini, Asstt. Editor-ICN
NEW DELHI: Right from the very beginning of the formation of new government in 2014, Prime Minister Narendra Modi’s approach has been putting the agenda of economic diplomacy on the front seat. Keeping in view the importance of economic diplomacy, Modi has kept his diplomatic relations program rather busy. His quality of making these programs worthwhile by enriching them with a personal touch is also something that leaves a mark on people’s minds.
Important Foreign Relations
Modi’s first brilliant diplomatic move was to invite the Head of Government of all SAARC countries to his oath taking ceremony in May 2014. This was followed by visits to different nations where he laid the foundation of the process of reshaping India’s foreign policy while prioritizing the country’s economic diplomacy.
The first foreign visit of PM Modi was Bhutan in 2014, where both nations targeted to achieve 10,000 MW in hydropower cooperation. During Xi Jinping’s visit in September 2014, 12 agreements were signed between the two nations, where China committed to invest $20 billion in India over the next five years and also establish an Industrial park in Gujarat and Maharashtra.
Another praiseworthy instance would be the relief and medical assistance offered by the Indian government to the earthquake victims of Nepal, which was indeed one of the largest relief operation India has ever launched. During his visit to Bangladesh in June 2015, Modi announced $2 billion line of credit to be used in health, infrastructure as well as education projects.
Modi visited France in April 2015, where both countries signed 20 MoUs and agreements. India asked France to supply 36 ready-to-fly Rafale fighter jets to upgrade India’s ageing fleet. India finally signed an inter governmental agreement with France in 2016 where it agreed to pay 7.8 billion euros for these jets. As part of this deal, India would also get the weaponry, including the Meteor missile, which is considered the most advanced in the world. Modi’s Russia’s visit in December 2015 includes major deals in the defense sector, the joint manufacturing of 200 Kamov-226T helicopters, and deals pertaining to agriculture.
Modi visited Laos in September 2016, where focus was to strengthen ties with the strategic Southeast Asian region, and also give priority to sectors like finance, disaster management, energy, and health. The bilateral agreement of India with Sri Lanka is also important as it strengthens the economic ties between the two nations. Sri Lanka is India’s second largest trading partner in SAARC, and amounted to $4.38 billion in the year 2016. As of now, Sri Lanka imports about $3.83 billion worth of goods from India, while exports $551 million to India. This trade pattern shows that the ball is in India’s court. The development of this bilateral relation will also ease tourism between the two countries as the process of issuing visas will become quicker.
Modi also visited Japan in November 2016, where India made a nuclear pact with Japan, aiming to ramp up the nuclear capacity ten-fold by 2032, and build 6 nuclear plants in south. Japan also announced a $35 billion over a five year period on India’s developmental programs. It also agreed to assist India in providing technical and financial support to introduce Bullet trains.
Modi’s visit to Israel in July 2017 is considered historic because he became the first Prime Minister to visit the country in the last 70 years. Both nations signed 7 agreements in key areas like space, energy, water management, and agriculture. An MoU was signed to set up $40 million worth India-Israel Industrial Research and Development and Technical Innovation Fund. Modi also met with the US president Donald Trump in 2017, and both committed to ensuring improved market access in areas like agriculture. As a part of “Strategic Energy Partnership”, US is expected to export natural gas and clean coal.
As a part of a regional tour, Modi visited Jordan in February 2018 and this marked the first visit by an Indian Prime Minister in 30 years. Deals were signed to enhance security and stability, and also to combat extremism. This was followed by a visit to Palestine, also the first visit by an Indian Prime Minister. 6 agreements worth $50 million were signed. One of them includes setting up a super specialist hospital in Beit Sahur.
PM Modi signed a deal with Britain in April 2018 that covers cyberspace, solar energy, water management, and artificial intelligence. Both nations called for a secure, free and prosperous Indo-Pacific. Modi also visited Indonesia in May 2018, where 15 MoUs in fields of railways and defence were signed.
On July 9, 2018, Prime Minister Modi inaugurated the manufacturing unit of Samsung, the largest mobile phone manufacturing unit in the world. Modi said that this will not only strengthen the business relations between the two countries but will also play a crucial role in the Indo-Korean relationship. He stated that an investment of Rs. 5,000 crore will help India become a “manufacturing hub of the world.” This will also be a great opportunity to forge closer ties with South Korea. The President of South Korea, Moon Jae In also expressed his hope to take the bilateral economic relations between the two countries to the next level.
India’s performance so far
India has good democratic legitimacy and an active non-state sector. Its influence in the G20, WTO, and climate change negotiations has been gaining momentum in recent years. Moreover, BRICS, whose idea was proposed by Jim O’Neill, Head of Global Economic Research in Goldman Sachs, is another association where India has taken the lead.
Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries (CII) have become more interested in shaping foreign economic policy, because of how the orientation of the Indian business sector looks now. Both these bodies organise forums that brings together business leaders and decision makers, facilitating interaction so that they can put forward their opinion on India’s foreign policy and economic diplomacy. This had also helped to develop state to state relations.
The role of private sector has also gained importance as the state is becoming less reluctant to get involved with the private sector. Many multinational corporations now have the power to voice their opinions on economic policy formulation. Additionally, media groups and research institutes also contribute their bit to shape the international economic agenda. Globalization is another factor which has caused the economic interdependence among nations to increase, thus reinforcing the role of economic diplomacy. India has managed to maintain a high growth rate of 7.1% and a high rate of export, and this makes India one of major global players.
The rupee was expected to remain strong in 2018 as well, just like the past four sessions, but due to some major changes in US import policy and taxation it has been facing all time low. Nonetheless, the International Monetary Fund claims that India could grow at 7.4% in 2018, against China’s 6.8%, making it the fastest emerging economy. IMF has also predicted a 7.8% rate of growth for 2019. So the recovery of rupee is very much possible in the near future.
India has moved into the top 100 rankings in the World Bank’s ‘Doing Business 2018’ and is among the top 10 improvers in this year’s assessment by implementing 8 out of 10 reforms. Easier business environment means greater opportunities for the entrepreneurs, especially the MSME sector.
These efforts have started showing positive results and in the last four years, the amount of foreign capital investment in India has increased manifold. FDI inflows have hit a new high of $61.9 billion in 2017-18 and India has become an attractive destination for foreign investment. A high rate of FDI inflows has helped bridge India’s fiscal deficit to a large extent. As stated by External Affairs Minister Sushma Swaraj, India’s economic diplomacy has attracted over $209 billion in investments from May 2014 to February 2018.
Modi’s foreign policy has been moving forward in proper rapport with domestic priorities. The purpose of this emphasis on foreign investment and collaboration is to give rise to a manufacturing revolution through ‘Make in India’ that will provide large scale employment opportunities, development of smart cities, high speed railway network, and rejuvenation in river system. New opportunities have been unearthed which has led India to engage in a large number of international bilateral and multilateral agreements with EU, ASEAN nations, Sri Lanka, Singapore, Thailand, and Malaysia. India has been negotiating for greater market access for our products under the Doha Development Round in the WTO with a view to protecting our trade interests.
Nations that host an Indian diplomatic mission
Since 2014, India’s economic diplomacy has come a long way. It has not only assumed more depth, but its reach and scope has also expanded considerably in tune with India’s status as an emerging economic power. India is now competing with other developed countries now like USA, Canada, Japan, Germany, France and more. What India needs is to establish cordial relations with those countries where the diplomatic relations have not been so great lately, like Pakistan.
There is a need of trust building within the societies and masses of India which will strongly communicates our global presence. It makes India come out as a powerful and a fearless nation, and this will probably help gain the faith of potential investors, as well as help establish stronger relations with other powerful nations. India will also climb up the global competitiveness ranking with the correct political and economic diplomacy.
India’s strategic capabilities and commitment to gaining a greater regional and global influence in international affairs is remarkable. In his term as Prime Minister, Narendra Modi has prioritized outbound visits to neighbours, great powers and others, plus incoming visits by foreign dignitaries, in what has been the most intensive engagement by any Indian leader. Economic diplomacy is a crucial element in his foreign policy. This marks a coming age for Indian economic diplomacy, in a widening partnership with private business entities.
