Economic Diplomacy 2021: How India can move from a year of diagnosis to a year of medication

December 21, 2020 12:25 PM

As billions were placed under lockdown in the confines of their homes and given an opportunity to conduct personal reflection on these values, nations were also given a chance at diplomatic assessment and revision.

By Rajesh Mehta and Manickam Valliappan, 

The word ‘eventful’ hardly does the bare minimum in describing the unyielding year of 2020. This year bought to the forefront the importance of collaboration, grit, and endurance. As billions were placed under lockdown in the confines of their homes and given an opportunity to conduct personal reflection on these values, nations were also given a chance at diplomatic assessment and revision. This year saw some drastic changes in the dismantling of multilateral institutions and widening international divisions. It was also a year of increasing poverty, widening inequality, and low economic growth – if any – for India.

While 2020 Indian news headlines were predominantly dominated by the India-China LAC standoff, there were also other events in Indian diplomacy that were relatively obscured but will potentially transform India’s international relations. However, the question remains of how India will use its levers of foreign policy to make use of diplomatic opportunities in the coming year.

On the Indian-European Union front, optimism is rife. The EU, which is already India’s largest trading partner, is in talks to expand India’s role in its trade policy, which is currently the EU’s 9th largest trading partner. The India EU summit in July laid the foundation for a deeper and more strategic cooperation between the European Union and India in times to come. Both the EU and India have agreed to deepen cooperation in areas like climate change, maritime security, digital economy, connectivity, research and innovation, water and climate action, and civil nuclear cooperation. 2021 also offers various opportunities in strengthening India-Scandinavia ties in the areas of innovation, security, and climate change. The foreign minister’s recent meeting with the envoys of the Visegrad group further indicates that India is pursuing wide-ranging bilateralism with all the EU members.

Against the India-EU backdrop, ties are also being actively strengthened between the UK and India. Vaccine collaboration between Serum Insitute and AstroZeneca/Oxford University to make a billion vaccines in India was just the beginning of heightened collaboration. The recent high-profile 4-day visit of Dominic Raab, UK’s foreign minister, has set the stage for a completely new level of India-UK ties. “What I think we recognise is the possibilities of a deeper trading relationship. The contours of our economies would allow that and we, certainly, as foreign ministers see a very powerful strategic case”, Raab said after a meeting with India’s foreign minister. PM Johnson’s planned visit to attend his invitation for India’s Republic Day could further cement ties between the two nations.

Engaging in cooperative talks with both the EU and soon to become post-Brexit UK is a welcome step in Indian diplomacy. As UK branches out of the EU and tensions spike with China, India will come across as an important strategic partner. India must heed this and at the same time recognize the importance of a trade deal with the EU, which would ensure an all-round strategy that would greatly benefit India in the long-run and reduce its trade dependency on China.

Increasing military ties in late 2020 between China and Pakistan will also be closely watched by Indian diplomats, and unification of India with its other South Asian neighbours to establish its regional standing is expected as a result. Towards late 2020, the Indian polity saw more diplomatic activity to address issues in this region. Ties with Bangladesh, which were expected to be severed because of the introduction of CAA, was cooled and strengthened, with PM Modi stating in the recently conducted India-Bangladesh summit that New Delhi will pay special attention to Bangladesh’s immunisation requirements. Bangladesh’s Beximco has signed an agreement with India’s Serum institute for 30 million vaccine doses. Vaccine diplomacy is knitting the two nations back into a strong unit. A string of Indian officials have also visited Nepal in hopes of warming chilly ties due to the Kalapani territorial dispute in 2019.

Halfway across the world, India’s ties with the US are at its peak. The Modi-Trump bromance has been well documented, and a healthy relationship between the two nations is expected to be sustained even after Trump leaves office. With India and the USA having strategic convergences on China, Trump’s visit in February led to an expansion of India-US ties in the energy, telecoms, and military sector. While Biden is certainly not expected to cozy up to China and will largely retain the Trump administration’s firmness on the matter, his approach will be starkly different. Rather than enforcing an ‘America First’ approach, which ultimately saw America pulling out of world forums, Biden will engage in the very multilateral platforms that Trump disregarded. India is expected to be a central figure in such a strategy.

With the new Biden administration also comes potential opportunities. The choice of John Kerry as climate czar signified that the new administration could very well be the trailblazer for climate change and could encourage a global shift to green energy. Climate action could be pushed to the forefront, and India’s renewable energy market, which is currently the fourth most attractive in the world, could have interesting days ahead in 2021. Immigration is also expected to be loosened under Biden; H-1B visas are expected to be increased which will benefit thousands of Indian professionals.

Following India’s withdrawal from the RCEP due to concerns of the organization being skewed in Beijing’s favour, India’s relationship with Australia is on a high. A free trade pact is slowly gaining ground as India and Australia engage in bilateral talks. The Quad, which conducted navy exercises last month, is also seeing security ties between India, USA, Japan, and Australia, but this cooperation is highly contingent on the state of the US-China relationship.

But as India increases its ties with the US, a longstanding ally is closely watching. Russian foreign minister Sergey Lavrov remarked India as being an ‘object’ of the West in its ‘anti-China’ agenda. He also accused the West of trying to undermine Russia’s close and privileged relationship with India. MEA spokesperson Anurag Srivastava was swift in response, saying that “India has always pursued an independent foreign policy based on its national interest. India’s relationship with each country is independent of its relations with third countries”. But this may not be enough to quench Russia’s concerns. India will have to carefully juggle its diplomacy between Russia and USA as we go into 2021. Global contradictions will have to be dealt in a pragmatic yet cautious manner.

Although India-Canada ties did not end on a positive note this year owing to Trudeau’s remarks in support of Indian farmers, there exists great opportunity between the two nations that must be harnessed diplomatically as we move into the next year.

India will have to divorce itself from geo-politically driven diplomacy, and instead focus on developing strong local institutions as countries realise their over-reliance on China and seek alternatives. India’s core diplomatic agenda for 2021 must revolve around a healthy, vibrant economy rather than responding to timely geo-political tides. It is sound economics that will build resilient and sustainable foreign relations. At a time when countries grow more protectionist and raise their doubts on globalisation, India must present an even stronger economic case for nations to engage in strategic and economic partnerships with.

In this regard, India must do better. The pandemic shook India’s economic foundation to its core, raising questions of how and when we will get out of this rubble. Abhijit Banerjee, the Indian-born economist and a Nobel laureate, remarked that Covid-19 was a ‘wasted crisis’ in terms of opportunities to do ‘radical things like sell off banks’. He also stated in September that India was among the worst performing economies and could have done more on the fiscal side.

Certain structural problems such as crony capitalism must also be addressed because the pillar of the Indian economy cannot lie on the shoulders of a few corporations. If there is anything the Covid crisis taught economies all over the world, it is the gravity of resiliency. Reforms to encourage competition among market players are the need of the hour if India were to build a durable foundation for its economy. Building an ‘Atmanirbhar’ India will require a level playing field where businesses can be self-reliant – as the term ‘Atmanirbhar’ literally suggests – and must not be dependent on a few major players.

The National Education Policy, STIP, Farm Bills, and Jal Jeevan of 2020 are much needed reforms to address issues concerning the outdated education, agricultural, and water systems, but the entire question of its effectiveness hinges on its implementation. The government needs to move from abstractions to concrete executions. If 2020 was the year of ‘whats’, 2021 must be the year of ‘hows’. India must move from a year of diagnosis to a year of medication.

Democratic reform is another area that India must focus on. One of the major reasons for heightened tensions between Western nations and China is the latter’s repressive domestic policy and anti-democratic conduct. If India were to present itself as a worthy alternative, this is another area it cannot be a laggard in. India’s 17-spot fall in the Human Freedom Index 2020 to 111th position is not a good sign. Democratic institutions must be strengthened and must not be a hindrance for current and potential foreign relations.

If India were to truly become a Vishwaguru again – a teacher that the world looks up to and would like to collaborate with – it needs to conduct rigorous introspection. It needs a combination of local economic, educational, and democratic reforms to propel itself to higher global heights. Just like how a teacher must nourish his/her mind to equip others with valuable knowledge, India must first nourish its own economic engine to make a firm global standing. Armed with favourable demographics, an ever-growing middle class and potential demand, 2021 could be the year that India bounces back on the path to prosperity.

(Rajesh Mehta is a Leading International Consultant & Columnist working on Market Entry, Innovation & Public Policy. Manickam Valliappan is a researcher closely working with Mr. Mehta. Views expressed are personal.)

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