The Modi strategy has been to work closely with Beijing and Washington, so as to bring India’s growth trajectory to a stable double digit period. Much progress has been made, but much of this has not come to public attention.
New Delhi: In his first term as Prime Minister of the Republic of India, Narendra Modi gave visible attention to the Ministry of External Affairs. The resultant impact of Prime Minister Modi across the world has become clear from the widespread global interest in the 2019 elections. From the anxious: “Will Modi win?” to the more hopeful: “How big will Modi win?”, queries are asked in every major capital of the globe to visitors from India. This is the first time since the days of Jawaharlal Nehru in the 1950s that there has been such interest in the elections in India, and this is the direct consequence of the interest and attention generated by Modi in his several visits abroad. In particular, the leaders of both superpowers—the US and China—have established a close personal relationship with the Prime Minister of India, as has most recently been demonstrated in their public reactions to the victory of the BJP under Modi in the 23 May 2019 Lok Sabha polls. The Modi strategy has from the start been not to avoid but to work more closely with Beijing and Washington, so as to bring India’s growth trajectory to a stable double digit period. Much progress has been made, but much of this has not come to public attention. An example is the trade deficit with China, which crossed $60 billion in fiscal 2018, the year that Modi and Xi established a new paradigm for Sino-Indian relations at the East Lake Guest House in Wuhan. Subsequently, under the direction of the Prime Minister, Commerce Minister Suresh Prabhu entered into discussions with his Chinese counterpart Zhong Shan, who had been similarly tasked by President Xi to ensure that trade between two countries that together comprise a fifth of global GDP and 35% of the total population of the world gets into a healthier balance. This fiscal year, the trade deficit between Delhi and Beijing has fallen to $53 billion. This is the first time in three decades that India’s annual trade deficit with China has fallen. Suresh Prabhu stressed in his talks with the Commerce Minister of China on the need to enhance market access for India in exports of IT, pharmaceuticals and agricultural goods, and under the umbrella of the strong personal relationship between Xi and Modi, this is taking place. While there has been adverse comment within India about the large volume of mobile telephone imports from China, what goes unmentioned is the fact that low cost Chinese smartphone models have resulted in around 160 million citizens of the world’s most populous democracy gaining access to the internet and to its benefits. Refusing to be stampeded into reactive stances by elements in his administration influenced by third countries eager to torpedo relations with China, Prime Minister Modi has held to the view that while the security challenges from China (mainly caused by the continuing love affair between the PLA and GHQ Rawalpindi) need to be robustly faced, the many opportunities opened up for India by a rising China need to be given equal attention, rather than be ignored as they were by past regimes. Over $110 billion of investment is awaiting entry into India from China, mainly in the form of component manufacturing and other plants that are eager to take advantage of India’s ample (and relatively low cost) trained manpower resources. This is separate from the $90 billion that would get invested, should there be a China India Economic Corridor (CIEC), which—unlike the troubled and loss-making China Pakistan Economic Corridor (CPEC)—would be immensely profitable for both sides, besides converting the Red Corridor into a Road Corridor.
While in absolute terms, the trade deficit with China may grow, Modi’s calibrated policies (that are being implemented by the Union Commerce Minister) will ensure that there will be a steady percentage fall in the imbalance. The potential for India-China trade is huge, around $300 billion, with exports from India having the potential of crossing $100 billion out of the total volume. The benefits that this will bring to the working population of both India as well as China are among the results of the 2018 Wuhan Accord arrived at between the leaders of India and China. For Beijing, the chemistry between Modi and Xi has become of great importance in view of what may be termed the fullscope Geostrategic War launched by President Donald J. Trump of the United States on China a year ago. This conflict is likely to last a generation or more. The US side hopes that it will end in the implosion of Chinese Communist Party (CCP) rule in the People’s Republic of China (PRC), while Beijing expects that it will establish a commanding lead over the US in terms of economic attainment and technological prowess well within a generation, that too without ceding any of the authority exercised by the CCP over the PRC.
MATTER OF OIL
During much of his first term, Modi was fortunate in that the price of hydrocarbons remained at a low level. This has risen during the past two years, but not because of market fundamentals. They have risen as a result of President Trump following the example of President George W. Bush and artificially boosting the price of oil through geopolitical shock therapy, mainly by creating an atmosphere of imminent war between the US and Iran, an event that would lead to an immediate doubling of oil prices and a global economic recession, including in the US. Given the trust that has been established between Trump and Modi, should Delhi persuade Washington to step aside while purchases of oil from Iran continue, the impact on oil prices would be immediate and beneficial to the global economy. Stopping India’s oil purchases from Iran, as demanded by John Bolton and Mike Pompeo, will almost certainly lead to China stepping into India’s shoes as the operator of Chabahar port, a switch that would adversely impact not merely Indian but US security interests. Continuing oil purchases from Iran by India is therefore a necessity for both Washington and Delhi, and a path needs to be found towards such an objective. This could include a much higher level of coordination between the US and Indian militaries, including replacing strategic defence systems such as Russia’s S-400 with the US THAAD and Patriot, both of which are on offer to India. Overall trade with Russia, for example in hydrocarbons and nuclear energy, could grow even while the present dependence on Russia for advanced defence equipment gets reduced. It needs to be borne in mind that Russia is now no longer a rival, but an ally of China, which itself is the only major military ally of Pakistan, the only country obsessed with doing harm to India. Again in the case of China, while a firm line has to be drawn concerning moves that impact the security of India, trade, tourism and investment from the PRC need to be encouraged. In the case of the US, while there needs to be very much closer cooperation on matters of security and defence, there needs to be a firm rejection of US efforts to alter in a negative manner the volume and composition of India’s trade and commerce through US measures that flout market imperatives, such as the use by Trump of national security as an excuse to meet US commercial objectives that go against the interests of its trading partners.
While he has been pilloried by political opponents in India as being “Hindu-centric”, the fact is that Prime Minister Modi has established closer ties with the Gulf Cooperation Council than any of his predecessors. Nehru had close ties with a few Arab leaders, but was not on cordial terms with many. Prime Minister Modi has won the friendship of practically all the key ruling families within the GCC. Given that India favours the status quo in the region and frowns on efforts at regime change, this is hardly a surprise. The synergy between the GCC and India created by the diplomacy of Prime Minister Modi can get leveraged into massive – easily $ 90 billion – and mutually profitable investments in India by the GCC states, thereby assisting in the securing of double digit growth that would liberate hundreds of millions from poverty. A suggestion could be to follow the example of London, New York and Frankfurt and open the door to Interest Free Banking, a system that has created controversy in India through its being labelled “Islamic Banking” by some. The advent of Interest Free Banking will create opportunities for the conversion of currency into bank deposits on the part of sections of the population that till now have kept away from the interest-driven banking system. It would assist in multiplying inflows into India from NRIs and others across the world. It would also assist in proving the falsehood behind allegations that Prime Minister Modi does not subscribe to the concept of “Sabka Saath Sabka Vikas” popularised by him but favours only particular faiths and not others. Societally, Prime Minister Modi could ensure that he do what Prime Minister Nehru shied away from, which is to ensure through example and legislation that medieval practices (especially those that discriminate against women and the modern, moderate majority in certain faiths) get removed. In such a task, the geopolitical bonds established by Modi across West Asia (including Iran) could play an important factor.
MODIFIED MIX
During his second term, it is expected that Prime Minister Modi will pay as close attention to the ministries of Home, HRD and Finance as is the case with the MEA. Paradigm shifts in policy are likely to result from such a “Modified” mix of policies for national renewal. Rather than being a diversion or an unnecessary expense, the numerous foreign visits of Prime Minister Modi have created conditions whereby the global synergy of India can be deployed in order to ensure double digit growth. The nation will be looking for such an outcome to the ministerial team Modi will unveil in Rashtrapati Bhavan on 30 May, and subsequently his chosen ranks of officials who will work in South and North Blocks, besides locations such as Krishi Bhavan, Udyog Bhavan and Shastri Bhavan. The Prime Minister pledged to the 1.3 billion people of India on 23 May that he would take India firmly into the 21st century, and this is a pledge that Narendra Damodardas Modi is capable of keeping, not just by 2024 but by 2022 itself.