If Year One was about diplomacy, Year Two has to be about the economy. The world is waiting to see what India has to offer in real terms.
At the end of a year of hectic diplomacy, Prime Minister Narendra Modi may well have come to the same conclusion that his predecessor Manmohan Singh did when he told the India Today Conclave in February 2005, “The world wants India to do well… our real challenges are at home.”
It is by ensuring that the Indian economy kept in step with an annual rate of economic growth of over 8.0 per cent in 2003-10, creating expectations of an India on the rise, that the government of the day was able to undertake important diplomatic initiatives. The economic slide after 2011, and the crisis of domestic governance that followed, brought the India Story to a grinding halt by 2012-13. A year ago, the political consequences of that misgovernance followed. A new leader took charge.
Most comments this past week on the Modi government completing one year have made the point that while the Prime Minister shines on foreign policy, his record at home on political and economic management has been below par. While Mr. Modi’s foreign forays have been impressive, both in style and substance, how the world will come to view India in the years ahead will depend on how the Indian economy performs and the polity managed. That Mr. Modi understands where the real challenges lie is demonstrated by the fact that he has made national economic development the focus of his international diplomacy.
Nobel Prize economist Thomas C. Schelling famously observed, in a testimonial to a United States Congressional Committee on U.S. foreign policy, way back in 1993, that international relations is all about three things: war and the avoidance of conflict; migration and the management of the movement of people; and trade, in its many dimensions.
This way of viewing international relations and foreign policy enables one to quantify the importance of bilateral relations. If the three dimensions to foreign policy are government-to-government (G2G), people-to-people (P2P) and business-to-business (B2B) relations, then it is possible to track relations between nations based on an analysis of how they fare along these three tracks.
For example, India’s bilateral relationship with the U.S. would score high on all three — G2G, P2P and B2B. The Soviet Union also used to score high on all three during the 1970s when India had close G2G relations, the Soviet Union was an important trade partner, and students of my generation were as willing to study in Moscow as in any other Western capital. Russia slipped down the B2B and P2P rankings even as it has maintained high scores on the G2G dimension.
China, after 1962, scored low on all three counts. Over the last two decades there has been a gradual improvement of G2G relations, but it is the sharp rise in B2B interactions over the past decade that has contributed to increased G2G and P2P relations. Given that the India-China G2G relationship can only improve when India feels more comfortable with China’s geopolitical stance in Asia and the resolution of the border question, Mr. Modi seems to have decided that the border issue can wait till the B2B and P2P aspects of India-China relations improve further and inject greater trust into the bilateral relationship.
Since the focus of foreign policy is on a widening of the space for India’s economic development and creating a stable regional environment to facilitate this, Mr. Modi has extended the policy of non-reciprocal ‘unilateral liberalisation’, pursued in the past with less developed economies in Asia and Africa, to China, offering e-visas to Chinese tourists. Such a policy is aimed at creating mutually beneficial inter-dependencies and constituencies for better relations.
It’s still the economy
Having surprised the world and citizens at home with his energetic and flamboyant diplomacy, Mr. Modi would do well to turn his attention to an improved management of the economy and domestic affairs in the months ahead. After all, the question can be asked, why does the world want India to do well? In large part because the economic betterment of over a billion people, as in China, presents opportunities for the rest of the world. Which is why the proper management of the economy is the key that will open new doors for Indian foreign policy.
Views about Mr. Modi’s management of the polity and economic policy tend to gravitate to two extremes. His critics focus on communal polarisation, agrarian distress, tax terrorism and the persistent unease of doing business in India. His admirers view all such criticism as sour grapes and the frustrated rage of the marginalised elite.
The truth is that Mr. Modi’s record at home has been mixed. The economy is certainly doing better, but things could have been even better. For reasons so far not explained, the government wasted its first six months in office as far as economic policy and governance reform were concerned. It paid a political price when it lost the local elections in Delhi and a handful of by-elections elsewhere.
For all his political brilliance, Mr. Modi initially allowed himself to be portrayed as a friend of business oligarchs, thereby curtailing his political space for policy action on the economic front, and has subsequently tried to distance himself from this image by not paying enough attention to improving the ‘ease of doing business’. If the ‘Make in India’ campaign had been launched instead as a ‘nation-building’ effort, like the Swachch Bharat campaign — “Bharat Mein Banao, Bharat Ko Banao” (Make India by Making in India) — the Prime Minister and all his economic ministers would have had wider political space to act.
The economy needs to move back to higher rates of investment and savings and higher levels of spending at home. This means expectations must turn decisively positive and remain so. The opportunity to alter expectations for the better immediately after coming to power last May was wasted. And only in 2015 has the government focussed on governance.
Birthdays are always occasions for resolutions and renewals. If the government decides that the coming year will be about better and inclusive governance, and about increasing investment and business opportunities to create new jobs and better infrastructure, then expectations can still be turned around. This also requires careful management of social and political tensions at home. The quality of both the political and the administrative leadership dealing with these challenges has declined. Thus, more effort is required to translate the slogan ‘minimum government, maximum governance’ into meaningful improvement in the quality of administration.
What the world wants
Man does not live by bread alone, nor do nations. So, it is not just the performance of the economy that matters for India’s relations with the world, but also what India brings to the global plate, so to speak. The international community does, by and large, celebrate the idea of India. Successive prime ministers have used the metaphor of Vasudhaiva Kutumbakam (The world as one family) to define India’s own identity, as a nation, and its approach to the international community. Mr. Modi, too, has adopted this idea.
Apart from India’s economic rise, the success of its secular, liberal and plural democracy is also desperately sought by a world divided along sectarian, ethnic, racial and religious lines. India’s rise as a democracy, and on the basis of the inclusive concept of Vasudhaiva Kutumbakam, has an appeal as important as the market for goods and talent that India represents.
These impulses ought to define the agenda for the government’s second year in office. The ruling coalition still has the advantage of numbers. The principal opposition party remains hobbled and unable to regain momentum. The government can have no excuses, other than its own inertia or lack of imagination, for not moving forward faster, and in a more inclusive way.
(Sanjaya Baru is Director for Geo-Economics and Strategy, International Institute for Strategic Studies, and Honorary Senior Fellow, Centre for Policy Research, New Delhi.)
Keywords: Modi 365, foreign travel, diplomacy, economic reform