Policy Paper No. WsPP 4/2015: https://sites.google.com/site/drarvindvirmani/policy-papers . I would like to thank Ashley Tellis, Adm Premvir Das, Amb Hemant Krishan Singh, Radha Kumar and Sanjaya Baru for comments on earlier versions of this paper.
In an earlier note, the author outlined the emerging and potential changes in India’s Foreign Policy under the Modi led Government (October 2014). Foreign policy actions of PM Modi’s government since then have fleshed out the predicted changes in foreign policy. The foreign policy developments over the seven months that have elapsed since then broadly support the expectations and predictions made last year. The current policy paper, therefore spells out the new Foreign policy approach of PM Modi’s Government in greater detail and with greater confidence. Indian Foreign policy experts may argue, with some justification, that this exactly how they have thought about India’s foreign policy for the past ten years, but in democratic India, it is the approach and mindset of the political parties and the political elite that ultimately determines how policy is operationalized. This is the emerging change that this paper is about.
Non-alignment to Tri-polarity
The most fundamental change in Foreign policy, is the one referred to in October 2014 as “India First.” The choice of words was perhaps not the most diplomatic, but the implications remain the same and are amply supported by subsequent developments. One of the important foreign policy events in during the last five years was a CPR paper titled “Non-alignment 2.0” i.e. the 21st century version of the post War (WW II) foreign policy of “non-alignment” between the two poles of that time, USA and USSR. By definition, Non-alignment starts with a definition of the “poles” or countries and their policies, between which one is non-aligned. “India first” turns this approach on its head, by defining India itself as one of the poles, with a clear set of domestic and international objectives and expectations from other countries. Instead of looking first at what other country’s objectives and expectations are, and weaving our way through the contradictory objectives of other poles, we as a fixed pole, first define our own objectives and our expectations from other countries, including the “poles.” We then try to convince them to support our objectives, making whatever bargains necessary for achieving these objectives. An essential element of this changed perspective, is the new government’s “pragmatic actions and view of the world, ” Therefore there has been a search for deals with every pole to further India’s “primary objective of closing the economic and technological gap and building national power, in a pragmatic forward looking manner jettisoning ideological blinkers and minimizing historical baggage (Oct 2014).” This is neither ‘non-alignment 3.0’ nor ‘multi-alignment’, but the first step in the “Multipolar transition to a Tri-polar world” (Virmani(2005)). India in 2013, ranked third behind USA and China in terms of size of GDP at PPP and ranked tenth behind Russia (9th) in terms of current dollar GDP. It ranked sixth in terms of economic power, as measured by the VIPP index of potential power. Author’s projections indicate that India’s VIPP rank will rise to number three by 2020, but it will take another decade to become strong enough to become the third pole. The Modi government’s aspirations of India becoming a ‘leading power’ not just a ‘balancing power,’” as outlined by the foreign secretary, reveals an appreciation of the emerging possibilities.
Some analysts have called India’s new foreign policy approach as ‘multi-alignment.” But this is a misnomer, because India is not aligning either with the sole super power USA or with the fast rising great power China, nor with the Great powers of the past (Japan, Germany, Russia, France, UK). It’s a “multipolar transition” because the relative position of these powers, with different strengths and weakness, is undergoing rapid change. India is on the way to equaling and/or excelling them in certain dimensions, while still being in a position to benefit from their historical strengths. This uncertain world, with the old equilibrium slowly crumbling, but a new one could take two decades to emerge, can be characterized as a multipolar transition.
The October 2014 note envisioned a change in policy along five dimensions: “There are five areas in which I see an emerging change in foreign policy: The centrality of economic & technological development, the integration of domestic and foreign policy with respect to this objective, the emphasis on “national power” including “military power” and “Soft power” and a reduction in self-imposed constraints on actions that third counties may construe as inimical to their interests.”
The alignment of foreign policy with domestic economic and technological objectives has proceeded as fast as, or perhaps even faster than predicted. The economic objective has become less diffused and more sharply focused with the fleshing out of the “Make in India” campaign. The focus of foreign policy is to attract foreign direct investment, risk capital (equity and long term loans) and foreign technology and expertise to make this objective a success. Defense production, is now a fundamental part of the ‘Make in India’ campaign. Hence attracting defense technology and joint ventures partners is a critical element of the foreign policy objective. As investment in infrastructure is an essential element of success of this campaign, attracting foreign capital and technology into infrastructure remains important. Other infrastructure intensive programs like “100 cities” are also part of the foreign outreach. Similarly, improving the “Ease of Doing Business” is essential for higher investment, production and productivity of both domestic and foreign investment and has therefore figured in the PM’s statements to potential foreign investors.
There is however a difference between the approach to the private sector in market economies (at one end) and the approach to State controlled or directed enterprises in non-market economies at the other. In non-market economies like China, where the party and/or the State, directly or indirectly , controls outward investment, tourism and imports, the approach has perforce to be to discuss & resolve economic issues with the government and its key economic organizations and State enterprises. In market economies like USA, Germany, Canada & Australia & UK the governments (and legislatures) of these countries can play little positive role in investment decisions, though they have sometimes played a negative role in supporting rent seeking by their firms. Thus in these countries, the PM has correctly made an effort to interact directly with major FDI investors and intermediaries in financial centers like New York, to convey the Indian Government’s commitment and determination to change India’s reputation of having one of the most obstructive bureaucracies in the World. Other countries fall somewhere within this spectrum and a dual approach has to be adopted of discussing selected economic issues like infrastructure development with the governments which drive them, but addressing issues of concern to FDI and equity investors directly with the private sector. Japan, which lies in the middle of the spectrum, the Government has considerable influence and capacity to influence the behavior of large corporates. Even France has a legacy of Government invested firms, which have been privatized, but the government still exercises varying degrees of influence.
The entire government has participated in identifying the expertise and capabilities of each High income country (Japan, USA, Australia, France, Germany, Canada, S Korea), that the PM has visited, with the view to attracting to India companies and organization that contribute to India’s economic & technological development objectives, with the latter covering both Defense and civilian areas. With France both Civilian nuclear co-operation and defense production have been advanced. In Germany the objective was to get the renowned high tech industry and Mittlestand to participate in India’s development. This has been followed by a visit by the German Defense Minister to India. The defense Minister’s trip to S Korea preceded that of the PM, with a view to cooperation in Shipbuilding and related industry in both civilian and defense sectors. Even though China is still a lower middle income country(LMIC), like Sri Lanka, India or Mauritius, an exception was warranted because it has investible surpluses and expertise in infrastructure & mass labor intensive manufacturing.
With the abolition of the Planning Commission, the submission & acceptance of the 13th finance commission report in early 2015, and increased devolution of funds for social sectors to States now have the funds to gear up their social sector bureaucracy and fulfill their social responsibilities. Thus, the salience of socio-economic development issues in foreign policy is likely to be less than it appeared in October 2014, though NRI audiences may continue , to be encouraged to participate in campaigns like “Swach Bharat” in their home States/Districts/towns.
Though Economic development is the foundation of Power, the Strategic (Nuclear, Space) and Defense element of National Power are receiving the personal and sustained attention of the Prime Minister. Starting with appointment of a full time Defense Minister, the backlog of pending and gridlocked procurement decisions is being rapidly cleared. The decision to allow FDI in Defense and to proactively involve the Private sector in production and design has been taken and has started being implemented. A more decisive thrust is also being imparted to development of border infrastructure. In Arunachal Pradesh and J & K, which was either gridlocked (eg environmental clearances) or moving at snails pace (BRA, funds), the Home Minister has taken a personal interest in building peace time border defenses to deter creeping encroachment.
It can be argued that much of this merely a speeding up of decisions that have been in the pipeline for half a decade to a decade. Budgetary trends are however, quite disturbing: On a (polynomial) trend basis India’s defense expenditures have declined from over 3% of GDP in 1985-86 to less than 1.9% of GDP in 2014-15. The sharpest decline occurred in the late 1980s & during the BOP crisis of 1990-1991. From 1991-92 there has still been a (linear) trend decline from about 2.4% of GDP to below 1.9% of GDP in 2014-15. Since 2011-12 defense expenditures are running even below this negative trend line and remain so even in the 2015-16 budget. Thus, there is still no change in the declining trend in budgetary allocations for Defense.
However, the statements of the Raksha Mantri (RM) suggest that more fundamental reviews and reforms in strategy, policy, rules and procedures can be expected. Some of these reforms require the setting up of new committees(procurement, offsets), others involve a re-look at old neglected committee reports (K Subramanian’s Kargil Review, Dr. V Kelkar’s on Private production & R&D, Prof Rama Rao’s on DRDO revamp) and still others may require completely new initiatives (National security doctrine, Asymmetric Defense strategy). There are enough indicators and statements to suggest that virtually all these issues are under the government’s lens, and we can expect in principle decisions by 2016 and concrete operational changes by 2019. RM has also promised that his recommendations to the Cabinet Committee on Security will be ready by July. The appointment of a tenured CDS with authority over strategic planning and budgetary allocation would provide a solid foundation for reversing the declining trend in defense expenditures as a per cent of GDP.
As far as the foreign policy aspects of national power are concerned the message of a more muscular policy of deterrence has already gone out to potential aggressors and their supporters and well wishers.
As expected from a NSA who is an expert on counter terrorism, there is (as predicted in Oct 2014), “an increased focus on unconventional threats (cross-border terrorism, use of non-state actors, foreign ideologues-mercenaries). The buildup of World class equipment and skills over a spectrum of warfare & covert capabilities and a willingness to boldly attack the aggressor in his safe havens.” This is already in the process of change, “both in terms of capabilities in counter-terrorism and defense against non-state actors, but even more importantly in (operational) doctrines incorporating a willingness to take calculated risks in using asymmetric capabilities.” As the the Raksha Mantri has said, this may involve, “using a thorn to remove a thorn.” We can now expect the Govt to develop an Asymmetric Defense Doctrine (ADD) and an Asymmetric Defense strategy (ADS) to deter State sponsored terrorism against India.
The October 2004 note predicted, “a greater emphasis on global socio-politics and “soft power”, the third dimension of national power, including the expansion of common ground based on religious and cultural heritage & history of India (e.g. Hinduism viz. Nepal, Buddhism viz. E & SE Asia, Yoga viz. West, modern/moderate Islam viz Indonesia), as well as the Indian diaspora across the World.” This has now been noted by every foreign policy analyst and its beneficial impact acknowledged by most. They have noted the use of this cultural affinity in China, Mongolia and S Korea. The missing element of this approach (our affinity to and encouragement of modern, moderate Islam), will hopefully, emerge during PM Modi’s visit to Bangladesh in June and a (so far unscheduled) visit to Indonesia during the second the year. Another change in emphasis is a less apologetic approach to highlighting democratic affinities with like-minded countries.
The semi-soft elements of “soft power” have also been given a greater thrust by quick and decisive action and naval & air deployments to rescue Indians and citizens of friendly countries, from areas of heightened conflict zones like Iraq, Syria and Yemen, and disaster relief effort in earth quake-hit Nepal.
The Stronger Poles
India’s Foreign Policy towards the USA and China is beginning to reflect the abandonment of past ideological-political baggage and self-imposed geo-political constraints. It is based on more realistic understanding of the strengths & weakness of these two important poles by the political leadership, and of how they can help fulfill or thwart India’s reformulated objectives of Economic and Technological Catch-up.
The USA and China are both economically and militarily much stronger than India. In terms of the authors VIPP index, China’s economic power is about half of US, while India’s economic power is about 0.28 of China’s. The strategic-military gap between China and USA is much greater than that between India and China. China is 15 % of US military power but rising quite rapidly, while India’s military power is about 42% of China’s but falling (VIPS).
Super Power USA
The US is still the sole super power, with yet unmatched technological capability in the field of Strategic and Defense Technology and Production and in Assets built using this technology. As often pointed out by analysts, its defense expenditures are greater than the aggregate expenditures of the next ten countries. According to an index developed by the author (VIPS), the USA has more than six times the strategic capability of second ranked Russia. Following 9/11 and even more strongly after discovery of extraordinary efforts by a rising power to acquire this technology covertly, the USA has strengthened its already stringent confidentiality-secrecy-security net around these technologies. Japan and the European countries like France (0.12 x US), UK(0.1 x US), Germany & Italy have strategic production capabilities that India can and will attempt to acquire from them. However, even their equipment often incorporates critical components or sub-assemblies from the US, which are subject to the USA’s comprehensive security-secrecy net. Thus USA policy on supply of critical defense & strategic technology & production capabilities to India, can play a critical role in acquisition of a technological edge viz any adversary with greater financial resources and expenditures on defense. The new government fully understands this potential, and has demonstrated it by resolving the nuclear issue and accelerating India’s strategic engagement with the USA by signing the US-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Rim.
There is, however, a gap in US (government and Congress) understanding, of India’s quest for economic and technological development, which is driven by the reality that India is a lower middle income country (LMIC), with unacceptable levels of poverty. Thus India’s financial capability and ability to take risks is limited and will remain constrained for a decade or so. US analysts like Ashley Tellis (2015) have understood and appreciated this fact and suggested that the USA act with generosity, instead of trying to extract concessions at every turn. He (correctly) argues that the economic & strategic development of democratic, diverse and plural India will act as an example to the rest of the World, help spread US principles and ipso facto serve US interest in a stable balance of power in Asia. Such an approach could revolutionize the Strategic Partnership.
Second Pole China
On China, a “symmetry strategy” seems to have been adopted by PM Modi. This involves holding a mirror to China, by demonstrating a carefully modulated, but symmetrical response to China’s actions affecting India’s national security environment. Thus China’s core interest in Tibet is being mirrored by a clearer enunciation to China, of India’s core interests in Arunachal and J&K. Similarly China’s thrust into South Asia is being mirrored by India’s foray into N. E Asia (Japan, S Korea, Mongolia) and into S. E. Asia (Vietnam & other ASEAN). The Indo-USA vision for the Indo-Pacific, including the S China Sea, can be viewed as an effort to complete the “symmetry strategy” with the assistance of USA, given India’s limited capacity for sustained operation outside the IOR. Though India launched its Indian Ocean initiative more than a decade ago, it has not been pursued with consistent vigor. China’s thrust into the Indian Ocean region, has however, helped to reinvigorate the relationship with Australia and the IOR islands of Mauritius & Seychelles and will re-activate the dormant Indian Ocean Region Association for Regional Co-operation (IOR-ARC). Greater interaction with Indonesia is also to be expected.
China’s “Silk road” initiative has not however, been mirrored by India, so far. India has protested against the routing of the Sinkiang-Gwadar economic corridor through parts of the Indian State of Jammu & Kashmir, under the (disputed) control of the Pakistan and Chinese Governments. The government should revive and actively pursue, the ESCAP initiated, ADB supported, Asian Land Transport Infrastructure Development (ALTID) project, including the Asian Highway and the Asian Railway. The new Japanese infrastructure fund of $110 billion, along with the Asian Development Bank (ADB), could fund the missing links between Vietnam and India and beyond, helping clear the hurdles in its completion. It could also be expanded to serve as a beacon of development of the backward, interior regions of ASEAN, India’s North East, Bangladesh and West Bengal.
The symmetry policy required a build-up of Indian border defenses to neutralize the build-up of Chinese military capabilities in Tibet. It doesn’t involve holding security relations hostage to economic ones or economic relations hostage to security. Thus in our view, criticism of the Indian government for delinking economic issues from security issues viz China is misplaced. The border settlement and the economic relations with China must be evaluated on their own merit in terms of net benefits to India. We also disagree with those who argue that economic relations must be deepened just to solve border or security issues, as they have little historical evidence to back such claims. Analogously, the symmetry policy doesn’t require holding relations with any other country hostage to relations with China or relations with China hostage to those with any other country. This is the standard approach of Great powers and also of China itself vis a vis the USA, Japan and most countries. Only a super power like the USA has the multi-dimensional power to gainfully link security & economic issues through World-wide economic sanctions, but even it is only able to organize such sanctions under extreme provocation and/or against much weaker countries.
China has long seen India as a potential market for Chinese exports of manufactures and construction services, an attraction that has been heightened by the sharp deceleration in growth of world trade after the global financial crises. The non-market nature of China and its Party led growth strategy of investment-net exports, raises suspicions about the enormous trade imbalance and the low imports of products in which India has a worldwide revealed comparative advantage(RCA) e.g. drugs and pharmaceuticals, auto parts, agriculture goods. The effort to find mutually beneficial areas of economic co-operation has, however, been deepened and expanded. India will clearly benefit from greater tourism, if the e-visa facility offered to Chinese tourists is matched by Chinese government encouragement to Chinese tourists and tour operators to treat it on par with ASEAN. India would also benefit from, China’s shift of labor intensive mass manufacturing to India as Chinese wages (are allowed to) rise; As China’s per capita GDP is 4.5 times India’s, unconstrained wage rates in China should be about 4.5 times India’s. Thus it would be in mutual interest for China’s to gradually shift labor intensive(LI) manufacturing of electronics, plastics, garments to India, starting with those items it is already exporting to India. Similarly it would be in the interest of both countries for Chinese infrastructure developers to set up joint ventures with Indian companies in India, and get debt financing from China to undertake infrastructure projects in India. MOUs valued at $22bi have been signed in railway & highway corridor and industrial park projects & industrial projects, though not all fit into the categories suggested above. The key issue to be kept in mind is the balance between cost competitiveness and risk bearing.
In the 1960s China made an explicit proposal to formally recognize India’s claims in the Eastern sector, in return for China’s claims in the Western sector (which was more or less the so called “MacMohan” line). To our understanding the Chinese premier even enclosed a map defining the new boundary and/or marking the areas which may have to adjusted/exchanged to accommodate geographical imperatives. In the 1980s there seem to have been some disagreement within Chinese Communist Party, on the Chou proposals to India, and some pull-back with respect to the area/district of Tawang, in the Eastern sector. But no clear diplomatic demarche was made to India or a public statement made to an Indian or English speaking audience.
A further advance on the boundary issue was made with the signing of the 2005 India-China agreement, which accepted the principle of “not upsetting settled populations” along with the well-known and universally accepted “watershed principles”, which was implicit or explicit in PM Chou’s 1960s proposal. This would be helpful in a few areas of ambiguity that may have remained if the water shed principle was used to locate the precise formal boundary. In a sense the internal disquiet that simmered in China during the 1980’s, against PM Chou’s proposal, appeared to have been quelled during General secretary Hu Jin Tao’s tenure, with China returning broadly to the position it had held in the 1960s.
In 2006 the Chinese government (suddenly) changed its formal public position, by declaring that the Indian State of Arunachal Pradesh was part of South Tibet. The Chinese ambassador to India criticized the Indian President/PMs visit to AP in the rudest and most offensive language (for a diplomat). This was followed by a series of orchestrated actions, like stapled visas for Arunachal residents and vetoes on multilateral loans for Arunachal Projects. Contrary to gullible recipients of Chinese propaganda, India is ready for a full settlement of the Sino-Indian border on the basis of the 2005 agreement. A return by China, to the letter and spirit of the 2005 agreement can lead to a complete settlement of the boundary issue. With China not in a position to step back from the aggressive posture adopted by the CCP since 2006, India has from that time proposed an alternative approach of clarifying the actual ground position, areas of interweaving patrols etc. so that progress could be made in small steps.
DCs, ASEAN and SAARC
India’s foreign policy towards developed countries (DCs)/high income countries (HICs) will be focused on technological development of India in both the civilian and defense fields. As most of these States are competitive market economies, the Indian government can interact directly with the private sector on market goods and services. G2G will therefore focus more on defense production and infrastructure where even DC/HIC Govt’s exercise greater control or have some expertise and influence. The converse of this policy, is that India will frown on efforts by developed country governments and their Civil society organizations, to arrogate for themselves the role that India’s State & local Governments, think tanks and civil society can and do play.
Though, formally, the “Look East” policy has been changed to an “Act East” policy, the mention of the freedom of navigation in the South China Sea in the US-India vision statement presages greater interaction with ASEAN. Enhanced security partnership with Vietnam is a reflection of this approach. As Indonesia is the largest member of ASEAN and treats other members of it as its closest partners, India-Indonesia relations await a new thrust. A visit by the PM to ASEAN would more clearly signal a change fro “Look East” to an “Act East” policy
Similarly, as noted by every analyst, India is taking a more pro-active role in economic development of the SAARC region and in the security of the IOR region. Though, Bruce Reidall may be a little premature in calling this, the “Indian Sphere of influence”, but a new ‘national security doctrine’ for the entire region stretching from the Himalayas to the Antarctic and from the Gulf of Suez to the Malacca/Lombok Straits is likely to emerge within a decade.
As the second largest country in the SAARC region and a country that been called an Incubator of terrorism, Jehad Central, and the “mother of Islamism”, Pakistan merits special attention within SAARC.
After some initial hiccups, the policy towards Pakistan is also emerging more clearly. This is the two pronged strategy of welcoming development of economic integration and social interaction (without pushing it) but repaying any aggressive actions, conventional or unconventional, with quick, appropriate & effective counter action. On cross-border terrorism and related cross border firing on the India-Pakistan border, a much firmer and decisive response strategy seems to have been decided on and appears to be under implementation. This recognizes the need for changing the old paradigm followed since 1990, with a new one for dealing with non-State actors, State sponsored terrorists and failed or failing States. India’s protest to China regarding its agreement with Pakistan to build road, rail or other projects in parts of Jammu & Kashmir occupied by Pakistan, is also part of this approach.
On economic and social interaction, SAARC is the best umbrella for carrying forward economic development, given the political reality of the deep State in Pakistan and the constraints imposed by it on the elected Governments (1st PPP then PMLN). As all seven members of SAARC are equal and each has veto power over new initiatives, it gives the nominal government of Pakistan the political cover it needs. Further, as Pakistan holds the chair of SAARC during 2015 and the other six members have already demonstrated their desire and commitment to move speedily on all fronts, it can choose the pace and timing of economic integration. Thus for instance, at the last summit, held in Nepal, Pakistan accepted only one of three major initiatives that the other six countries had approved. The focus of economic & social interaction with Pakistan is therefore shifted from the bilateral to the pluri-lateral aegis of SAARC. Given that the other six members are eager to move, any aspect which Pakistan wants to pursue can easily be incorporated as a SAARC initiative. If Pakistan is not interested in economic co-operation, it is best for India to leave it pursue its own course, without engaging in periodic, futile attempts.
The tentative conclusions reached in October 2014 have been strengthened: “The PM Modi led Indian government is changing the emphasis of India’s Foreign and National security policies. Elements of this change in approach are already visible. These involve a clearer definition of Indian interests (“India First”) in terms of economic and technological development, a greater focus on these goals in foreign policy and a consequent integration of domestic and foreign policies. Other changes involve a greater focus on the development of national power, in particular an enhancement of the somewhat neglected element of military power, its broader definition to include asymmetric warfare of which State financed-directed non-state actors are a dangerous part, and a jettisoning of self-imposed constraints of ideology and misplaced fear of offending other countries who display no such squeamishness in their behavior. Overall a much more confident, credible and effective national security-foreign policy is predicted to emerge over the next five years.” Some of these elements have been operationalized while others a re still works in process.
A philosophical under pining cum broader direction for India’s new foreign policy is also emerging. This is implicit in the government’s formulation of India going from being a “balancing power to a leading power.” The government plans to pursue a policy that accelerates the development of India to the position of the third most powerful economy in the World. It will also attempt to raise India’s rank in strategic-military power, an effort that is more difficult and costly, and therefore can benefit greatly from help from super power USA and other historical Great powers like Russia, France, UK, Japan and Germany. India has also begun playing a greater role in the economic development of the SAARC region and has initiated the process of raising security co-operation in the Indian Ocean, South China Sea and Pacific Ocean.