India’s foreign policy amidst fear of global downturn

(India’s foreign policy needs to broad base itself by seeking new allies in the developing world. This is likely to open up the possibility of working for multilateral democratic world order)

Foreign policy of any country, it is commonly said, is a mere extension of its domestic politics and policies being followed in national sphere. The statement however needs a critical scrutiny in India’s context. It is generally believed that India embarked on the path of economic reforms in the early 1990’s in wake of global changes taking place at that time manifested by the disintegration of erstwhile communist USSR and fall of Berlin wall. These events basically signified the end of cold war with capitalistic bloc led by USA which stood for liberty and free market (managing to establish its hegemony) and also managed to establish its hegemony. It left the US as the sole superpower in the world with capacities to be a dominant power in global politics in ways never seen before in world history. In the emerging geo-political situation at that time India’s ruling elite did not have much choice but to accept the International Monetary Fund (IMF) and World Bank dictated policies of ‘structural adjustment’ of economy. This also saw a compelling yet gradual opening up of the Indian markets, so as to align with global markets in return for loans from Bretton Woods institutions to cope with dire Balance of Payment (BOP) situation that the country was facing in early 1990s. Thus the change in external situation proved crucial for India to adopt policies of liberalization, privatization even in the domestic sphere that were promoted in the name of ‘Washington Consensus’.

US focus in foreign policy

The last two decades in India has seen an unprecedented economic growth due to market based policies adopted. Even if one ignores the lopsided nature of this growth, one may realise that it has certainly assisted in creating some sought of consensus in favour of such policies in place of relatively closed and statist economy of India before liberalization in1990’s. These changes were also reflected in India’s foreign policy when it reduced the emphasis on principles and priorities such as Independent Foreign Policy and Non Alignment Movement and gradually started aligning with US at the global level. Barring temporary set back for few years due to nuclear test by India in 1998, the persistent warming of relationship between two countries from early 1990’s continued to culminate with India-US Strategic Partnership in 2005. The partnership saw its high during India-US Nuclear deal wherein US went out of the way to alter the prevailing non-proliferation regime so as to make it possible for India to participate in global nuclear commerce.

The US centred foreign policy of India now needs to be expanded to include new allies from developing world so as to have diversified base in wake of persistent world recession and downturn in economy. The US being the largest economy in the world was the epicentre of global recession which started in 2008.In wake of this development, there is a general perception that the impact and influence of US on world politics would reduce gradually. This would be even more steep if the aftermath of the recession in the form of economic slowdown persists for some more years. US is already feeling the heat in form of ‘Occupy wall street’ protests as it is widely believed that the irresponsible decisions of financial firms situated at the wall street resulted in the global recession affecting millions of people worldwide. It in a way signifies the people’s urge against policies promoted in the name of ‘Washington Consensus’. India thus needs to broaden the ambit of its foreign policy to make sure that it has allies on which it can fall upon and ensure global democratic order in place of unipolar world, as the former is likely to be in larger national interest.

Efforts to build democratic world order

The characteristic of global finance in terms of its interconnectedness has shown how an economic turmoil in one major country spreads like fire to rest of the economies of the world. This certainly props the urgency to strengthen the oversight and regulatory mechanism of the global financial system by democratic reforms in institutions like IMF, IBRD and the World Bank. On this specific issue and other similar concerns at the global level like UN Security Council reforms, talks on climate change, negotiations at the World Trade Organisation (WTO) interests of emerging and developing economies such as China, Russia, South Africa, Brazil, Mexico, Indonesia etc are converging as never before. Foreign policy of India needs to be tailored in a way that these synergies of interests can be propelled at the global level to achieve democratisation of geo-political and geo-economical order. Economics, these days, seems to be the governing factor in foisting relationship between nations, in place of politics as was the case during the cold war era. This certainly makes cementing ties between emerging economics for mutual gains as a difficult possibility in the near future. To overcome such possibilities, groupings like IBSA (India-Brazil-South Africa), BRIC(Brazil-Russia-India-China), and G77(grouping of 77 developing countries) will have to seek to play a larger and proactive role at the global level. The agreement in 2009 between developed industrial economies and major developing countries that G 20 (being more inclusive in nature) in place of G8,would be the architect of global economic policies is certainly a step in that direction. Even a report of Congressional research service titled ‘The Global Financial Crisis: Foreign and Trade Policy Effects’ accepts the fact when it states, “the fact that the G-20, not the G-7, has become the international coordinating body for resolving the global financial crisis indicates that countries such as China, Russia, India, and Brazil have taken a seat at the head table along with the advanced industrial nations of North America, Europe, and Japan.”

The trend can also be witnessed when BRICS countries called for “comprehensive reform of the UN, including its Security Council.” China too said that it would endorse the aspirations of India, Brazil and South Africa for permanent membership of the UNSC. The group also announced their decision to stop mutual trade payments in US dollars and instead give credits to one another in their national currencies alone. The development banks of each state signed an agreement to gradually alter loan currencies from US dollars. This was intended to strengthen financial cooperation between the BRICS countries, as well as to expand the international significance of their national currencies. Such declaration certainly gives voice and expression to concerns expressed by many developing countries over the fact that the US dollar as the main reserve currency of the world is not economically beneficial for them in the long run and gives US undue advantage in international trade which jeopardises their trading interests. This happens due to the fact that to finance current account deficit US has the privilege to rely on its own domestic currency which is not available to other countries and are thus required to built reserves of foreign currencies mainly in US dollars. These reserves tend to get invested in US fed securities thus developed countries end up financing fiscal deficit of US due to fact that US dollar continues to be the main reserve currency in the world. The possibility of stronger relationship among developing countries in international arena for mutual gain can be ascertained also from a report released by Asian Development Bank which states that Asia will play a very important role in the process of global economic domination reform. The report states that the rise of emerging market economies indicates a new world order, in which the G-20 has become the global economic steering committee. The report noted that Asia has led the global recovery and the region will have bigger voice on the global stage, such as shaping the G-20 agenda for balanced and sustainable growth through strengthening intraregional trade and stimulating domestic demand.

Such convergence of interests of developing countries is likely to fructify as emerging economies (being the engine of global recovery), will have greater negotiating power during global talks on issues of concern at world level. Foreign policy of India would need to work on channelizing these shared interests, concerns, and opportunities in a way that it can become a force which could boost bargaining power of developing countries during consultations on issues of global concerns. These can be achieved by building solidarity between developing countries by identifying issues through elaborate discussions on which their interests converge. In this way these nations would be most likely in a position to open the possibility of  extracting concessions from developed countries on negotiations in international forums on issues like climate change, global warming, reforms of IMF, world bank etc. It has generally been seen during such talks that nuance difference of opinion between developing countries at different level of development is exploited by developed industrialized countries to draw wedge between such countries to protect their own positions in such tough negotiations.

Seeking new allies and replenishing old relationship

South-South cooperation has been the buzzword in international diplomacy for sometime. India too needs to forge the possibility of strengthening the trend further within the ambit of its foreign policy by cultivating new relationship to diversify its allies. It has been observed during the current global recession that India’s exports were hit badly. This tendency can be curtailed to some extent by forging economic relationship with new countries in Latin America and Africa especially which would open up the possibility of branching out its export base. Energy diplomacy of the nation also needs to factor into account the possibility of south-south cooperation to diversify sources of energy fuels. The fact that position of nuclear energy as an avenue to satisfy growing energy appetite of Indian economy is highly volatile in wake of reservation expressed by US to India’s Nuclear Liability Bill increases the urge to explore new sources of energy. Venezuela for example wants to reduce its dependency on US markets for its oil exports and India too needs more sources willing to supply hydrocarbons to satisfy its growing energy appetite. Indian public sector undertaking ONGC has entered in to contract with Venezuela too extract oil and natural gas. Such efforts need to be intensified to diversify energy base. An Iran-Pakistan-India gas pipeline is also on backburner for sometime now. India voted against Iran at IAEA under US pressure at the time of negotiations of nuclear deal with US. According to experts, this has certainly put India’s relationship with Iran, a traditional ally and supplier of hydrocarbon to nation in jeopardy. It would be fruitful to explore the possibility of reviving the relationship.

Geo-politics of neighbourhood

India foreign policy priority has been, and will remain, the need to ensure peace and stability in her neighbourhood, and have meaningful ties. It raised many eyebrows when there was striking mismatch of perceptions that is rare for Indo-Russian meetings of the top diplomats when they set forth distinctly differing perspectives on foreign military presence in Afghanistan. Russian Foreign Minister registered Moscow's strong opposition to the permanent deployment of United States military bases in Afghanistan and in former Soviet Central Asia while the Indian External Affairs Minister SM Krishna stressed the need for foreign powers to help Afghanistan fight the menace of terrorism. Different perceptions emerged during a joint press conference of Russian Foreign Minister Sergei Lavrov and India’s Foreign Minister SM Krishna during latter’s visit to Russia. India needs to work with trusted ally Russia on this specific aberration between their relationships as presence of American army in Afghanistan for long has certainly created potential destabilizing effect on the geo-politics of the region as Russia and China would not be comfortable with this proposition. Neutral and independent Afghanistan for now seems to be much safer bet for playing out the possibility of stability in the disturbed region in the long run. India’s national interest demands that the country take independent position on such issues which is likely to have long term repercussions in her neighbourhood.

Concluding remarks

The most important foreign policy priority for India, from the time of her independence, has been to secure a global environment that is conducive, and if possible supportive of the aspirations. Considering this aspect, India needs to re-look its foreign policy in wake of the possibility that global balance of power is likely to shift towards multilateralism. As USA is eying India to maintain greater influence in Asia as part of its global plan, India’s close relationship with the US is likely to raise tension among some countries in the Middle East and Asia. It is time to have a broader outlook since the concerns can best be addressed by taking a position on issues in a way that the possibilities of exploring multilateral democratic world order at global level remains at the epicentre of Indian foreign policy.

By Saurabh Naruka