Indian Foreign Policy in Changing Global Dynamics - Current Affair for UPSC, IAS, Civil Services and State PCS Examinations

Indian Foreign Policy in Changing Global Dynamics - Current Affair for UPSC, IAS, Civil Services and State PCS Examinations

Why in News?

Prime Minister Narendra Modi’s massive electoral mandate should add to India’s muscle as he strides onto the world stage in his second term. But the world’s a bad-tempered place these days and his — and India’s — diplomatic outreaches face a new set of challenges.


Speaking at a public rally in Ahmedabad recently Prime Minister Narendra Modi, said that the coming five years will be “the time to regain India’s lost position in the world order.” An ambitious word, since India’s share of the world product was 20 per cent in 1800 and is around eight per cent today. For the new government now, setting the domestic agenda will be a relatively straightforward affair as compared to foreign and security policy.

PM Modi put uncommon energy into foreign policy in his first term. But it was a scattershot approach with as many hits as misses. His focus on security was fitful, driven more by electoral considerations than anything else. But then, in his term, Indian security did not confront any challenge of the dimension of Kargil, or even Mumbai in November 2008. But both came together, aided – though not abetted – by Pakistan into the winning electoral strategy that built on the need for a strong and decisive PM.

Now the first priority before the government is to forge domestic economy in great shape. The decline in car and two-wheeler sales and the slowdown in air passenger traffic, labour survey report, declining GDP growth rate etc are signals that things are not good.

At home, we can control the various factors in play, but abroad, there are other players, some positive, others inimical. There are issues, such as the building US-Iran tensions, the US-China trade spat, the rising climate of protectionism and developments like Brexit, are not in our hand to control. The combined impact of all these factors has implication on our growth trajectory.

Troubling Neighbourhood

Despite the great energy PM Modi has put into foreign policy, the payoff has been limited in the neighbourhood. In Bangladesh, Nepal, Sri Lanka and the Maldives, minus exportable resources or military power, India’s clout depends on which government is in power, not on our intrinsic capacities. A selfidentified ‘leading power’ like India should be able to shape the policies of its neighbours. But India lacks the material power to mould their behaviour and the inability to reform its military limits its role. Far from shaping events, we end up reacting to them.

According to experts, in our very neighbourhood, our clout depends on whether or not the political forces in power are partial to India or inimical to it. So when a Khaleda Zia, or an Abdulla Yameen are around, there is trouble. But things change when a Sheikh Hasina or a Mohammed Solih are in power. And here we are not even counting our most troublesome neighbour, Pakistan.

Dealing with Islamabad/Rawalpindi remains a herculean task that any Indian government finds daunting. The response to the Pulwama attack by a strike on Balakot is portentous and has put Pakistan on the backfoot, uncertain as to how it should respond next. But the generals in Rawalpindi are unlikely to abandon their game easily. So now we need the electoral strategy to become effective policy. This requires far more resources and effort than what was visible in Modi v 1.0. The armed forces are in desperate need of money for modernisation, but more important, they require deep restructuring and reform which crucially depends on effective political guidance and leadership. To press home the Balakot advantage, government need to shape a well-resourced and modern military, one that can fight and win wars, not merely conduct highly publicised one-off strikes.

What will be significant is the manner in which the two countries shape the post-Balakot narrative. If Pakistan is determined to continue the use of proxy warriors, New Delhi may be confronted with dangerous choices in view of the red lines drawn in the wake of the Pulwama blast.

The Extended Neighbourhood

In last week of May, PM Modi invited representatives from the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) member states to attend his swearing-in ceremony. BIMSTEC has been gaining prominence in Indian foreign policy over the last few years. More than two decades old, today it covers around 21 percent of the world’s population and a combined gross domestic product of more than USD 2.5 trillion. Indeed, BIMSTEC has largely replaced the South Asian Association for Regional Cooperation (SAARC), whose representatives were the guests of honour at PM Modi’s last inauguration. The shift signals that the prime minister may have given up on engaging Pakistan.

Channeling India’s regional foreign policy through BIMSTEC underlines New Delhi’s desire to focus on the country’s eastern frontier. As India focuses on the Indo-Pacific, BIMSTEC, if creatively engaged, can be an important platform for India to enhance its profile in East and Southeast Asia.

Similarly PM Modi’s efforts have made the situation in the near abroad better. The outreach to Saudi Arabia and the UAE has yielded significant returns in political and economic terms and India has managed to maintain strong ties to Israel and Iran as well.

US-Iran Relations and India

Prime Minister Narendra Modi has won his second term with a thumping victory, and the diplomatic dance being played by India between Iran and the US will become one of the first major foreign policy challenges of his new tenure. The US, an increasingly pivotal partner for India, offers a challenge not just to Indian bilateral ties, but its idea of ‘strategic autonomy’. Foreign secretary Vijay Gokhale earlier this year said that India’s alignment today is issue-based, not ideology-based, giving it diplomatic flexibility and decisional autonomy. This thinking is now being tested.

India’s relations with Iran are in the Trump administration’s cross-hairs. While New Delhi managed to save the Chabahar Port project from US ire, oil imports played the role of the ‘fall guy’ as Washington moves troops to West Asia amid an increasingly precarious geopolitical situation. India, which imports nearly 70% of its annual crude requirements, historically had Iran as one of its top three suppliers. Oil is the single-most important commodity, political or economic, between New Delhi and Tehran. Remove oil from the picture, and India-Iran trade ties are laid bare bone with little else to ride home about for now.

The loss of cheap oil is not the only issue here, the other is the American veto on India’s ability to shape a policy related to its own interests. It’s Iran today, it could be Russia, or some other region tomorrow. Modi successfully managed the transition from the Obama to the Trump administration. But the personal touch that characterised the Modi style is missing with Trump. The Indo-USJapan trilateral, based on a mutuality of interests in the Indo-Pacific, is working well, but there’s always danger that at some time it will crash into Trump’s America First approach.

The Chinese Challenge vis a vis US Trade War

An even bigger challenge is around the corner with China. After Doklam, the Sino-Indian relationship has been reset by the Wuhan summit. Its next iteration is expected in September this year and we could see some interesting developments, including a forward movement on the border and, agreement to push third country infrastructure projects. This policy has sought to balance cooperation, competition and conflict with China in a manner that ensures that there is no mutually debilitating breakdown. But with the growing China-US schism, India may once again find it difficult to maintain an even keel. The US, for example, is making the blacklisting of Huawei as the touchstone of its friendship. Can India afford to take up the US on this score? India’s ultracheap telecom networks depend vitally on their Chinese connection. Following the US lead here could be a bridge too far.

The US and China have been slugging it out since Trump slapped heavy tariffs on imported steel and aluminium items from China in March last year, and China responded by imposing tit-for-tat tariffs on billions of dollars worth of American imports. The dispute escalated after Washington demanded that China reduce its $375 billion trade deficit with the US, and introduces “verifiable measures” for protection of Intellectual Property Rights, technology transfer, and more access to American goods in Chinese markets.

There is no question that economic growth and asset markets will be badly hurt by a full-blown trade war. The more important issue is the current global economic order is in danger of being dismantled, brick by brick. The ramifications will go far beyond trade— the impact on geopolitics, for instance, could be far more serious.

But there is some silver lining too. This Sino-US standoff provides opportunities for New Delhi. US companies are scrambling to rebuild their supply chains away from China. India could be the destination for relocation. India can become more competitive in segments such as textile, garments and gems and jewellery since India already has an edge. However, this is doubtful in the short run because China’s exports to the US are much more diverse and it’s a tall order for India to fill the gap. The rupee will weaken more on account of capital flows than the impact of trade problems. Our exports plus imports of goods and services constitute around 42% of GDP. Also, we have a current account deficit dependent on external capital inflows for financing.

US under Trump Administration

India’s going to have to tread a cautious path between the US and China, complicated by the capricious Donald Trump who’s trying to create ‘a myway- or-the-highway’ unipolar world in which the US rules are supreme. With economic growth slackening and unemployment at a 45-year peak, Modi will have to start emphasising trade and business.

Already, India’s in the bad books of the US and as of June 5, Washington’s ending India’s preferential trade status over tariffs on US goods like Harley- Davidson motorcycles (a tiny fraction of US exports to India but one on which Trump appears fixated) and price caps on medical devices, of which US is an important supplier. Besides that, the US is unhappy about our e-commerce rule changes and India’s bid to build its own hi-tech national champions that could curb space for companies like Google, Microsoft and Facebook. At another level, the US has also scrapped India’s dispensation to buy Iranian oil and its Iran blockade means the fate of Chabahar port is now uncertain. On a different front, with Russia too, relations are frayed though we’re still buying their arms. But those arms purchases have riled the US and Moscow is worried the US will put intense pressure on India to buy American arms.


For the new government, playing by the rules of new global diplomatic challenges, weaponisation of international trade, threats to multilateralism and global diplomatic institutions are the challenges that wrap around the US—Iran kerfuffle, and by association, the globalised Indian economy as well.

Foreign and security policy are only a means to an end. To be truly transformative they must rest on the foundations of a vibrant economy which alone can provide the military and economic sinews to win friends and influence people. Perhaps, learning from the past, the new government will anchor itself on renewed economic growth and give us a foreign and security policy that is robust, sustainable and even historic. If the government can restore the economy to its growth path and push it up to a high-growth zone, its second term can be termed as successful. This requires not just political capital, but also executive skills. But to achieve all that at home, we need a peaceful periphery and a stable world order.

General Studies Paper- II

  • Topic: India and its neighborhoodrelations.
  • Topic: Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests.
  • Topic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora.


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