India’s Foreign Policy and Trade Relations
[King’s College: Feb 09, 2023]

Professor Kapur, President of King’s College,
Professor Tillin, Prof. Ladwig, Prof Gupta,
Ladies and Gentlemen, 

Thank you for this neighbourly invitation to pop across the courtyard—metaphorically speaking—and talk about Foreign Policy and Trade. I see I have around 30 minutes to do so. Given the complexity of these themes and the fact that each could be the subject of at least a term-long module, I fear you will be left with the feeling that Woody Allen had when he said, “thanks to a speed-reading course, I was able to read War and Peace in one hour. It’s about Russia”. I can only hope you will at least remember that it was India that you had heard about today. 

More seriously, foreign and trade policies are in every sense of the term part of the same process by which a nation seeks mutually-beneficial partnerships with the external world. We live today in an era in which the broad guiding principle for such external policies is mutuality of benefit: suffice here to say that this is a relatively new approach that was not always the case, say, a century and more ago. 

What then are the current guiding principles and contextual factors that shape foreign trade and political policy? While I cannot presume to speak for other countries, the following apply to India: 

First: obviously, securing national interests. Naturally there must be a broad harmony of interests and values, but fundamentally, the purpose of foreign policy is the protection and promotion of national interest. In recent years, we have added to this larger definition the notion that this also involves safeguarding the interests of Indian citizens, and building ties with people of Indian origin, of which there are an estimated 32 mn worldwide. Our efforts in these two related lines of endeavour are the logical extension of policies that have seen India open its borders to PIOs in crisis, from the then Burma in the early 1960s to east Africa in the early 1970s: today the protection of the Indian state includes evacuation of Indians in distress, from Afghanistan, Ukraine, during COVID, from Yemen, and so on, and the promotion of links with diaspora include an overseas Indians conference as well as an annual travel scheme for diaspora youth to re-connect with India. Indeed, the primary purpose in the Government of PM Modi is to ensure that our external policies—political, economic, trade—all converge around the defined national goal of renewal of India. The target is to ensure that every one of India’s diverse communities are better served through better delivery of services, and that all Indians lead comfortable lives in a developed country, within the centenary of our independence. 

Second, policy is about optimization of alternatives, based on the recognition that contrary to what theoretical analysis might suggest, in the real world, choices come with consequences, and the latter usually come with costs. As the adage goes, its easier to say, much harder to do. Therefore foreign and trade policies are all about choosing the least worst option, and seldom perfect options, because choices need to be made, and not merely debated, and costs need to be assessed and often paid. Examples of these policies in actual effect include decisions to manage and if possible, mitigate the sourcing of defence hardware, electronic goods, energy from abroad. While we are moving steadily to reduce external reliance in the first two, we remain dependent on external sources for hydrocarbon fuels, for over 80% of our needs. 

Third, effective policies are about grounding decisions in the clearest possible understanding of the prospect of ensuring an intersection between your own national needs, external options, and the costs of making specific choices. This also means that policies must be based on pragmatic and realistic assessment of actual capabilities: your own and those of your interlocutors—even adversaries.  In practical terms, this means that our policies have had to be tailored to fit the shifting security and economic environment around us, especially in Asia. That means doing so in a manner that is well-suited to India’s democratic system, and the notion of mutuality of benefit for partners. In other words, our approach to the world is not, and has never been, mercantilist.

Fourth: if the purpose of policies to manage the external domain is to minimize risk and maximize benefits—and ensuring both a multiplicity of options and that the chips stay up are obviously also benefits—then it follows logically that policy must be based on rigorous understanding of the current external environment. In other words, unlike theoretical constructs, in the real world, policies and actions need to take into account the prospect of multiple ranges of responses and counter-measures from other players and partners. Thus it isn’t even chess or go: policy-making is multilevel, multiplayer chess. That too, on a continually-evolving playing board.

Ladies and gentlemen, 

Having said all of this, what then would we describe as the trajectory of Indian foreign policy? Let me make a few broad thematic points: 

First: Continuity of purpose. 

In the dawn of India’s independence, the primary means of promoting national interest was to place faith in the newly-established international political and financial system, defined by the UN and the Bretton Woods institutions, on one hand, and on an active effort to avoid being drawn into the polarization of the world. This was a necessary response to the context of post-independence India, with the heavy burden of a traumatic partition, grinding poverty, rampant illiteracy and extreme underdevelopment. Obviously, the strategic space for choosing our own economic and strategic options was very narrow, and even then, choices were painted in Manichean terms, as between darkness and light. As we know, life is seldom quite as monochromatic. 

Our efforts were therefore aimed at managing to keep our policy options open, and to build partnerships in the newly decolonized nations of Africa, Asia and Latin America, both bilaterally and through plurilateral mechanisms including the NAM. Economic cooperation in what was then quaintly called South-South framework was surprisingly robust, but of course, limited by the simple limits of wealth in the post-colonial “third world”—now perhaps a pejorative term. This phase lasted perhaps the first few decades of the post-war period, even though the base concept was perhaps mortally wounded by the 1962 India-China border conflict. Even so, this era dragged on until a decisive shift brought the Cold War to high noon (to mix metaphors and movies shamefully), in 1971. 

That change, in a sense, was quite enough to compel a change in our approach. The opportunity to mitigate the reduction of our strategic space was presented to us by the outbreak of civil war and mass atrocities in what is today’s Bangladesh. The War that liberated Bangladesh was in many senses a major transformation of the strategic context of Asia and indeed the world. And it was doubly effective because it was both a moral victory and a strategic imperative. But between 1971 and the late 1980s, policy more or less stagnated, along with our economy, which remained inward-looking.

The end of the Cold War and the start of the all-too-brief unipolar era may not have ended history but it certainly ended the debate about next steps in India. The early 1990s brought about systemic reorientation of both foreign and domestic economic policies, with India dismantling its license-permit economic system, initiating market-oriented reforms, and opening up formal bilateral relations with Israel and with the constituent Republics of the former Soviet Union. Of particular interest at the time was the initiation of the process by which relations with the US began to be substantially reshaped. Ties with Southeast Asia were reinvigorated by the ‘Look East’ policy. And India and China normalized relations on the premise that both sides would create confidence building measures to manage the undemarcated boundary, which would be set aside for later resolution while we built trust through trade and people to people ties. All this helped ignite growth in trade, investment flows and bilateral partnerships as India finally began to realize its vast economic potential. 

Today too, even as the unipolar era ended and multilateralism comes under heavy challenge from both sides of the spectrum, the larger premise of Indian foreign policy remains robustly focused on maximization of national benefit. The past decade or so has been a sustained effort to reduce the disadvantages in our strategic landscape—both inherited since 1947, and acquired due to the hesitations of history. These, by the way, include the delay in opening up our markets and reforming our economy, and in failing to decisively end the era of nuclear ambiguity (1974 to 1998) especially as proliferation from one neighbour to another eroded the benefit of such an approach. 

The new approach includes a more robust effort to secure interests through national strengths, regional cooperation and partnerships and external friendships. This has in practice meant a Neighbourhood First approach to our relatives in South Asia; extending that further to civilizational neighbours in Southeast and West Asia through Act East and Link West policies; integrating into our largely continental strategic vision (the result of being strategic prisoners of difficult land boundaries) a maritime security and geo-economic approach, and building up robust partnerships with the US, Japan, and Australia, opening out new vistas with large emerging economies like Brazil and South Africa, while managing important and historic partnerships in Europe, Russia and with historic partners in Africa and Central Asia. Underpinning this is a significant expansion of trade and commercial ties with the world, as India developed FTAs with ASEAN, with Korea, Japan and now with Australia and UAE. As a vindication of that strategy, India’s trade growth has been sustained, with goods exports crossing the long-standing glass ceiling of US$ 400 bn in 2021-22. Indeed, sustained growth since the mid-2000s has been transformative: the UNDP estimates that some 415 mn people were lifted out of poverty in India between 2005 and 2021.

2: Balancing and Hedging strategies: 

For the world’s most multi-ethnic, multilingual and multireligious country, located as we are in the central and southern core of Eurasia, it is an obvious fact that we have an interest in working toward a multipolar Asia. Frankly, looking at relative growth prospects globally, it is not unreasonable to say a rules-based, multipolar Asia is crucial if the world is to remain a multipolar construct based on international laws and rules. In direct linear evolution from the dawn of our independent foreign policy, our objective has been to take on global responsibilities, offer partnerships to other developing countries based on practical, locally-appropriate technologies, and to be a constructive player on global issues of the day. Examples include our seminal contribution to the establishment of peacekeeping operations as we now know them; the creation of India’s very successful ITEC programme for technical cooperation, and more recently, contributing to global challenges through cooperative endeavours ranging from Humanitarian Assistance and Disaster Response (as in this week’s terrible Gaziantep quake); the International Solar Alliance; vaccine alliances and COVID vaccine cooperation; and even the effort to create an alliance to build disaster resilient infrastructure. Indeed, the steady rollout of India as a provider of developmental assistance—some US$ 28 bn of highly concessional loans committed so far solely in the developing world, but in terms that are not part of the OECD discourse—is also a new phenomenon. 

All of these are also fundamentally balancing and hedging strategies. Just as India hedges and balances various global partners and regional concerns, so too the multi-layered evolution ongoing elsewhere imply the world’s equation with India will continue to change and evolve. That is to say, India’s policies in terms of hedging and balancing will also not be static over time. 

This is particularly relevant to consider, as the contours of modern geopolitics transition, perhaps decisively, leading to the end of what might be called the era of benign globalization. This is of course a factor of the changing dynamic of great power contestation. It is a fact that the transition of leading power status from the UK to the US in the first quarter of the last century was unusually peaceful and almost seamless in terms of the absence of contestation between them. But arguably, from a historical perspective that was the exception and not the norm: as Thucydides reminds us, we only need to look at Sparta and Athens, or more recently, imperial Germany and the UK. The rise of the USSR was also comparatively less contested also because it took place during World War II, but the rise of China has been unarguably a more contested process, not the least because the declining salience of a third power (competition with which had inspired the original US-China rapprochement of the 1970s) impacted at least to some degree upon US-China relations. What then do we make of the historically unique process by which two large neighbours are rising at the same time, albeit at different tempos, and using different levers of power?

The short answer for India is that a rising India, with a complex array of domestic and regional challenges to address, must manage with great dexterousness relationships with larger powers and those of similar size but with less complexities. This is often forgotten: in a world of so many shape shifting options, there are no binary formulations that will work and certainly models used by others will not fit either. Especially not for a large State such as India. 

So what then is Indian policy in this context? Frankly, it was and will remain a factor of its needs and a reflection of the balance India must strike in the management of its ties with the US and China, first and foremost, but also Russia, the EU,  Japan, ASEAN and the UK. For those of you who think this is a novel challenge, recall that we have long experience in dealing with this predicament, as I suggested a short while ago: we adjusted our policies to avoid alignment in the Cold War; but we made the amendments necessary in the aftermath of the China conflict in 1962. We made the necessary adjustments in 1971 again, given the prospect of a US-Pakistan-China axis, enabling thus the liberation of Bangladesh. And we have done so repeatedly, as and when the circumstances have so dictated, as trendlines of geopolitics changed around us. 

3. Managing a new era of geopolitical transitions

Today more than in any other recent era, we live in a time of visible geopolitical contest and naked self-interest: nations do what they must with visibly less pretence. Increasingly, the discontent with globalization, ironically in the very countries that advocated it, has led to a resurgence of rhetoric about securing jobs and preventing immigration. Thus a more nationalistic approach to international relations will impact upon the multilateralization of the world, which until recently seemed a never ending rising tide. And so, the balance of power is once again in vogue as an operating principle for middle powers and for rising nations like India. Indeed, it would be naïve to expect otherwise, as the erstwhile global order threatens to degenerate into a marketplace with more players, less rules—or less adherence to the known rules of the road—and far more volatility. 

Our policies today therefore reflect our own effort to protect India and its interests from the blowback inherent in many of such measures. Thus the effort to widen our sourcing of energy products, to deepen our quest for indigenous technology and defence manufacturing capabilities, and to widen our economic partnerships with strong two-way investment relationships ranging from Australia on the one hand to the US on the other, and with everything from Japan, Korea and the EU in between. In short, faced with new volatility and greater flux, the focus is on creating relationships that offer greater balancing options, while investing and attention in economic interdependence, so as to reduce the space for and temptation to experiment with political risk-taking. These are therefore new and unchartered waters that offer space for looser coalitions and plurilateral partnerships; but with looser ties come looser rules. With the attendant rise in risks, there are also new opportunities to create new friendships, short of alliances, but robust enough to accommodate some differences and divergences of policies. While this indeed is how the India-US relationship has evolved in the period since 2005, but it is also how other partnerships could potentially evolve as like-mindedness develops as an option to structured alliances. We are therefore entering an era of considerable risk, but also one in which the system that we have come to know could well be reshaped comprehensively. Indeed, the terrible conflict ongoing in Ukraine could be one of the precipitating factors of such a hinge moment. 

4.  Peace and cooperation in the “near-abroad”

As in Europe a hundred years and more ago, the impact of modern hard borders and Westphalian state structures upon the Asian region is a comparatively new phenomenon. Without getting into the thicket of history, let us focus for a moment on the big picture. From 1947, a primary driver of Indian foreign policy has been the desire to ensure a stable and peaceful neighbourhood and to avoid to the extent we could South Asia becoming a stage for geopolitical contestation. Even if it could be said that the Nehruvian era focused more on a broader concept of the neighbourhood and regional cooperation, there is little doubt that this has been a consistent focus of Indian policy-makers. The effort to focus more narrowly upon the immediate neighbourhood began to be more visible during the time of PM Indira Gandhi, and developed further in the tenures of PM Gujral and PM Vajpayee. It is however only in the Government of PM Modi that a stated “Neighbourhood First” policy has been placed at the heart of a Government-wide approach to our civilizational partners and closest neighbours.  This is an obvious recognition of the fact that relations with neighbours—especially on land—impact well beyond the standard foreign policy, security and external trade establishments. Indeed, ties with neighbours impact upon policy-making across the board—from agriculture and fisheries to forestry and the environment, from water-sharing to heritage conservancy. 

In assessing India’s Neighbourhood First policy, it is important to emphasize that the effort has consistently been to allow the networks created by culture, economics and indeed history to flourish in a manner that does not threaten the identity of individual states. And yet it recognizes that the diverse links that connect South Asia have a certain deeper logic that has often transcended modern borders on the ground. It is in recognition of some of these challenges that the most of South Asia has attempted to develop modalities that enable trade in goods and the movement of people to take place with minimal restrictions. 

Indeed, it is not often recognized that India has open borders with Nepal and Bhutan, and for people in the vast border districts of the Northeast, a free movement regime also with Myanmar. And so hard land borders are not only a 1960s construct, they are also the minority: they exist only between the post-Partition nations of India and Pakistan, and subsequently, Bangladesh. Even so, with Bangladesh, we have a complex web of cross border connectivity by road, rail, inland waterway, air and maritime services that has already created some of the closest links in trade, investment and travel flows in the subcontinent. So too with Sri Lanka and somewhat further afield, Maldives and even Afghanistan, at least until August 2021 in the latter case. 

It is in recognition of this reality that successive governments have worked to try and address apprehensions about the disparity of size, but also to ensure that all nations in the region have a collective stake in peaceful cooperation and harmonious coexistence. The notion of ensuring that all our boats rise together fundamentally underpins India’s “Neighbourhood first” policy, which has sought to add a strong economic and developmental agenda to strong political and cultural ties. Thus Nepal, Bhutan, Bangladesh, Sri Lanka, Maldives, Myanmar, and until 2021, Afghanistan, being India’s most important development partners as well as major trade partners. Regional trade and communication links are still a matter of priority, as well as a focus (if not a stated policy) on at least facilitating Indian investment into these markets—no mean sum for a nation that itself seeks massive doses of investment—upto $ 1.4 trillion--to build the infrastructure it needs to achieve development. 

There is one obvious exception in this narrative, and that is of course the result of that nation’s consistent rejection of any form of good neighbourly cooperation, beginning with its determination to use all means including weaponizing terror as an instrument of state policy. 

6. Looking ahead, Indian foreign and trade policies will continue to face challenges in delivering upon their core task of creating growth in the country, sustaining international partnerships and helping propel the national transformation project. In my mind, I see six big-picture challenges that policy-makers in India will grapple with, along with partners abroad, as these are common concerns for all nations today:

i. Connectivity is today the new ‘Great Game’. India shares the international community’s desire for enhancing physical as well as softer forms of connectivity. We believe in transparent development of infrastructure and the use of responsible debt financing practices, while underlining respect for sovereignty and territorial integrity, ensuring technology transfers, rule of law and the protection of the environment. This is a principled approach, and therefore we are always open to discussion.

ii. Maritime security is a second key concern. India supports respect for freedom of navigation, overflight and commerce throughout the region. It expects nations to resolve territorial and maritime disputes peacefully and in accordance with international law. And just as important, we practise what we preach. India is also increasingly shouldering responsibilities in this area. In recent years, we have concluded White Shipping Agreements with many countries and emerged as first responders in HADR situations, including in Turkiye and Syria. The Indian Ocean is a collaborative arena with vast potential that, as we should see, is the largest English-speaking region in the world. In this regard, creating a loose-structured, but common Asian security architecture will be a long term challenge for all of us in the region. Currently the only strong cooperation framework is ASEAN, but a growing number of plurilateral and trilateral cooperation frameworks—from QUAD to trilaterals with France and UAE—suggest that there is much more that needs to be done.  

iii. Terrorism and Radicalization is a shared challenge, to deal with which India is open to working more purposefully with any nation or association. Perhaps there should be greater appreciation that it is India that insulates much of the world from viruses proliferating to its West. In an era when networking amongst terrorists is reaching serious proportions, societies facing threats must respond more cohesively. In particular, they must be clear that there is no justification for terrorism on any grounds.

iv. Economic globalisation is under pressure and even as we counter protectionism, it is important to analyse the causes for this trend. The virtues of preferential trade arrangements are less self-apparent today, possibly because many of its outcomes have been very one-sided. Clearly, PTA/FTAs are not the same as openness. Arriving at a more balanced position would require a more objective assessment of how they have worked so far. As far as India is concerned, our approach to these arrangements is premised on mutuality of benefit, not unilateral transactions that offer a limited window for profit, while IP and capacity are siphoned away.

v. Climate change is a global challenge that requires extraordinary levels of farsightedness, especially in facilitating the financial and technological conditions that will allow developing countries, emeging markets and even small island nations and least developing economies to make green transitions economically viable. India’s efforts in this regard are significant and substantive—we have reached our target of generating 40% of our power from renewable sources eight years ahead of schedule--and that is before you take into account the fact that India’s share of the problem is based on a far lower per-capita carbon emission level as compared to much of the world. In short, nations and people should not be confronted by an invidious choice: lift people out of poverty or find solutions to save the planet. Eventually, we will need to find ways in which anthropomorphic impact on the planet is reduced. The recent LifeStyle for Environment (LIFE) Mission launched in India with the UN Secretary General stands as a means by which nations can reconsider the impact of modern lifestyles on our planet. 

vi. Finally, arriving at a new consensus about the international order and the mechanisms that have served us since the 1940s. As a nation that benefits from the international law-based order, but one that is not status-quoist , merely because the order freezes in time a world that last existed in the 1940s, we are still comfortable with the existing aircraft, provided there is a suitable rearrangement of seats and running repairs. We do not however seek to replace the aircraft altogether.

7. In conclusion, you might ask, your policies might be fine as far as securing India’s rise is concerned. But what is in it for the rest of the world? How do we benefit? That is indeed a fair question. Let me suggest here what the rise of an India that is committed to a reformed, but existing international order, means for the world. As current G20 chair, for instance, we have set out our vision of how the world’s 20 largest economies and other guest invitees can help move the dial forward on addressing the leading challenges of humanity. We have identified:

• Leveraging technology to solve problems. India has deployed technology at collosal scale to roll out 1.2 bn unique identity cards, through which social sector payments, public health insurance and other benefits are paid routinely and directly. Hundreds of millions have been brought into the banking system, and our FinTech system now records the world’s largest number of payment operations, at 8 bn in Jan 2023, just one month, by an order of magnitude. 

• Strengthening the international order by enhancing the voice of the global South. India has long worked with partners in Asia, Africa and Latin America to promote a fair, balanced and cooperative world order. 

• Promotion of a lifestyle that is more in harmony with nature, and our own effort to depoliticise the global supply of food, fertilizer and healthcare, especially vaccines. 

• Creation of resilient supply chains and wider dispersal of value chains of production.

• Peace through dialogue, and the settlement of disputes through peaceful means. 

8. I realize that I have probably overstepped the time allotted to me here and that I have probably also offered many of you a long enough opening for a  restful mid-afternoon nap. For those who are in a rush, my apologies. And for those who will need to regretfully return to class after awakening from a deep dream of peace, my apologies again.

 Thank you for your patience.