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India must waste no time Acting East

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In Brief

Since the turn of the 21st century, the Asia-Pacific region has become central to Indian strategic thinking. The Act East policy, unveiled by the Indian Prime Minister Narendra Modi in late 2014, reinforced this objective.


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And during his visits to MongoliaAustralia and at the ASEAN summit, Modi vigorously underlined how India’s destiny was tied to the future of the Asia Pacific.

Even as New Delhi strengthens its ties with ASEAN, several ASEAN countries — including the Philippines, Cambodia and Indonesia — are yet to ratify the India–ASEAN agreement on services trade. In August 2015, New Delhi began a long overdue review of its trade agreement on goods with ASEAN. India’s interests in the multilateral ASEAN-led Regional Comprehensive Economic Partnership (RCEP) agreement have also meant that it has deferred the conclusion of a bilateral trade agreement with Australia. Despite India’s optimism and Chinese pressure for an early agreement on RCEP, any conclusion of the agreement, which was due in 2015, could still be a way off.

Delays in multilateral trade agreements will effect India’s capabilities in advancing global value chains. Also, the commercial incentives that the US-led Trans-Pacific Partnership generates for partner countries — six of which are also in the RCEP — could further increase these costs and stymie Indian economic integration in the region.

New Delhi could use its growing global stature to reinforce its eastward economic goals. China’s military posture — and, to a lesser extent, US rebalancing — is effectively forcing nations such as Australia and Japan to reconsider and reshape their national security priorities.

Given India’s recent growth rates and maritime prowess, countries such as Japan, the Philippines and Australia have lent support to New Delhi’s notions of an enhanced role in the region, leading India to increase its maritime commitments with Japan, Australia and Indonesia in 2015. India’s enthusiasm for greater naval linkages has been reinforced by India’s strategic competition with China. But just as Beijing grows increasingly restive in the Asia-Pacific, New Delhi’s eastward economic gallop has considerably slowed.

In this context, Japan and Australia are both stepping up defence spending and, partly at Washington’s encouragement, are willing to embrace India as a strategic partner in the region. The former Australian prime minister Kevin Rudd has boldly suggested that India could join key regional economic organisations such as the Asia Pacific Economic Cooperation (APEC) forum. East Asian nations are likewise eager to deepen economic ties with India.

But concerns remain about the pace of India’s economic response to these developments. Since 2012, India’s share of trade with prominent Asia Pacific nations — such as Japan, Australia and the ASEAN nations — has declined. And New Delhi’s commercial partnerships — with Australia, Vietnam, Japan and others — remain underdeveloped.

Japanese exports continue to face tariff barriers that deter their flow into India. Despite Australia offering tariff concessions, India has delayed negotiation of the key bilateral trade agreement that was expected to be concluded in early 2016.

Developing border infrastructure at trading outposts between India and Myanmar — India’s gateway to Southeast Asia — will improve trade between India and the ASEAN nations. But budgetary allocations to develop such infrastructure have been cut by more than 30 per cent for the 2016–17 financial year compared to the previous year.

Whether or not India partakes in larger maritime security arrangements in the Asia Pacific, strengthening economic ties with the region should be non-negotiable. Modi can begin by pressing his administration to conclude a pending trade agreement with Australia before the 12th round of RCEP negotiations begin in Perth this April.

With New Delhi’s emphasis on economic cooperation, as India’s foreign secretary argues, connectivity and development will be crucial. To improve bilateral trade, New Delhi should speed up port and road connectivity projects to Myanmar and Thailand, and address tariff concerns.

India is undoubtedly looking global. As it transitions to a leading regional power alongside China, it should make better use of its growing ties in the Asia Pacific to strengthen economic linkages. As the Vietnamese Ambassador to India Ton Sinh Thanh said recently, India not only has to act east, it must also act fast.

Hemant Shivakumar is a National Parliamentary Fellow at The Australian National University and a Research Associate at the Centre for Policy Research in New Delhi.

2 responses to “India must waste no time Acting East”

  1. Admittedly, I don’t have much knowledge about India. But this is not the first piece I have read which noted India’s lack of implementation of policies.

    Is Modi great at formulating an idea but lacking in follow through? Does he not have the interest in or the ability to administer policies?

    Or is the Indian government/bureaucracy so unwieldy that he, or any other leader, cannot seem to implement things readily enough?

  2. I don’t know why people keep talking about India’s “recent high economic growth”. India’s economic growth shot from 5% to 8% because they changed the calculation method from factor cost to market price and if we calculate the GDP based on old method the GDP growth of India didn’t change much.

    India’s economic development is just as good as it was before and policies should designed based on this fact instead of the man made growth rate hike.

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