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Finding the balance in India’s geo-economics

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An engineer walks on an iron structure at the construction site of a railway bridge in Kouri in the Reasi district in Jammu and Kashmir state, 4 March 2015. (Photo: Reuters/Mukesh Gupta).

In Brief

India is struggling to reconcile conflicting goals in geopolitics and geo-economics. In the lead up to India’s 2014 national election, the then opposition Bharatiya Janata Party (BJP) foreshadowed a shake-up of India’s foreign policy.


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But almost half way into the BJP’s five-year term, there have been only small changes.

India’s recent pre-emptive ‘surgical strikes’ against Pakistan-based militants across the line of control in Kashmir is a departure from the previous government’s policy of strategic restraint. While cross-border raids took place under the previous government, these operations were kept ‘under wraps’ in favour of diplomatic pressure against Pakistan to end its support to Islamist groups that are fuelling the conflict in Indian-controlled Kashmir.

The Modi government’s decision to publicise and escalate India’s responses to cross-border attacks signals a change in tactics, but the limited and defensive nature of the military action suggests that the government has modified rather than abandoned strategic restraint altogether.

This reflects the broader pattern of continuity in policy with targeted changes that have characterised the Modi government’s foreign policy. This continuity is underpinned by a core set of long-term geo-economic strategies that were pursued by the previous Congress Party government and have been adopted and reinforced by the BJP government.

Geo-economics involves the adoption of market-led global strategies for economic growth and the subsequent transnationalisation of state-building. For instance, instead of exclusivist alliance relationships or economic autarky, many states now pursue transactional strategic partnerships with a variety of other states, which are designed to further their integration into markets, regulatory regimes and global value chains.

Geo-economics therefore entails an approach to territory and security that differs to that of geopolitical concerns about the protection of national borders and economies, territorial expansion and political alliances. The geo-economic emphasis on global economic competitiveness has altered both the domestic and the foreign policies of states, even if long-term goals have remained broadly consistent.

India’s foreign policy since 1947 has focused on shaping the global and regional environment in ways that further its economic development, political stability and its ability to avoid external relationships that place it in a subservient position. But in the last two decades, the means of achieving these goals have been centred on global and regional geo-economic engagement.

India’s geo-economic strategies under both the Congress and BJP governments have encompassed a range of ventures: there are strategic partnerships with countries as varied as China, the United States and Iran; there is a new resource- and trade-driven engagement with Africa; and an emphasis on maritime security has emerged.

Initiatives that focus on regional and sub-regional cooperation and economic integration and cooperation — such as the Regional Comprehensive Economic Partnership (RCEP) — have also been pursued. Engagement with the Indian diaspora and projecting ‘soft power’ have been prominent and, through his relentless travels, Modi has contributed a new vigour to these strategies.

Attracting foreign direct investment (FDI) to India and addressing key economic problems — such as India’s ‘jobless growth’ — are key aims of these strategies, as are strengthening the Indian private sector and state-owned businesses, bolstering energy security and securing maritime trade routes. In RCEP negotiations, for instance, India has been focused on securing labour mobility for its skilled workers and advancing the interests of its core industries of pharmaceuticals and textiles. Yet the outcomes of these strategies have so far been underwhelming.

Reduced global demand and a lack of private investment in manufacturing have contributed to the fall in India’s exports and the decline in job growth. The inability to negotiate domestic reforms has hindered FDI. The geo-economic focus of India’s foreign policy does not mean that geopolitical issues have disappeared. The unresolved Kashmir dispute and the connected issue of Islamist militancy places major constraints on India’s geo-economic strategies in South Asia.

India’s recent surgical strikes have been carefully presented as a one-off counter-terrorism action to avoid major international fall-out and economic disruption, but the risk of escalation exists and the potential economic costs of conflict are significant. The dispute continues to stymie the growth of political and economic integration in South Asia. Already the recent escalation of tensions between India and Pakistan has put on hold plans to introduce special business visas to promote commerce in South Asia.

Lingering geopolitical distrust of China arising from the unresolved India–China border dispute and concerns about China’s own geo-economic strategies, such as the ‘One Belt, One Road’ (OBOR) scheme, contribute to India’s worries about being subordinated within a new Chinese-dominated world order.

India has been unenthusiastic about engaging with OBOR since it is perceived as a unilateral initiative. While India has committed to the Bangladesh–China–India–Myanmar Economic Corridor, which is now a part of OBOR, progress has been slow.

India’s foreign policy increasingly rests on a delicate balancing act between its long-term geo-economic goals, emerging geo-economic rivalries and remaining geopolitical contests. This balance seems set to become even more precarious as the domestic, regional and global environments become more fractious and demanding.

Priya Chacko is a Lecturer in International Politics in the School of History and Politics, the University of Adelaide.

One response to “Finding the balance in India’s geo-economics”

  1. Great article. Thanks for the in depth of Indian issues. But there are still so many factors that can affect India and South Asian countries. True, China is a major and growing problem for India and other countries in the south China sea. China is going to dominate and it’s going to create problems for India since already blocking many of India’s efforts to growth. For example, either in the case of NSG or giving veto to known terrorist mastermind. China is showing India its goal by doing this and more. Even supporting Pakistan. But the main problem for India is the growing relationship between Russia and China. The U.S is not understanding its role in Asia. The U.S is failing to engage with Russia which in turn allows Russia to even engage more with China. The growing relationship between China and Russia is not only a problem for India but China can influence other NATO countries. The European Union has it’s own disadvantages. So the growing China, the election U.S , escalating tension in Pakistan, and relationship of India – Russia is all a major concern. Mr. Narendra Modi’s next 2.5 yrs is going to be extremely important for India in managing both internal development and also striking a balance in foreign relationship. Though India remains the fastest growing country, it still has lot to do. The next president Of U.S and the way he/she going to engage in south-China sea, with Russia , with Afghan, with Philippines and with China will change the course of strategic relationship in the 21st century . What India wants is a peaceful world where it can aspire to grow to it’s full potential.

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