Modi’s Five Foreign Policy Challenges

Our research shows, that PM Modi faces five key foreign policy challenges including Permanent Membership of the UN Security Council, taking a balanced position on Iran, countering trade imbalance and border disputes with China, and Neighborhood First Policy and making south-south cooperation work. Modi Sarkar 2.0 has its hands full. The million-dollar question is, can he deliver?

Modi’s Five Foreign Policy Challenges

Narendra Modi’s first innings was highlighted for his extravagant foreign trips and tours like no other Prime Minister before. However, his foreign policy performance in the first innings arguably remains mixed. As a result of which, he is going to carry more complex foreign policy challenges given some changes in the world politics.

We have highlighted five such key challenges that he will have to fix in his second tenure. Can he deliver?

Trade Imbalance and Border Dispute with China

The burgeoning trade deficit with China has been a constant cause of concern for India. As of March 2019, the figure was USD 58 billion out of a total bilateral trade of around $80 billion.  Increasing tariffs on Chinese goods may not be the perfect solution as then imports would still come in from elsewhere and China would most likely impose retaliatory tariffs which would be detrimental to India’s tiny toehold in the Chinese market. India has to work for ensuring greater market access to Indian agricultural products such as sugar and rice, as well as fruits and vegetables.  Efforts have to be made on reducing barriers for greater access to the strong sectors of Indian industry, i.e. pharmaceuticals and IT products and services in the Chinese market.

Another way that is talked of to reduce the trade deficit is increasing the Chinese investment in India in infrastructure projects like road, rail, industrial parks food processing sector and getting the increasing number of Smartphone companies like Xiaomi, Vivo etc to set up their manufacturing bases. But after the Huawei case has come to light there is an increasing fear of Chinese investment due to intellectual property issues and the fact that all Chinese companies are required to assist the government in intelligence gathering. These pose serious questions to India’s national security architecture.

Next is China’s constant blocking of India’s ascent as a global power. It is today the only P5 member that is blocking India’s quest for permanent membership of the UNSC. Also to be worked upon is the non- NPT signatory membership to the NSG that China has been blocking. The NSG waiver that India has is only an ad-hoc arrangement as India has to negotiate every single nuclear material or technology transfer bilaterally whether it is the case of Australia or Canada. The NSG membership is also crucial for the successful transition to the next stage of the nuclear programme.

There has to be a settlement on the boundary question as it has been dragging its feet since long and turned out to be an irritant in the growth of the relationship as was seen in the case of the Doklam standoff. The China-Pakistan axis is also something that has to be broken as that is what is emboldening Pakistan to continue its terror-export policy. To the credit of the Modi government, a major achievement has already happened in this regard with the listing of Masood Azhar as a global terrorist with Chinese concurrence.

Long-Pending UNSC Reforms

Permanent membership of the UN Security Council is the logical culmination of India’s quest to be a global power. Along with India other leading contenders like Germany, Japan, Brazil, and South Africa etc should also get the membership. That would also stand to declare that this is a truly multipolar world. This is the best government to do it as it has got a historic mandate and the highly decorated former Foreign Secretary, S Jaishankar at the helm of the External Affairs Ministry.

Regional Economic Integration and Connectivity through Neighbourhood First Policy

The key to the success of India’s Neighbourhood First policy which was on full display at both the swearing in ceremonies are the issues of regional connectivity and trade. A World Bank report stated that India’s existing trade with neighbours was only 31% of the total potential. Currently, India’s actual trade in South Asia accounts for $19.1 billion which is a miniscule three per cent of its total global trade at $637.4 billion. This has to be boosted by easing tariffs, ports restrictions and other non-tariff barriers.

According to Sanjay Kathuria, lead economist at the World Bank, owing to economic and non-economic barriers, it is cheaper for Sri Lanka or Bangladesh to imports from Nepal than from far away Brazil. Average tariffs in South Asia during 2016 stood at 13.6 per cent as against the global average tariff of 6.3 per cent. Despite big measures like the South Asian Free Trade Area (SAFTA), countries are still maintaining high tariffs/ para tariffs on a large number of items.

Regional connectivity projects have to be completed at a fast pace whether its air, rail, road or waterways because these are key to boosting both passenger and freight traffic. Some of the key projects are the Kaladan Multi Modal Transport Corridor and the BCIM corridor. The finalization of the Coastal Shipping Agreement among BIMSTEC countries would greatly reduce shipping costs within the region. These are pivotal to the success of BIMSTEC and Act East cooperation. Creation of a common energy market through pipeline linkages and electricity trade would be a game changer for the region. Long delays like in the case of Chabahar Port (it has taken 15 years to launch Phase 1) cannot be afforded here given the Chinese OBOR is growing at rapid pace.

Forums like the Indian Ocean Rim Association (IORA) have to be reactivated to strengthen India’s position and combat China’s String of Pearls strategy. The region also shares common challenges with India like the need to overcome hunger and poverty while being important for the realization of the sustainable development goals.

What Position should India take on Iran?

India has to navigate a tough situation in the Middle East given the US sanctions on Iran. To India, Iran offers a lot- cheap oil and gas supplies and also a ready market for food products. Importing oil and gas from Iran saves India precious foreign exchange. Iran is also the gateway for India to Central Asia and beyond through the International North South Transport Corridor (INSTC). India has to make it amply clear to the US that it may be in the US national interest to sanction Iran but for India, to honour US sanctions, by stopping all trade ties with Iran would be ruinous. To circumvent the sanctions, the Rupee- Rial payment mechanism has to be ramped up and Iran has to agree to buy more of Indian goods like food, drugs and chemicals.

There is a tremendous scope for Indian pharmaceuticals in Iran since Indian medicines are considerably cheaper than the Western medicines. India has also recently emerged as an important destination for medical tourism, because of its good quality affordable healthcare. Iran could be a good market for refined petroleum products. India is seeing the highest unemployment rate in more than 40 years and therefore Indian involvement in developing infrastructure; industry and oil and gas exploration etc could potentially solve the problem of providing jobs for Indian youth.

Making South-South Cooperation work for regional good

This has been a long-standing theme in international politics that is still relevant today. India’s legacy of being one of the leaders of the NAM means it is poised to take on a large role to achieve this. Indian leadership of the International Solar Alliance (ISA) is seen as one such case. The vision for a New International Economic Order envisioned during the heydays of the Non Aligned Movement (NAM) has still not materialized and taking forward WTO negotiations that are still stuck in the Doha round due to the clash over the nature of agricultural subsidies will definitely be a challenge.

The other angle to South- South Cooperation is the nature and scale of India’s engagement with Africa and South America.

Even today, South America is known as the last frontier in India’s foreign policy. It is an area that can provide a variety of opportunities to India. With 20% of the global reserves of oil and gas, it can help India reduce its dependence on Iran and the Arab countries. Due to a combination of low population with vast land area, it can improve India’s food security by supplying oil seeds and pulses at cheaper rates.

But there are also challenges like the lack of regular and direct connectivity due to the huge distance and the fact that Argentina and Mexico are members of the Coffee Club, i.e. countries opposed to increase in the permanent members of the UNSC.

In Africa, India has to encounter a growing China. While India’s relationship with Africa goes back a long way, it is no match to the economic might and the sheer scale of projects executed by China. In 2014 itself, the China-Africa bilateral trade was 4 times that of India.

The Indian Ocean maritime region has become very much important as it carries two-thirds of the global oil cargo, one third of the bulk cargo, and half of all the container traffic.

China’s increasing presence in the region like in Gwadar, Djibouti, Kyaukpyu makes it very important for India to increase its naval capacity and also keep maintain strong ties with friendly nations like Mauritius and Seychelles.

Author Bio

Rajesh Saravanan is a student at Hindu College, University of Delhi. He has a keen interest in foreign policy and aspires to be a diplomat.  He is doing his internship with The Policy Times and occasionally blogs at Indian Zest.

Article Name
Modi’s Five Foreign Policy Challenges
Our research shows, that PM Modi faces five key foreign policy challenges including Permanent Membership of the UN Security Council, taking a balanced position on Iran, countering trade imbalance and border disputes with China, and Neighborhood First Policy and making south-south cooperation work. Modi Sarkar 2.0 has its hands full. The million-dollar question is, can he deliver?
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The Policy Times