Reaching its economic goal should be India’s biggest strategic objective – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/policy/view-reaching-its-economic-goal-should-be-indias-biggest-strategic-objective/articleshow/79498476.cms

SynopsisBut can India convert this convergence of opportunities into gains, like Japan did after World War 2 and China did after the Cold War? And, for that, the challenges remain internal, not that much external. New Delhi has responded with a policy of self-reliance: ‘Atmanirbhar Bharat’. But that would remain incomplete without a clearly articulated trade and economic strategy to engage with the world.

The economic and political churning for a new world order is well and truly afoot. EU appears to be already working on a document to forge a new concord across the Atlantic. The shifting sands of power in West Asia point towards emerging new alignments, while powers in the Indo-Pacific are exploring different security arrangements to deal with the China threat.

Much as these changes — the China threat included — seek to alter the global power discourse, they will only open more doors of opportunity for India. But can India convert this convergence of opportunities into gains, like Japan did after World War 2 and China did after the Cold War? And, for that, the challenges remain internal, not that much external. New Delhi has responded with a policy of self-reliance: ‘Atmanirbhar Bharat’. But that would remain incomplete without a clearly articulated trade and economic strategy to engage with the world, one which takes forward Prime Minister Narendra Modi’s own articulation on Atmanirbhar Bharat being, among many things, a ‘Make in India for the World’ project.

For that, the first big shift has to be a complete overhaul of India’s trade policies. It must move away from a tariff-based approach to one centred on quality and standards. In fact, the ambition should be to harmonise domestic and global standards. The argument that the Indian market is for cheaper, less quality goods needs to be challenged upfront.

In that respect, trade is a bit like climate change. For years, India resisted the climate debate on the argument of common, but differentiated, responsibility, successfully putting the onus on developed nations to take cuts and make good the damage they had done to the environment through their development phase. While that was intelligent diplomatic play then, it took time for India to realise that eventually climate change was about technology transformation in the long run, not just emission cuts. And there, India’s interests lay in making the shift, embracing it, and not falling behind the technology curve. In fact, Modi became the first Indian PM to publicly endorse climate change policies and not see it as a North-South debate.

Get Chained to Value
A similar shift is needed on the trade and manufacturing side. For long, Indian negotiators have tried to run circles around WTO and free trade agreements (FTAs) to get tariff waivers, but have been unable to cross the quality and standards barrier. At a time when GoI is trying to turn crisis into opportunity by pressing ahead with big-ticket reforms, this may be an area worth looking at, especially if it wants to move up the value chain within global supply chains.

One of India’s biggest advantages, while insisting on companies to set up production facilities here, is the size of its market. This is a significant plus over other countries competing to attract businesses diversifying their supply chains from China. Any new trade and economic strategy needs to leverage this market strength more effectively, especially at a time when security is critical to any supply chain. Again, China did so with great success in the 1990s and 2000s.

Further, a trade strategy should be pursued on sound economic logic, not under any made-up strategic compulsions. The notion that there are such pressures on India must be shunned at the highest political levels. India must be clear about its economic goal because that itself is its biggest strategic objective.

Even now, when questions are raised over why FTAs have not worked in India’s favour, or why it was necessary to go along with Regional Comprehensive Economic Partnership (RCEP) negotiations this long when the trade surplus with China was galloping ahead, the bureaucracy tends to take cover under term ‘strategic considerations’. The idea that bad economic decisions need to be taken for strategic reasons must be rejected outright. Yes, there can be exceptions to the rule, but they have to be extremely rare and limited.

In the case of India, the argument is doubly flawed because the strategic environment has only been favourable. India’s rise is in the larger interest of the world. There is no major power, barring China, which would question this premise. And Chinese military aggression in Ladakh has only strengthened this political logic across global capitals.

In fact, China is on the opposite end, trying to leverage its economic strength to deal with a hostile strategic environment. Beijing is hoping that Donald Trump’s exit from the White House will help reduce pressures. But from what it appears, EU is drafting a whole new alliance document with the US that aims to counter China, which has sought to drive a wedge within EU through a ‘17+1’ grouping of central and eastern European countries.

Indiyeah, Goes the Chorus
In contrast, India’s political acceptability is extremely high. In West Asia, for instance, the UAE has put visa curbs on Pakistan, while Indian workers are gradually finding their way back as the economy there opens. The new power equations in the region — Israel, Saudi Arabia, the UAE — also benefit India.

It’s always a rare moment in a country’s history where its strategic positioning and acceptability provides greater flexibility to its economic planners. Mostly, it’s the other way around. The challenge now is to leverage this broader political acceptability for an economic purpose.

Views expressed are author’s own

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