Test for Modi diplomacy

India with its quest for attracting greater foreign direct investments (FDI) has stepped up its diplomatic efforts around the world. These have gained a renewed vigour after the country relaxed FDI norms and shortlisted as many as 25 sectors to attract investments under the ambitious ‘Make-in-India’ programme. These sectors are namely auto components, automobiles, aviation, biotechnology, chemicals, construction, defence manufacturing, electrical machinery, electronic system design and manufacturing, food processing, IT &BPM, leather, media and entertainment, mining, oil and gas, pharmaceuticals, ports, railways, roads and highways, renewable energy, space, textiles, thermal power, tourism and hospitality and wellness.

Total cumulative inflows of FDI since the year 2000 to 2014, however, were not encouraging. It stands at only $355,415 million including equity inflows, re-invested earnings and other capital. Therefore, the new government that came to power under the leadership of Prime Minister Narendra Modi in May last year became bullish in attracting FDI and opened up as many as 25 sectors of the economy to foster growth. The government feels that in the current period of continuing global slowdown, India with a market size of 1.2 billion people can be the most suitable destination for global investors.

At a recent meeting of Heads of Indian Missions Abroad, Prime Minister Modi urged them to step up diplomatic efforts aiming at garnering FDIs, augmenting country’s trade opportunity and meeting energy needs. The President’s address to the joint session of Parliament just before the Union Budget has revealed the government’s intention to deepen engagements almost everywhere across the globe, including West Asia, Central Asia, Africa and South Americas.

The government’s ambitious projects like Bullet Train, Digital India, Skill India, Housing for All, Swachh Bharat Mission, Namai Gange, Smart Cities, Heritage Development and Augmentation Yojana to name a few would need investments by prospective overseas investors including Indian diaspora. Investments are also needed in infrastructure sectors like industrial corridors, railways, roads and highways, freight corridors, information technology highways. Energy sector, particularly clean energy sector has been earmarked as a priority area for attracting foreign investment and technology transfer.

Developing closer integration of South Asia is an integral part of Modi diplomacy. With the agreement on energy cooperation approved in the last SAARC Summit at Kathmandu, the government has planned setting up of solar energy generating capacities along the international borders. The idea of a dedicated satellite for SAARC region is another area of proposed cooperation with South Asian countries. The most vital and effective economic integration in South Asia can, however, be possible with the setting up of value chains across the region. For instance, Bangladesh that does not grow cotton but sources from India and exports readymade garments can through distributed value chains encourage competitive advantages in production of both raw materials and value-added products.

With prospects of Indian cricket team brightening up at the World Cup, India has embarked upon cricket diplomacy in the region. The Indian Foreign Secretary Subrahmanyam Jaishankar has planned “SAARC Yatra” and would visit all the countries in the region. Some analysts believe that stalled dialogue between India and Pakistan is likely to revive after a popular government is put in place in Jammu and Kashmir. India’s cricket diplomacy with Pakistan is likely to encourage people-to-people contact before the dialogue process resumes.

The President’s address mentions the need for deepening cooperation with Europe. As Europe is currently undergoing recession in its economy, the prospective investors from that continent would look for investing in India if adequate environment is created. Though India has come closer to US in many ways and the latter has agreed to invest in the former’s nuclear power project, New Delhi is cautious about restoring confidence and momentum in its time-tested strategic partnership with Russia. Both the US and Russia have assured co-production and development in defence sector.

India is particular in developing its shipping sector also. Under Make-in-India programme it has planned to strengthen ship designing capabilities, ship building and ship repair activities.

India has taken up with sincerity about its relationship with ASEAN and East Asia Summit and has changed its policy to ‘Act East Policy’ The Chinese President Xi Jingping on his recent visit to India had pledged to invest $20 billion in industrial and infrastructure projects in India within a span of five years and $10 billion to other countries in South Asia.

But Japan had promised more – an investment of $35 billion for building smart cities and next generation infrastructure with the same period. In addition, Japan has pledged ODA loan of 50 billion yen to India Infrastructure Finance Company Ltd for a public-private partnership infrastructure projects in India. Australia has agreed to sell uranium for India’s nuclear power projects.

President’s address says about the need for deeper engagements with West Asia, Central Asia and South Americas. West still remains a troubled spot, but is a necessary destination for sourcing India’s energy needs and also Sovereign Funds for investment in the country. Central Asia is an energy rich region and India needs to strengthen its relations with the countries in the region.

Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline is in the process of becoming a reality. India’s proposed route through Chabahar port in Iran to Afghanistan, Central Asia and beyond to Europe should be taken up with urgency.

Africa is a continent of strategic importance to India. The third India-Africa Forum Summit meeting that is slated to take place in this year is expected to take the relationship to a higher level. Similarly, if the relationship with the Community of Latin American and Caribbean States (CELAC) is raised to summit level talks, India can get a firm foothold in the region. Some of the African and Latin American countries are energy rich and can meet India’s energy needs.

New Delhi’s ambition to strengthen its relationship across the globe can result in better trade relationships and two-way investment opportunities. Prime Minister Modi has so far met over 40 world leaders, including those at the margins of major multilateral events. He has directly appealed to the Indian diaspora and corporate houses in countries he visited for investing in India. He has received assurances from many world leaders and global corporate houses. It is to be seen how the commitments translate into actual investments on the ground.

By: Ashok B Sharma