India’s geoeconomic strategy

ABSTRACT

Many observers recognize policy continuity as a prominent feature of India’s statecraft, but practitioners see fundamental changes in the last quarter century. In this article, we explain how India’s economic expansion because of sustained economic growth altered its statecraft. That prosperity is a prerequisite to sustain power has been well recognized through history by major thinkers of strategy. We examine the relationship between India’s economic strategy and its congruence with its foreign policy strategy. In particular, we illustrate how India has viewed geoeconomics, defined here as “the use of economic instruments to achieve specific geopolitical results.” We highlight the degree and instruments of India’s economic statecraft as an integral component of its foreign policy, and its strengths and limitations relative to other rising powers.

Notes

1. The deal followed a logistics pact signed on August 30, 2016 between India and the United States to provide to militaries of both countries with access to designated military facilities on either side for refueling and replenishment. Maulik Pathak, “Reliance Defence Signs Warship Repair Pact with US Navy.” Livemint, Febuary 14, 2017.

2. Charu Sudan Kasturi, “UAE Keen on Indian Imams.” Telegraph, February 10, 2016.

3. This included purchasing the S-400 Triumf air defense system, and collaborating in manufacturing four state of art frigates and a joint production facility for making Kamov helicopters. http://indianexpress.com/article/india/india-news-india/india-to-buy-gamechanger-s-400-air-defence-system-from-russia-3084151/ (accessed data March 15, 2017).

4. See Michael Mandelbaum, The Fate of Nations: The Search for National Security in the Nineteenth and Twentieth Centuries (New York: Cambridge, UK: Cambridge University Press, 1988); Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York:Vintage, 1988); Eliot Cohen, The Big Stick: The Limits of Soft Power and the Necessity of Military Force (New York, NY: Basic Books, 2016).

5. Fareed Zakaria, From Wealth to Power: The Unusual Origins of America’s World Role (Princeton, NJ: Princeton University Press, 1998), 1.

6. Harold Lasswell, Politics: Who Gets What, When, and How (New York: Meridian Books, 1958).

7. David Allen Baldwin, Economic Statecraft (Princeton, NJ: Princeton University Press, 1985).

8. Benn Steil and Robert E. Litan, Financial Statecraft: The Role of Financial Markets in American Foreign Policy (New Haven, CT: Yale University Press, 2006); Robert D. Blackwill and Jennifer M. Harris. War by Other Means: Geoeconomics and Statecraft (USA: Belknap Press, 2016).

9. Michael Mandelbaum, The Case for Goliath: How America Acts as the World’s Government in the Twenty-First Century (USA: Public Affairs, 2006).

10. Edward N. Luttwak, “From Geopolitics to Geo-Economics: Logic of Conflict, Grammar of Commerce,” The National Interest 20, no. 1 (1990): 17–23.

11. Samuel P. Huntington, “Why International Primacy Matters,” International Security 17, no. 4 (1993): 68–83.

12. Robert D. Blackwill and Jennifer M. Harris, War by Other Means: Geoeconomics and Statecraft (USA: Belknap Press, 2016).

13. Sanjaya Baru, “A New Era of Geo-Economics: Assessing the Interplay of Economic and Political Risk.” IISS Geo-Economics and Strategy Seminar, March 25, 2012.

14. Angus Maddison, The World Economy: A Millennial Perspective (Paris: OECD, 2001), Table B-18. Maddison estimates India’s share in the world economy as 22.5 percent in 1600, 24.4 percent in 1700, and 16 percent in 1820.

15. Cited in Srinath Raghavan, India’s War (USA: Basic Books, 2016), 456.

16. Roy (2017) argues that domestic business interests played a crucial role (in addition to some prominent economists such as V.K.R.V. Rao). Tirthankar Roy, “The Origins of Import Substitution in India,” Economic History of Developing Regions 32, no. 1 (2017): 71–95. However, there were other views, but fundamentally Nehru was himself skeptical of international trade and markets.

17. Daniel R. Headrick. The Tools of Empire: Technology and European. Imperialism in the Nineteenth Century (Oxford, UK and New York, NY: Oxford University Press, 1981).

18. Robert S. Anderson, Nucleus and Nation: Scientists, International Networks, and Power in India (Chicago, IL and London, UK: University of Chicago Press, 2010); Jahnavi Phalkey, Atomic State: Big Science in Twentieth-Century India (Ranikhet, India: Permanent Black, 2013.)

19. John Waterbury, Exposed to Innumerable Delusions: Public Enterprise and State Power in Egypt, India, Mexico, and Turkey (New York, NY: Cambridge University Press, 1993).

20. See, for instance, Robert H. Wade, Governing the Market: Economic Theory and the Role of Government in East Asia’s Industrialization (Princeton, NJ: Princeton University Press, 1990). The inability of the Indian state to do the same has been attributed to a mix of ideology – a lack of conviction on the benefits of export-led growth – and political economy, in particular a “soft” state, that found it difficult to impose the necessary disciple on capital, organized labor or state enterprises.

21. Sanjoy Chakravorty, Devesh Kapur, and Nirvikar Singh, The Other One Percent: Indians in American (New York, NY: Oxford University Press, 2017).

22. Aseema Sinha, Globalizing India: How Global Rules and Markets Are Shaping India’s Rise to Power (Cambridge, UK: Cambridge University Press, 2016).

23. N.S. Sisodia, “Economic Modernisation and the Growing Influence of Neoliberalism on India’s Strategic Thought,” in Indian Grand Strategy: History, Theory, Cases, edited by Kanti Bajpai, Saira Basit, and V. Krishnappa (New Delhi, India: Routledge, 2014).

24. Shivshankar Menon, “Foreign Policy in the Wake of Economic Reforms,” in India Transformed: 25 Years of Economic Reforms, edited by Rakesh Mohan (Gurgaon, India: Penguin Random House, 2017), 168.

25. Subrahmanyam Jaishankar, “Speech at the First Gateway of India Dialogue.” Ministry of External Affairs, June 13, 2016. http://mea.gov.in/Speeches-Statements.htm?dtl/26902/Speech_by_ForeignSecretary_at_the_First_Gateway_of_India_Dialogue_June_13_2016

26. The data is from Arvind Subramanian, Eclipse: Living in the Shadow of. China’s Economic Dominance (Washington, DC: Peterson Institute for International Economics, 2011).

27. Robert D. Blackwill and Jennifer M. Harris, War by Other Means. Geoeconomics and Statecraft (Cambridge, UK: Harvard University Press, 2016), chapter 3, “Today’s Leading Geoeconomic Instruments.”

28. Vijay Joshi, India’s Long Road. The Search for Prosperity (New York, NY: Oxford University Press, 2017).

29. See chapter 7, “The Indian Diaspora and Indian Foreign Policy,” in Devesh Kapur, Diaspora, Democracy and Development: The Impact of International Migration from India on India (Princeton, NJ: Princeton University Press, 2010).

30. Rishika Chauhan, “Sanctions and Emerging Powers: Examining the Indian and Chinese Stance,” in Routledge Handbook of Asia in World Politics, edited by Teh-Kuang Chang and Angelin Chang (2018).

31. Devesh Kapur, “The Quest for Global Leadership: U.S.-China Competition in Multilateral Financial Institutions,” China Quarterly of International Strategic Studies 3, no. 2 (2017): 243–65.

32. This includes one of the oldest regional development banks, the Latin American Development Bank (Corporación Andina de Fomento or CAF, established 1968); one of the oldest regional monetary funds, the Latin American Reserve Fund (Fondo Latinoamericano de Reservas or FLAR, established 1978); a virtual currency (the Bolivarian SUCRE, Sistema Único de Compensación Regional); and a variety of other arrangements such as payment systems.

33. John Henderson and Stephen Clarkson, “Promoting Regional International Public Finance and the Rise of Brazil: Comparing Brazil’s Use of Regionalism with Its Unilateralism and Bilateralism,” Latin American Research Review 51 no. 4 (2016): 43–61; for an earlier more optimistic of Brazil’s multilateral efforts see Leslie Elliott Armijo, and John Echeverri-Gent, “Brave New World? The Politics of International Finance in Brazil and India,” in The Financial Statecraft of Emerging Powers: Shield and Sword in Asia and Latin America, edited by Leslie Elliott Armijo and Saori N. Katada (New York, NY: Palgrave Macmillan, 2014), 47–76.

34. Ashima Goyal, “Payment Systems to Facilitate South Asian Integration,”http://www.igidr.ac.in/pdf/publication/WP-2015-021.pdf

35. Devesh Kapur and Rohit Lamba, “Strengthening the Japan-India Economic Partnership,” in Poised for Partnership. Deeping India-Japan Relations in the Asian Century, edited by Rohan Mukherjee and Anthony Yazaki (Oxford, UK: Oxford University Press, 2016).

36. These two cases are illustrative of the relationship between India’s growth and a change and its economic statecraft. In the absence of primary data, the causal linkage is suggestive not definitive. See David Collier, “Understanding Process Tracing,” PS: Political Science and Politics 44, no.4 (2011): 823–30.

37. Srinath Raghavan, India’s Wars: World War II and the Making of Modern South Asia (New York, NY: Basic Books, 2016).

38. “ASEAN-India Relations,” http://mea.gov.in/aseanindia/20-years.htm (accessed November 27, 2017).

39. These invitations are in addition to other bilateral meetings between the heads of states. We highlight Republic Day invites, because they appear to signal the choices India is making while developing its strategic ties.

40. The case for policy continuity is emphasized by Pratap Bhanu Mehta, “Still Under Nehru’s Shadow? The Absence of Foreign Policy Frameworks in India,” India Review 8, no. 3 (2009): 209–33; and Vipin Narang and Paul Staniland, “Institutions and Worldviews in Indian Foreign Security Policy,” India Review 11, no. 2 (2012): 76–94. For practitioners who say that much has changed see essays by Shivshankar Menon, Shyam Saran, and Sanjaya Baru in India Transformed: 25 Years of Economic Reforms, edited by Rakesh Mohan (Gurgaon, India: Penguin Random House, 2017).

41. Fareed Zakaria, From Wealth to Power: The Unusual Origins of America’s World Role (Princeton, NJ: Princeton University Press, 1998).

42. Ian Hall, “Is a ‘Modi Doctrine’ Emerging in Indian Foreign Policy?” Australian Journal of International Affairs .69, no. 3 (2015): 247–52; Rajesh Basrur, “Modi’s Foreign Policy Fundamentals: A Trajectory Unchanged,” International Affairs 93, no. 1 (2017): 7–26.

43. This would be so at both market and purchasing power parity (PPP) exchange rates although India’s per capita income will be well below those of industrialized countries. Currently India is the world’s fourth-largest economy based on PPP exchange rates.

44. Ministry of External Affairs Annual Report, 2015–16, Appendix IX.

45. Amit Agnihotri, “Budget Cuts Affecting Foreign Policy Objectives: Tharoor.” Business Standard, February 18, 2017.

46. Lant Pritchett, “A Review of Edward Luce’s In Spite of the Gods: The Strange Rise of Modern India.” Journal of Economic Literature 47, no. 3 (2009): 771–80.

47. Abhijnen Rej, “Beyond India’s Quest for a Neoliberal Order,” The Washington Quarterly 40, no. 2 (2017): 145–61.

Additional information

Notes on contributors

Amit Ahuja

Amit Ahuja is an Associate Professor of Political Science, University of California at Santa Barbara, Santa Barbara, California, USA. Devesh Kapur is Professor of Political Science, Madan Lal Sobti Professor for the Study of Contemporary India, University of Pennsylvania, Philadelphia, Pennsylvania, USA.

Devesh Kapur

Amit Ahuja is an Associate Professor of Political Science, University of California at Santa Barbara, Santa Barbara, California, USA. Devesh Kapur is Professor of Political Science, Madan Lal Sobti Professor for the Study of Contemporary India, University of Pennsylvania, Philadelphia, Pennsylvania, USA.