Ministry of External Affairs Government of India

INDIA'S CHANGING GLOBAL PRIORITIES AND THE ROLE OF LOOK EAST POLICY

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  By: Amb (Retd) Pinak Ranjan Chakravarty
  Venue: Indian Institute of Technology (IIT), Chennai
  Date: October 30, 2017
  

Chairperson, faculty members, students, friends, ladies and gentlemen, I am grateful to the Ministry of External Affairs, for sponsoring my visit and IIT Madras for hosting this lecture. I propose to have a Q&A session after I have spoken. An interactive Q&A session will be more exciting than a monologue from me.

I am delighted to be here primarily for 3 reasons – one, the quality of this audience; the best and the brightest; two, because IIT always reminds of my personal tryst with undoubtedly, the most famous of higher institutions in our country; and three, your beautiful campus.

The year was 1970 and having finished school - it was class 11 then - I found myself sitting for the IIT entrance test; there were not too many career options – doctor or engineer were the two leading ones, for those who came from the science stream. To cut a long story short, I landed up at IIT Kanpur for the entrance interview and was advised about the streams I could join in different IITs – there were 5 IITs then.

I don’t know why but I had got into my head that if I did not get the course of my choice, I would look for other options. I was not offered the course I wanted and I decided to board a train to Delhi; I bought a 3rd class ticket and being tall and fairly well built as a 16 year old, I managed to jostle my way into the train through a milling crowd. The train was so overcrowded that I only managed to sit on the floor near the door for the overnight trip. My next attempt was at Delhi University – many friends and seniors had studied there. Finally, I joined DU, giving up the IIT option and ended up getting a Masters degree in Physics and Astrophysics.

The Civil Services were an attractive career option those days, when career options were limited. Banks too were also attractive option as employers. Living in a DU College hostel, sitting for the Civil Service UPSC examination was infectious. It was not an easy decision to make. But I did, encouraged by my parents and friends. Meanwhile, I had also decided to sit for several other recruitment exams conducted by leading companies and Banks. I joined the SBI for around 6 months, till the appointment offer to join the Indian Foreign Service came by telegram.

This personal story may be boring, even irrelevant, but I chose to narrate it because life is about change and choices. Nations too have to face change, adapt and make choices when formulating policy, whether domestic or foreign.

I hope some of you are motivated to join the Civil Service and I, personally, would hope that some among you will eventually join the Indian Foreign Service. Having spent almost 37 years as a diplomat, I can say with confidence that I have not regretted my decision to pursue a career in diplomacy. Over the years, we have welcomed several IIT graduates into the Foreign Service. We would be happy to welcome more, at a time when the Government of India has approved an ambitious expansion of the cadre of India’s professional diplomats. I have come across many IIT graduates wile interviewing candidates as a member of the UPSC Civil Service Interview Board.

Many among you will go on to become future policy makers and managers of our country’s destiny. Beyond graduation, you will eventually assume leadership positions in your respective workplaces in the next 30-40 years. As managers and leaders of the future, you will have to expand and integrate your knowledge horizon for national development, corporate or organizational goals. Your skill bank must include a general understanding of India’s foreign policy challenges in the changing international order.

There is an enduring link between foreign policy and national development, as we live in an increasingly integrated world, where cause and effect are quickly transmitted globally and nimble footed decision making can make a huge difference for desired outcomes. Foreign policy is a sub set of a nation’s national policies and is symbiotically linked to national goals and objectives as defined by its political order. It follows priorities set by the government of the day but also transcends ideological leanings of parties in certain domains that remain non-partisan. It is driven by demands of development.

For instance, IITs and IIMs were established because India needed engineers and professional managers for new industries and large numbers of Public Sectors organizations during the 1950s and 1960s. The then Planning Commission decided to tap foreign expertise in setting up the IITS and IIMs. Indian diplomats of that era were instrumental in making this collaboration happen by connecting with foreign governments and institutions to facilitate setting up these institutions which have helped enormously the course of development, not just in India, but also provided management professionals to global corporations.

There are any more such examples in almost all sectors of our country’s development – the Green Revolution – Food security, White revolution (self-sufficiency in milk and milk products), Energy security, Space, Steel, Mining, Manufacturing, Services, Defence, acquisition of technologies, IT etc. The quiet and sustained efforts of Indian diplomats over the decades have contributed to the progress in all these fields, in the overall context of national development. I can tell you from my experience as a diplomat serving in Israel the work we were tasked to do in the domain of Agriculture, Defence and Defence technologies.

INTERNATIONAL ORDER

The international order after the 2nd World War was crafted by the victors, primarily the USA, which emerged as the strongest military and economic power. In the financial domain we saw the creation of the Bretton Woods institutions – World Bank and the IMF, the US dollar as the international currency, the international trading order fashioned by GATT and its successor the WTO and related institutions. After the failure of the League of Nations in the post 1st World War period, lessons were learnt in crafting the successor organization, the United Nations, in an era which saw the use of nuclear weapons. Never in history had such a weapon of mass destruction had been created and used. The development of nuclear weapons had an enormous impact on the international order. Such weapons have never been used again.

The communist revolution in China, the emergence of hundreds of new independent nations from the death throes of colonialism, the Cold War, the war in Vietnam, Non-Alignment, Bipolarity and rapid growth in international trade came to define the international order from 1950s to 1980s. Rapid advances in healthcare and new medicines led to an explosion in global population. It is instructive to note that at independence the average life expectancy in India was 27; today its approaching 70.The most rapid growth in population took place in China and India, the only two countries today each with billion plus population.

We live in a world of change and globalization, wherein technology and innovation are the principal drivers of change. In the last 6 decades the most important vector that has influenced almost all aspect of human civilization is technology. This inexorable advance and the pervasive influence of technology will continue and affect all aspects of the economy and our own lifestyles. Technology has changed the international order in a fundamental manner and will continue to do so, sometimes in very disruptive ways.

The advances in robotics, Artificial Intelligence, 3-D printing and manufacturing, will usher in a 4th Industrial Revolution that would reduce the role of human labour. How do we adjust and adapt to these inexorable changes? Will manufacturing return to the developed world with the development of robotics? Countries are already talking about phasing out petrol and diesel vehicles in the next 3-4 decades. There are several such examples.

One overwhelming aspect of technology is the Cyberspace and the explosive growth of the digital economy. We are now converting to accessing FLIPKART, SNAPDEAL, AMAZON, OLA, UBER, MAKEMYTRIP, to name only a few. We are using thousands of applications on our Android smart phones to do a range of economic activities that no one imagined even a decade back. The social media has taken the world by storm, particularly the younger generation which is tech-savvy and hooked to their smart phones. For someone like me who joined the workplace during the era of manual typewriters and telex, this phenomenal shift has happened during my lifetime. We started using computers in the government in the early 1990s.

The head long rush in technological innovation and its adaptation as economic instruments in the last 25 years will certainly demand your close attention in your future workplace. Cyberspace will increasingly dominate the global economy. The internet economy of the G-20 countries has crossed USD 4.2 trillion. No one can ignore the magnitude of this change. In India, mobile users have crossed a billion and internet users over 350 million. Smartphone users are about 1/3rd of mobile phone users. This market cannot but increase. Flash sales of smart phones by e-retail portals exhaust their stock within minutes.

Take another example of technology overwhelming the status quo – the Post and Telegraph department. We could not imagine that we will be able to live without postal stamps, letters, telegrams, money orders and similar services. I recall that my appointment offer to the Indian Foreign Service reached me one early morning by Telegram. I have kept this Telegram framed in my home for display. Let us also look how the Post and Telegraph sector is coping, though slowly, as change comes slowly to all services in the public sector. Today the vast network of this sector is adapting to the last mile delivery of products from e-retailing companies in the rural areas. The impressive reach of a postman into homes in the remotest corner of India is a great boon for physical delivery of services, making this an exciting area for further growth.

I would like to show you a short video clip which converts statistics into a visually display of change. To illustrate the inevitability of change, it is instructive to know how countries have moved up or down in the global index of development over the centuries. Let’s see this -

[VIDEO CLIP]

The international order is currently undergoing a phase of power disequilibrium. We have left behind empires, revolutions, imperialism, colonialism and wars that marked the passage of the last three centuries. We live in a world whose structure is highly integrated technologically, intimately connected with digital information flowing at the speed of light in all directions. The gradual and inexorable shift in the centre of gravity of geo-political and geo-economic power towards Asia, away from the power centre based on the trans-Atlantic alliance, is now well underway.

Geo-politically and geo-economically, the most significant global change by far and which has had the most impact on the international order has been the amazing transformation of the Chinese economy. India’s economic progress has also been impressive but it is China’s rise that has shaken up the international order in a fundamental way. Never in human history have we seen a massive transformation of a country as large as China. The scale and impact of this change has been astonishing. This has led to a shift in the global economy that has diminished the hegemony of the developed Western economies. The economic transformation of China is clearly the most significant development since the economic reforms started in China in 1978. China’s economy soared and has since overtaken that of Japan. With GDP around USD 10 trillion in real terms, it is catching up with the USA.

China is today the largest merchandise exporter in the world, running huge trade surpluses with almost all major economies. China’s Belt and Road Initiative [BRI], formerly OBOR/MSR, is a geo-economic and geo-strategic blockbuster. China’s military modernization, particularly its naval expansion, should leave no one in any doubt about its intention to become a great power and dominate the Indo-Pacific region. With economic power shifting to Asia there is the inevitable power shift, with China flexing its economic and military muscle. The BRI has attracted many Asian countries to sign up, expecting huge Chinese investment for infrastructure development, thereby moving firmly into China’s geo-economic orbit and thereby into China’s sphere of influence. India has opposed the BRI because one section of it, the CPEC, goes through PoK. It is matter of sovereignty for us, though we are not in a position to prevent it.

The power disequilibrium in the international power structure is likely to lead to a multi-polar world, with 3-4 dominant powers but no single superpower. The management of this emerging international system will devolve on some large countries with demographic and economic heft. In this future landscape the USA, China, India and to some extent Russia and Japan will increasingly play balancing roles. India will become the most populous nation on the planet, with a huge market for energy, goods and investment. Such a future will have substantive domestic impact and on India relations with the outside world. One such multilateral grouping is the G-20, comprising the top 20 countries in the world as per their GDP which is now a regular forum for discussing economic and fiscal policies. The G-7, a club of the most developed countries, has only one Asian country, Japan. China and India, the two fastest growing economies today are not in G-7. This makes G-7 less credible today.

Two recent events are likely to have significant impact in Asia. First, the confirmation of President Xi Jinping, as the General-Secretary of the CCP and China’s President, after the recent conclusion of the 19th Communist Party Congress, as the most powerful Chinese leader in our time, While reassuring the world that China’s foreign policy will be peaceful and independent, will uphold international justice and will seek to build a "common destiny for mankind”, China’s deeds rather words will be watched carefully. China will continue to pose a huge foreign policy challenge for India. The disputed border and the China-Pakistan strategic alliance directed against India will remain the most enduring challenge well into future.

The second significant future event is the massive electoral victory of PM Shinzo Abe of Japan. To meet the challenges posed by a powerful and hegemonic China, Abe’s Japan is poised to play a crucial role, in concert with India and the USA in the Indo-Pacific region. China’s aggressive role in Asia is likely to cement growing ties with the Asian democracies. India’s closer strategic ties with Japan and the USA are being propelled by both economic and strategic factors. India and Japan are working on an ambitious programme, the Asia Africa Growth Corridor (AAGC), with a Japanese commitment of $30 billion and an Indian commitment of $10 billion. The project is aimed at building capacity and human resource development in Africa as well as developing infrastructure and institutional regional connectivity. China’s BRI is not the only big connectivity project, though it is the best funded.

Here I would like to show you some of the competing connectivity projects that are on the anvil in Asia and Eurasia -

[PP PRESENTATION]

ASIA CONNECTIVITY COMPETING VISIONS

When reviewing India’s challenges in the changing international scenario, it is not difficult to identify our domestic issues of poverty, education, health, access to water, climate change and environmental degradation and related issues, as enduring challenges that the country has to overcome. The primary goal of all policy, whether domestic or external, is the transformation of India into a developed, prosperous and peaceful society. Meeting external challenges is ultimately dependent on how successfully we deal with domestic challenges.

Recognizing this trend, our foreign policy re-orientated itself quite some time ago from the traditional political domain to economic diplomacy. While traditional economic diplomacy of promoting merchandise exports continued, the canvas was broadened. Technology spotting, encouraging FDI, facilitating inflows of technology, climate change and other areas of vital interest to our national development became priority domains.

For India, management of our relations with China has been an important foreign policy challenge, not just on the economic front, but also in the politico-security domain because of the unresolved border dispute and the China-Pakistan nexus. While China has become one of our largest trading partners, as a result of which some of our small and medium industries have been driven out of business. We are running a huge trade deficit with China that stubbornly refuses to go away, posing a permanent challenge to our foreign and national policy. The option that we have adopted can be described as cooperation and competition and avoidance of conflict. The recent faceoff between Indian and Chinese troops on the Doklam plateau and its peaceful resolution is a good example of conflict avoidance.

One significant impact of the rise of China is the change that it has brought about in the strategic orientation of Japan, in both its economic and security dimensions. Other Asian countries have been impacted in a similar manner providing opportunities that India has to factor into its policies, giving foreign policy a crucial role in leveraging these opportunities. There is a slow and steady move towards increased cooperation between the large democracies like Australia, India and Japan and the USA and countries like Indonesia and Vietnam. These trends can create business opportunities that future managers of our country’s policies can leverage to our advantage.

Another crucial area for national development with a key role for foreign policy is the Energy Sector. India’s economic growth has to depend on imported energy and this dependence is likely to increase to almost 90% of our requirement in the next decade and beyond. Fortunately, for a variety of reasons, principally the success of "fracking” technology in the USA and no cut back in production by the oil producing countries, there is a supply glut in the market and oil prices have reached a historic low. This situation is a huge boost for our balance of payments. This situation of low oil prices may not last for long.

One of our foreign policy objectives is to tie up long term oil supply contracts, taking advantage of low prices. The Gulf countries host an Indian diaspora which is almost 7 million strong. Their wellbeing has been one of the top priorities of our foreign policy. India is the world’s largest recipient of foreign exchange remittances, mainly from the Indian diaspora. The shift to renewable energy sources from the traditional fossil fuels has begun as direct result of Climate Change factors. The consumption of energy will grow manifold and the fields of solar and wind energy and other renewable energy resources will be an active arena of the economy providing opportunities for business.

Those among you who venture out into the financial world should note the changes in global economic governance. The Bretton Woods institutions like the IMF and the World Bank have been used to perpetuate the financial hegemony of the Western developed countries. The skewed policy of generous and mild disciplines on European countries for economic structural adjustment programmes and imposing punishing financial disciplines on Asian and African countries, has led to the search for alternate financial institutions. These Western dominated institutions have resisted change for far too long and carried on with their neo-colonial approaches. The IMF has now accepted the Chinese currency in its basket and the weighted voting method has also accommodated higher quota to China and India.

New financial institutions like the BRICS new development bank and the Chinese promoted Asian Infrastructure Investment Bank (AIIB) of which India became a founder member are giving countries in Asia more options. The international system built up by the victors of the Second World War led by the USA is now under challenge. More and more countries are exploring trade and oil deals which are not designated in dollars. Even today oil is quoted in US $ so that the energy market remained tied to the US currency, just as the US $ became the international currency.

The uncertainty in the international economic and security situation will pose challenges for Indian foreign policy and national development strategies in the coming decades. The scramble for resources is now entering the planet’s seas and oceans. This has been referred to as the "Blue Economy” which brings in aspects of environment, marine and coastal economy. The broad thrust is on sustainable development. We can, however, expect continuing contest among nations in this domain. Chinese attempts to develop and occupy islands in the South China Sea is basically to ensure that China can claim sovereign rights to exploit marine resources, apart from the strategic objective of controlling the Sea Lanes of Communications. India has been focussing on the Bay of Bengal and the Indian Ocean and the rim countries to promote economic and security cooperation. The Indian Ocean is a vital area of strategic interest to India.

LOOK EAST POLICY/ACT EAST POLICY

Now let me turn to the "Look East” Policy [LEP], now renamed "Act East Policy” by the current government. This policy option was one of the earlier shifts that took place as a result of the changing international order. The LEP, is now more than 2 decades old. Any nation that undertakes course correction in its foreign policy exploring new options, does so inevitably under a certain set of circumstances, both internal and external. This usually happens when the international power equilibrium is disturbed by external cataclysmic events, such as the collapse of the Soviet Union or the less cataclysmic and more gradual disequilibrium created by the rise of China. When the world enters such phases of disequilibrium in the international power structure, it forces nations into making policy changes, to protect its perceived national interest. Internal developments also impact upon foreign policy.

The renewed vision to seek closer relations with countries in India’s extended eastern neighbourhood was quintessentially India’s response to domestic economic challenges and the changing international order, marked by a unipolar world, brought about by the collapse of the Soviet Union and the end of the Cold War. Thus the economic reforms of 1991 and the opening up of India’s economy provided the impetus for reworking India’s foreign policy. Faced with multiple problems, economic and political, India adopted two parallel new policy tracks - a domestic policy path of economic liberalization and the external policy path of the LEP to help expand India’s trade and investment with the dynamic ASEAN region. These two choices have transformed India’s economy and foreign policy in the past 20 years. LEP was a logical outcome of domestic compulsions and a changed external environment.

The renaming of the LEP as the "Act East Policy” [AEP] is a recognition of the fact that India’s trade has shifted eastwards – over 50% now. The logical pull factors include the Bay of Bengal, Bangladesh, Myanmar and the countries of the ASEAN. Another compelling reason for India’s AEP option is failure of SAARC to actualize the South Asian Economic Union. South Asia trades much more with the rest of the world than within the region. It would surprise you to know the regional trade in South Asia is only around 5% of the total trade of the SAARC countries.

The ASEAN region along with India together comprises combined population of 1.85 billion people, which is one fourth of the global population and their combined GDP has been estimated to be over $3.8 trillion. Investment from ASEAN to India has been over $70 billion in the last 17 years, accounting for more than 17 percent of India's total Foreign Direct Investment (FDI). India's investment in ASEAN during the same period has been more than $40 billion.

There are ambitious connectivity proposals that are being held up by the non-cooperation of Pakistan which seeks to hold all progress among SAARC countries to its bilateral disputes with India. Pakistan, therefore, has become the biggest obstacle to trade flow, connectivity and almost everything that could give access to India to the Central Asian countries. The Turkmenistan-Afghanistan-Pakistan-India [TAPI] gas pipeline project has been in a limbo, despite agreements. Turkmenistan, a landlocked country, is rich in gas deposits and India is a logical consumer as an energy deficit country.

This has led to India exploring sub-regional initiatives in the east with Bangladesh, Bhutan and Nepal, popularly known as the BBIN countries as part of our AEP. The power sector, transmission lines, transportation by waterways, coastal shipping have emerged as new connectivity links. The electricity grid of Bangladesh, Bhutan and Nepal are now connected with India. Power is imported and exported as per Power Purchase Agreements and can also be bought from the Indian National Power Grid. Railway connectivity projects are underway that will provide transportation links via Bangladesh to Agartala. India is exporting almost 700 MW of power to Bangladesh. The logic of the AEP option is compelling and therefore, BBIN and BIMSTEC have become default policy options.

AEP’s fundamental objective is to promote create connectivity for trading corridors with Myanmar and Thailand, both member countries of ASEAN. Thus India has pursued the Tri Lateral Highway Project with Myanmar and Thailand, the Kaladan Project with Myanmar development of the Sittwe port in Myanmar and other connectivity projects. The political and security situation in the north-eastern states and Myanmar are problematic and create challenges for these policies to be implemented. These foreign policy initiatives have a direct bearing on the development of our north-eastern States. The strategic dimension of these options becomes clear when we consider that it is to the East that we see the rise of China and the contest that is underway in the South China Sea, involving some ASEAN countries and Japan.

India’s policy options in this changing international order will essentially be work for a multipolar world order. This would challenge the world vision of China which has set sights on challenging the USA and pushing its way as the Asian hegemon and eventually a global one. The pushback to China’s aggressive posturing has begun already. The challenge is to manage this change without conflict. Many theorists of international relations have predicted that USA and China will inevitably fall in the "Thucydides Trap” and end up in a conflict. Thucydides was a Greek historian who wrote about the rise of the city state Sparta which challenged the power of the established Athenian city state in ancient Greece. Thucydides postulated that conflict is inevitable when a rising power challenges an established power. While this may be historically true to some extent, to extrapolate and conclude the inevitability of conflict is, in my view, premature in our current international order.

There is no appetite for conflict in the current international order. There will be competition and cooperation. World leaders meet frequently in a variety of global fora and these frequent interactions help to defuse tensions, though each great power does not give its stated goals. A China-centric international order cannot be stable and China has no history of being a global hegemon. China’s "Middle Kingdom” mentality was regional and limited to China’s periphery, even in sub-regions which now Chinese territory. Moreover, China is an authoritarian state whose default position is not based on democracy or consensus. China has no history of creating and protecting an international order based on maintaining public goods.

The current phase in the international order, therefore, will require India to navigate by hedging, bandwagoning and forming coalitions with like-minded powers to ensure that the international order moves towards a multipolar configuration. Avoidance of conflict will certainly be a main pillar of this policy for India. This will require building deterrence, both conventional and non-conventional, judicious management of our periphery and full speed ahead on domestic reforms, economic growth, job creation and a stable social order. It is from domestic strength that we can build the sinews of our foreign policy options.

Thank you. I would be happy to take questions.