By James Lamont in New Delhi
Published: January 30 2009 00:10 | Last updated: January 30 2009 00:10
Most aspiring world powers are reaching into the policy drawer for a checklist to navigate the global politics of a downturn. None more so than India.
The global financial crisis has hit the country at an inconvenient time, as it reaches out politically and economically to the western world. The sliding markets and liquidity squeeze have shown India and China far from “decoupled” from US and European economies. “The Indian century”, as some like to imagine it, has hit an early global obstacle.
“The credit crisis has delivered the first major external economic shock of India’s meteoric 21st century rise,” says Peter Mandelson, the UK’s minister for business. “India is less dependent on export demand than China or other parts of Asia, but the pressures on developed world investment can, and are, having the same impact on growth in India, China and the other emerging economies.”
Mr Mandelson, on a visit to New Delhi this month, outlined back-of-the-envelope steps for India, urging it to stay on its globalising path. He proposed:
● keeping trade flowing and the economy open;
● signing the European Union-India free trade agreement;
● using the optimism surrounding Barack Obama’s presidency in the US to strike a Doha trade talks deal later this year;
● using the downturn to shift into low-carbon technology;
● and helping the Group of 20 nations, which meets in London in April, achieve a shift in international politics to a new agenda.
Mr Mandelson's checklist resonates with many Indian leaders, but they acknowledge that if they achieved only one or two of the more modest goals over the coming year they would be doing well.
India’s leadership craves a greater role in the world’s multilateral organisations whether as a permanent member of the United Nations Security Council or guiding the global financial system at the G20. They are also aware that India plays a pivotal role in the success of the World Trade Organisation’s global trade talks and initiatives to combat climate change.
Growing influence, however, is not confined to the negotiating table. India is fast modernising its armed forces, already among the largest in the world. The deployment of Indian naval vessels in the Gulf of Aden to protect shipping from pirates at the end of last year was a sign that New Delhi was prepared to expand the reach of its operations outside of UN peacekeeping missions.
In Manmohan Singh, the economist turned prime minister, India’s allies have had a partner hitting all the right notes.
“Our century will be shaped by how we respond to the global economic crisis today. If nations look only inwards and imagine they can solve all their problems on their own, they will fail,” he says emphatically.
Mr Singh has presided over one of the biggest shifts in India’s international alignment since the end of British rule in 1947.
The world’s largest democracy has traditionally behaved as a leading non-aligned country, and always been regarded as a good partner to have on single issues but difficult to engage across a range. Increasingly, as it projects itself more forcefully on the world stage, it is having to develop a broader, more consistent stance befitting one of the world’s fastest growing large economies.
In this regard, India’s single greatest recent foreign policy transformation, of which Mr Singh is the architect, is its fast warming relationship with the US. This had already begun in spheres such as education and IT outsourcing. But it took a civil nuclear agreement, signed with the outgoing Bush administration, to lift sanctions imposed in 1970s and unlock the potential of India’s relationship with the US, thought unimaginable a decade ago.
“The new relationship rests on a convergence of US and Indian national interests, and never in our history have they been so closely aligned,” reports an Asia Society taskforce led by Frank Wisner, a former US ambassador to New Delhi.
Since the nuclear deal’s passage through the US Congress, India’s foreign outlook has changed dramatically, not only because of the global financial crisis, but also because of a devastating terrorist strike on its financial capital.
Since the Mumbai terror attacks last November, India and its neighbour Pakistan have been engaged in a frustrating diplomatic exchange over who was responsible and whether they will be brought to justice. India’s foreign policy has quickly, though temporarily, narrowed to focus on the instability of South Asia and a familiar stand-off with Islamabad, with whom India has fought three wars in the past six decades.
Some commentators, such as Gurcharan Das, the former chairman of Procter & Gamble in India, are critical of what they call a return to the hostilities of the past. Rising Chinese and Indian economic development are higher priorities than a public row with Pakistan, he says.
Vishnu Prakash, one of the government’s chief foreign policy spokesmen, insists that one advantage of his country’s large civil service is that India will never be a “one issue” country. With so much hanging on India’s participation in global debates over financial infrastructure, climate, trade and terror, the international community will want to believe him.