25 years of liberalisation: A glimpse of India’s growth in 14 charts

“No power on earth can stop an idea whose time has come,” said then finance minister Manmohan Singh quoting Victor Hugo while presenting the Union Budget on 24 July 1991. And with these words started the long and painful process of economic liberalisation in India.

The liberalisation was aimed at ending the licence-permit raj by decreasing the government intervention in the business, thereby pushing economic growth through reforms. The policy opened up the country to global economy. It discouraged public sector monopoly and paved the way for competition in the market.

The policy, which met with wide opposition from within the Congress and even the domestic industry, was seen as the only way out for India after the balance of payments crisis that brought the country to its knees.

However, after the Congress government under PV Narasimha Rao managed to overcome all the opposition and push through the reforms, successive governments too devised similar policies to slowly and surely shed a Nehruvian legacy.

As the nation marks the 25th anniversary of the economic reforms this month, here are 14 charts that will help you find out how the country moved.

Gross domestic product:


The size of the economy can often give the first impression of the might of a country. GDP gives the total worth of the goods and services produced in a country in one particular year. India’s GDP stood at Rs 5,86,212 crore in 1991. About 25 years later, it stands at Rs 1,35,76,086 crore, up 2216 percent. In dollar terms, India’s GDP crossed the $2 trillion mark in 2015-16. Currently, the country is ranked ninth in the world in terms of nominal GDP. India is tipped to be the second largest economy in the world by 2050.


Once admonished for its “Hindu rate of growth” – cliché for low rate of economic growth – post-reforms, India remained the second fastest growing economy in the world, behind China until 2015. Especially, between 2005 and 2008, the economy clocked the 9% mark annually. With the NDA government revising the GDP growth figures and China slowing down, India is now being billed as the fastest growing major economy in the world, with a growth rate of 7.6% in 2015-16.

Foreign direct investment


Before 1991, foreign investment was negligible. The first year of reform saw a total foreign investment of only $74 million. However, investments have steadily risen since then, except for occasional blips between 1997 and 2000 and 2008 and 2012 – owing to the global economic slowdown. As of 31 March 2016, the country has received total FDI of $371 billion, since 1991. The year 2008 recorded the highest FDI inflow of $43.40 billion. The biggest spurt in inflow was between 2005 and 2006 – 175.54%. As of March 2016, India has attracted $10.55 billion worth of FDI. In 2015, India received $63 billion (nearly Rs 4.19 lakh crore) and replaced China as the top FDI destination, according toThe Financial Times.

Foreign exchange reserves:


It was India’s dismal state of forex reserves that forced the government to bring in economic reforms. Now, 25 years later, forex reserves are at a record high. In 1991, it stood at just $5.8 billion. As of 24 June, the country’s forex reserves are at $360.8 billion. Usually, import coverage of 7-8 months is considered sufficient. The biggest jump in reserves was witnessed between 2007 and 2008 when the kitty bulged 55% to hit $309.2 billion.

External debt:


As the economy expanded so did the country’s external debt as companies started borrowing from the overseas markets to fund their growth. In 1991, the country’s external debt stood at $83.8 billion. The rise has been steady with the figure in December 2015 hitting $480.2 billion. Though the figure looks huge, as a percentage of GDP the external debt has declined. In 1991-92, external debt as a percentage of GDP stood at 38%. The corresponding figure in 2015 is just about 24%. Between 2007 and 2008, external debt rose by more than 30% which is the steepest rise in the last 25 years.

Foreign institutional investment:


Unlike FDI, FII investment is not for long term and is sensitive to domestic and international volatility. FII inflows and outflows may often reflect a nation’s economic and political stability. In 1992-93, FII inflow stood at a meagre $4.2 million. By 1994-95, the figure had risen to $2.43 billion. However, there was a net outflow of $386 million for the first time in 1998-99. The reason for this may be the political instability and the Kargil War. Another major outflow was recorded in 2008-09 – $9.83 billion – during the global financial crisis. FII inflow rose to $45.69 billion in 2014-15 from $8.87 billion in 2013-14, a 414 percent spike in just one year. In 2015-16, however, there was a net FII outflow of $2.53 billion.



Though only around small fraction of the Indian population plays in the share market, the ups and downs in the Sensex reflect the prevalent economic and political scenario in the country. The 30-share index was lingering around the 1000-level in 1991 before crossing the 4,000 mark the next year. However, the Harshad Mehta scam brought about a downturn, with markets ending 1992-93 below the 4,000 mark. The Sensex reached the high point of 15,644 by the end of 2007-08, but fell 38 percent to 9,708.50 points by the end of 2008-09. Since then, the Sensex has risen steadily to reach 25,341.86 points by the end of FY 16.

Per capita income:


Per capita income is the average income of every citizen arrived at by dividing the GDP by the country’s population. Though purely a statistical exercise which may not necessarily show the true picture of a country’s development, nevertheless the data makes for an interesting read. Between 1991 and 2016, per capita income rose from Rs 6,270 to Rs 93,293. This is a whopping 1388 percent jump. However, there’s nothing to be euphoric about the number. As RBI governor Raghuram Rajan says, with this number we are nowhere near ending poverty. “…We are still a $1,500 per capita economy. All the way from $1,500 per capita to $50,000, which is where Singapore is, there is a lot of things to do. We are still a relatively poor economy and to wipe the tear from every eye, one would at least want to be middle-income around $6,000-7,000 which, if reasonably distributed, will have dealt with extreme poverty. And that is two decades worth of work to be even moderately satisfied,” he said in a recent interview to The Times of India.

Purchasing power parity:


Purchasing power parity (PPP) gives a comprehensive idea on the standard of living and the cost of living in a particular country. When per capita income of Indians is calculated in terms of PPP, the standard of living has improved for sure. However, the cost of living has risen too. In 1991, per capita PPP was $1,173. In 2014, it rose nearly five-fold to $5,701. Nevertheless, when compared with developed countries, India’s standard of living as well as cost of living is quite low.

Share of agriculture, industry and services in GDP


The post-reform period shows the gradual decline in the agriculture sector’s contribution to the Indian economy. India’s traditional occupation, agriculture now contributes only about 15% to the GDP, down from 29 percent in 1991. The services sector has taken the lead role in propelling the economy at the global stage. The IT sector has been the torchbearer of the service sector in India. Currently, it contributes around 53 percent to the national economy. In the meanwhile, the industrial sector has undergone marginal growth in the last 25 years.

Power generation and consumption:


Electricity consumption is a proxy for growth. As a country prospers economically, its power consumption increases too. This has been the case with developed countries such as the US. Post-reforms, per-capita power consumption in India has increased each year. Cumulatively, there has been about 162 percent growth between 1990-91 and 2012-13 – from 291.8 KWh to 765 KWh.

Labour force and employment:


The labour force in India currently stands at 49.7 crores. In 1991, it stood at 33.7 crores. More or less two-fifth of population is part of the labour force. The most important fact is that the decline in unemployment rate over the last 25 years is only marginal – from 4.3% in 1991 to 3.6% in 2014. The sectoral composition of labour has witnessed a notable change. The agriculture sector, which is considered India’s backbone, now employs less than 50% of the labour force, while industrial and service sectors have marginally surged ahead.

Car sales:

Source: tradingeconomics.com

With the increase in per capita income, the prosperity of the middle class has also increased for sure. What else describes the rise in car sales in the country. In 1991-92, just over 2 lakh cars were sold. The figure rose to 3, 12,000 by March 1995. The sales crossed the one million mark in 2003-04. The latest figures show that about 20.3 lakh cars were sold by the end of 2015.



The telecom revolution in India can be called the biggest legacy of the post-1991 economy. Telephone, especially wireless, subscription has witnessed exponential growth since the dawn of this century. Telephone connections steadily rose in the initial few years, but could never match the rapid rise of SIM-based mobile subscriptions. In the last eight years, the number of telephone connections has been dipping marginally.

Mobile phones have revolutionised the way Indians communicate. In the last 15 years, wireless subscription has grown by a whopping 28,611 percent. As of March 2016, there are more than 103 crore mobile subscribers in the country. Currently, India is the second largest mobile subscribers in the world after China.

Economic reform is a continuing process and not a one-time action. The present NDA government – which recently opened the defence and aviation sector for 100 percent foreign investment – is carrying forward the legacy of the 1991 reforms. With China slowing down, US slowly losing its clout, and the EU weakening, the Indian economy seems better placed to reach new heights.

This article was originally published for Firstpost.com. My co-author was Mr Kishor Kadam, a data analyst.

Here is the link:http://m.firstpost.com/business/25-years-of-liberalisation-a-glimpse-of-indias-growth-in-14-charts-2877654.html

Narendra Modi in South Africa: Can ‘rainbow nation’ be India’s pivot to Africa?

Prime Minister Narendra Modi arrived in South Africa on Friday. This is the second leg of his four-nation tour after Mozambique. His visit assumes significance as it is the first state visit by an Indian prime minister in a decade. The importance of the visit is also underlined by the fact that he is going to spend two days in the country, travelling across Pretoria, Johannesburg and Durban. The “rainbow nation” is a major cog in India’s pan-African ties.

India and South Africa have historical ties

Modi has called South Africa an “important strategic partner, with whom our ties are historical and deep-rooted.” Indeed, India , from the time of British rule, has been close to the African nation.

The fact that Mahatma Gandhi began his public life in a racially-segregated South Africa, and Africa’s apartheid-era hero Nelson Mandela was inspired by India’s non-violent freedom struggle stands testimony to the friendly relations between the two countries. India supported the African National Congress during its Apartheid-era struggle, while the party had an representative office in New Delhi.

Symbolically, Modi will undertake a train journey from Durban to Pietermaritzburg Station, where Gandhi was thrown off the train.

South Africa also boasts a strong 1.5 million Indian-origin population, whose ancestors arrived in the country around 150 years ago.

Since the end of Apartheid, bilateral relations have improved significantly. Prime Minister Modi has met his South African counterpart, Jacob Zuma, on a number of multilateral forums like Brics (at Fortaleza in 2014 and Ufa in 2015), the 2015 G20 summit in Antalya and the recently-held India-Africa Forum Summit in New Delhi.

Both nations enjoy buoyant economic ties

India’s economic ties with South Africa are strong. South Africa is India’s second largest trade partner in Africa, after Nigeria. Total trade between the two countries stood at $11.8 billion in 2014-15. Between 2014-15, India exported $5.3 billion worth of items from South Africa, while its imports stood at $6.5 billion in the same financial year. The trade deficit too is narrow – $1.195 billion. It is interesting to know that bilateral trade was just worth $3 million in 1992-93.

While Nigeria is the largest trade partner, most of the trade revolves only around oil. South Africa, on the other hand, is rich in many minerals. This has meant that Indian multinationals like Tata and Mahindra have significant interests in the country.

India, the biggest consumer of the yellow metal, mainly imports gold, but also steam coal, copper ores, and various kinds of minerals, while it exports vehicles and components thereof, transport equipment, drugs and pharmaceuticals, engineering goods, footwear, chemicals, textiles, rice, gems and jewellery among others.

India and South Africa are potential strategic partners

Both nations are claimant to be the next big “superpower” after the US. Both nations are part of several common international platforms. The BRICS which also includes Brazil and China is the one major platform through which both nations have deepened their ties. 

South Africa can be called India’s gateway to Africa. The country is also important from the point of view of its political stability. While the rest of the continent has been constantly troubled by political instability, South Africa has by and large been peaceful and politically stable.

It is also an important part of the Nuclear Suppliers Group. South Africa – formerly a nuclear armed nation, before closing its nuclear program – is a also a rich source of uranium. India is claiming a position in the elite nuclear trade group. However, South Africa is reported to have objected to its entry since it is not a signatory to the Non-Proliferation Treaty. Its support is key for India entering the club.

India-South Africa ties: The way ahead

While the NSG snub might have played a dampener in the otherwise fledgling bilateral relations, there is immense scope for boosting ties between the two countries. Trade may become the biggest guiding force for India-South Africa ties. Bilateral trade is expected to reach $20 billion by 2020.

India is looking to expand its international footprint. With China already playing a lead role in Africa, it is time for India to catch up. The continent, especially South Africa with its strong India ties, can help it do so.

In the diplomatic game that is being played in Africa, the rainbow nation may well be India’s pivot to Africa.

In that regard, Modi’s four-nation Africa tour could be a game-changer for India.

This article was originally written for Firstpost.com. Here is the link: 


A Dravidian citadel: Here is a brief guide to understanding Tamil Nadu politics

The chaotic environment during elections – including all the rallying, speeches, and party promises associated with it – is at its fever pitch in Tamil Nadu, where elections are just like some religious carnival.

Politics in this state is unique because of two factors: the influence of the Tamil film industry and the total dominance of Dravidian parties. Here is a quick guide to Tamil Nadu politics, this state’s political history and its intricacies:

The Self-Respect movement

EV Ramasamy, fondly called Periyar, founded the Self-Respect movement in 1925 in the erstwhile Madras Presidency. It encouraged non-Brahmins – called Dravidians – to abandon the “superstitious” Vedic culture, revert to the ancient Dravidian civilization, and develop rationalist thoughts. Brahmins were scorned for introducing “alien practices” like the caste system, branded “North Indian outsiders”, demonised as”Aryan colonialists”, and in many cases, also attacked. Atheism was the cornerstone of the movement as Brahminical rituals were condemned. One outcome of it was the “self-respect marriages”, an alternative for marriages that were conducted without a Brahmin priest. The propagation of the Tamil language has been the biggest hallmark of the movement.

Pre-independence Dravidian politics

The Justice Party is generally accepted as the predecessor of the DMK and AIADMK. Formed in 1916, it was mainly controlled by landowners and non-Brahmin upper castes. However, it shared its ideals with the Self-Respect movement. It introduced reservations in educational institutions and brought about religious reforms while in power between 1920 and 1937. Nevertheless, it lost its relevance after being identified as a non-Brahmin elite party, and finally merged with Periyar’s Dravidar Kazhagam in 1944. The social movement began taking a political turn in 1937 after the Congress government made Hindi a compulsory language. This was vehemently opposed by followers of Periyar, who termed it a “Brahmin-Bania ploy” to colonise the “Dravidians”. From then on, until 1962, it demanded an independent nation called “Dravida Nadu”. The demand never really found any takers and fizzled out.

Tamil Cinema and Dravidian politics

Cinema transformed Tamil politics, providing it with an excellent platform for propagating Dravidian ideals. Parasakthi, written by Karunanidhi and released in 1952, is now considered a major milestone for the movement. Such kind of movies explicitly or implicitly propagated ideals of social justice, rationalism and anti-Brahminism. Actors like MGR, SS Rajendran, Sivaji Ganesan and MR Radha were the early torch-bearers of the DMK in the industry. When MGR formed his own party, he used his movies to build his vote base. Kollywood and Tamil politics are so inseparable that when superstar Rajinikant urged voters to vote against Jayalalithaa in the 1996 elections, her party was routed. The fact that a former actress presently rules the state, and that actors like Vijayakanth have their own party, is a testimony to the influence of cinema in Tamil Nadu’s politics.

The rise of DMK

The political plunge bore fruit in 1967, when the Dravida Munnetra Kazhagam, an offshoot of the Dravidar Kazhagam, swept the Assembly elections. CN Annadurai became the Chief Minister and remained in office until his death in February 1969. He was succeeded by M Karunanidhi – the incumbent president of the party. The first government legalised “self-respect marriage”, implemented pro-poor schemes like providing subsidised rice and promoted the Tamil language. The party won its second consecutive election in 1971. By then, however, inner-party rivalry and allegations of corruption weakened the ideological bearings. A year later, actor MGR left the party to form his own – All India Anna Dravida Munnetra Kazhagam. This split the Dravidian movement into two and the rivalry between them continues till date.

MGR era

The year 1977 was a landmark one in Indian politics as Marudhur Gopalan Ramachandran – popularly known by his acronym MGR – became the first film star-turned-Chief Minister of any Indian state. He remained the CM till his death in December 1987; winning three consecutive elections. The mid-day meal scheme – now almost in every state – has been the legacy of his government. However, his “populist” administration was also beset with allegations of rampant corruption and bureaucratic inefficiency, as the state economy crumbled under the burden of subsidy. He led AIADMK to share power at the Centre – a first for any Dravidian party – when Aravind Bala Pazhanoor and Satyavani Muthu were inducted into the short-lived Charan Singh government. His death split the party into two factions – one led by his wife Janaki Ramachandran and the other by Jayalalithaa who later prevailed.

The Jayalalithaa era

Jayalalithaa joined AIADMK in 1982. She was appointed Propaganda Secretary and also nominated to the Rajya Sabha. After her mentor MGR’s death, she took over the party leadership and unified the party. In the wake of Rajiv Gandhi’s assassination in May 1991, AIADMK swept to power in the subsequent election. Marred by allegations of blatant corruption, she lost the 1996 elections.

Consequently, a judicial probe was launched, leading to her brief imprisonment. Nevertheless, her party made a comeback in the 2001 elections. Though her second term was less controversial, she lost the 2006 elections. AIADMK is currently in power after routing arch-rival DMK in the 2011 elections. It is also interesting to note that she became the first sitting CM to be disqualified after conviction in September 2014. After the Supreme Court overturned the conviction, she returned to head the government in May 2015.

Dravidian parties and the Union Government

Dravidian movement distinguished itself with its rabidly anti-North and anti-Centre stance. However, with the passage of time, political motivations surpassed ideology and made both parties share power at the Centre. While AIADMK has been at the Centre only briefly – 1979 and 1998-1999, DMK has been a key component of various Union governments since 1989. Notably, it has been a part of every alliance in the past three decades – National Front, United Front, National Democratic Alliance (NDA) and the United Progressive Alliance (UPA). In the run-up to the 2004 general election, the DMK tied up with the Congress. The alliance swept all the 39 seats and helped the latter form the government at the Centre. A stand-alone AIADMK won all but two seats in the 2014 Lok Sabha polls – most number of seats for any Dravidian party ever.

Caste in Tamil Nadu politics

The Dravidian movement visualised a casteless society. However, political pursuits have encouraged both parties to build caste-based vote banks. Tamil Nadu politics is dominated by a few castes, mainly the Chettiars, Thevars, Nadars, Mudaliyars, Gounders and the Vanniyars. Except for the Chettiars – a forward caste, most of the other politically powerful castes are classified Backward Castes (BC). Both Dravidian parties pin their electoral hopes on BCs who constitute 68% of the population. While Thevars are generally considered a traditional AIADMK vote-bank, other caste vote-banks have straddled the political spectrum. There are few prominent caste-centric parties like the Pattali Makkal Katchi (PMK), which represents the Vanniyars, and the Vidhuthalai Chirutigal Katchi (VCK) – a Dalit party. These parties, however, have only been at the periphery of state politics.

A virtual two-party system

Tamil Nadu is one bastion which the Congress has failed to breach since losing power in 1967. It has been relegated to playing second fiddle to either of the parties. The Bharatiya Janata Party is a virtual non-entity here while smaller Dravidian groups like the MDMK and DMDK have negligible impact on the electorate. Since 1989, neither Karunanidhi nor Jayalalithaa have won consecutive assembly elections. Both have alternately occupied the Chief Minister’s seat at St George Fort.

But whether 2016 sees a change in the trend is something to watch out for.

This article was originally written for Firstpost.com, at the time of Assembly elections 2016. 

The link: http://m.firstpost.com/politics/a-dravidian-citadel-here-is-a-brief-guide-to-understanding-tamil-nadu-politics-2760056.html

Television Tantrums and the Art of Fuelling Public Rage

“The broadcast media has created the conditions for a civil war in India. What kind of journalism is this supposed to be?” said Vishwa Deepak, a former producer at a Hindi news channel who quit following disagreements over the coverage of the recent JNU students row. Indeed, Indian media, especially broadcast, had been at the forefront of a concerted campaign to galvanise public opinion against a protest on the basis of a video – now found to have been doctored, proving that “intellectual shallowness and superficiality” rules this news medium.

The whole ‘debacle’ was primarily a creation of the broadcast media, especially of a bespectacled prime-time jabberer and a formerly jailed editor-in-chief who was caught in a sting operation. By conveniently telecasting the footage of a pro-Afzal Guru protest, without checking for its veracity, TV channel bosses ensured that more and more viewers get glued to the narrative that was being weaved in their studios.

The formula to sway the public is quite simple: whip up popular sentiment and then create an information asymmetry where there is no difference between opinionated and objective news. People can get carried away by what the media says. That’s the power of framing and agenda setting for you!

However, the central point in this fiasco pertained to the application of sedition charges over sloganeering students. The 19th century sedition law does not prohibit sloganeering. Whether students raised pro-Afzal slogans should have been an non-issue unless people were incited to rebel against the ruling dispensation. Fortunately, after the “anti-India” sloganeering video was declared fake, the sedition angle has been quashed.

Nevertheless, TV anchors – to garner higher TRPs – focused their debates on “anti-national” elements, repeatedly raising questions on sedition. By talking vaguely on the sedition law, our “holier- than-thou” anchors misled gullible viewers, many of whom later logged in to Twitter and Facebook to vent their anger at the students.

The issue is, thus, not about free speech at all. It’s about the irresponsible coverage of the broadcast media. Instead of debating on reforming the now redundant sedition law, our anchors were busy with their jingoism. Alas! Principles of journalism went for a toss.

However, the fact remains that every political party has misused the sedition law. JNUSU president Kanhaiya Kumar was slapped with “sedition”, but public intellectuals – aided by our media – helped release him. Isn’t this the triumph of free speech? And his “victory speech”? Didn’t TV news channels broadcast it live across India? Is this not sufficient proof of free speech in India?

This fiasco, though, must act as a reminder to our TV channels to restrain their “misplaced rhetoric”, inform the public rather than misguide them with doses of “infotainment” and stop manipulating news for the sake of higher ratings. Had they focused on the issue objectively, without playing into the hands of certain vested interests, the issue would have just fizzled out.

I won the second prize at the monthly essay writing competition held by the Meghnad Desai Academy of Economics.

Modi and India’s Policy towards Its Immediate Neighbours – Trade and Commerce over Politics

‘Tsu-NaMo’ has become the new word to describe Narendra Modi’s spectacular victory in the recently concluded Lok Sabha elections in which he, as the Prime Ministerial candidate, guided his party, the centre – right Bharatiya Janata Party, to a clear majority.  After winning 282 seats in the 543-seat lower house of the Parliament, Modi-led BJP will certainly have more elbowroom in driving India’s foreign policy.

Even before he had been sworn-in, Modi began his diplomatic outreach, inviting the leaders of the South Asian Association for Regional Co-operation (SAARC) countries for his swearing-in ceremony on May 26. This initiative was appreciated as Pakistan’s Prime Minister Nawaz Sharif, Sri Lanka’s President Mahinda Rajapakse and other SAARC leaders attended his swearing in; turning an otherwise domestic event into a truly international event.

The Future of ‘Coalition Dharma’

But could a weaker Modi – at the mercy of the All India Anna Dravida Munnetra Kazhagam (AIADMK) and old ally Shiv Sena – have invited Rajapakse and Sharif to his swearing-in? The answer is certainly no. Fractured mandates in the previous elections came in the way of India’s strategic interests, resulting in regional groups dictating terms to the government. The Dravida Munnetra Kazhagam (DMK), a Tamil Nadu based ethnocentric party, pulled out of the Congress-led United Progressive Alliance (UPA) government over the Lankan Tamil issue in April 2013 after India supported a diluted U.S. backed resolution against the island nation. The UPA government had been held to ransom since the end of the civil war in 2009 by the DMK and another Tamil party (AIADMK).  India had to walk a diplomatic tightrope to not only appease Tamil sentiments but also keep Sri Lanka happy. This has significantly damaged its once fledging relationship with the island nation.

The Trinamool Congress led by Mamata Banerjee – a former ally of the UPA, which rules West Bengal – blocked the implementation of the Teesta water sharing treaty and the land boundary treaty. The latter’s ratification was not only blocked by the Trinamool but also by the main opposition party BJP after it refused to support a constitutional amendment that was necessary to implement it. The river water sharing treaty was abruptly scrapped in September 2011 and the enclave exchange between India and Bangladesh has not yet taken place.

Unlike Manmohan Singh who had to follow the ‘coalition dharma’– an erudite byword for coalition compulsions, Modi has no such baggage, and his National Democratic Alliance (NDA) includes neither the Trinamool Congress nor one of the two major Tamil parties. Marumalarchi Dravida Munnetra Kazhagam (MDMK) led by Liberation Tigers of Tamil Eelam (LTTE) sympathizer Vaiko is an ally but has failed to win any seat. His protests against inviting Rajapakse for the swearing-in fell on deaf ears, signalling that no fringe regional player can throttle India’s strategic interests. A business friendly Narendra Modi is being seen as a leader who would aggressively pursue ‘economic diplomacy’ with key countries including those in our neighbourhood, safeguarding its core interests backed by credible military power while shifting towards a policy of using soft as well as hard power.

Modi’s Handling of the Ministry of External Affairs

The Ministry of External Affairs – which handles India’s external relations – has gone to Sushma Swaraj while Gen. (Retd) VK Singh would assist her as Minister of State (MoS).  The 62 year old Swaraj is the first lady to independently hold this portfolio. An articulate orator, she is the best choice to be the foreign minister given her experience as the Leader of Opposition when she called on various international leaders. But her personal rapport with Modi is something one needs to look at in the days to come. Gen. (Retd) VK Singh is the first retired general turned minister.  As a former army chief, he is aware of the security situation in the Af-Pak region, border tensions with Pakistan and China and latter’s growing military might in Asia.  Modi might formulate his external security policy working in tandem with him. He has also been given the independent charge of the Ministry of North East region. Though this ministry is not directly related to external affairs, the North East features prominently in India’s relations with Myanmar, Bhutan and of course China.

Modi is keen to develop infrastructure in this highly neglected region which could serve India three purposes – at the outset it would help in facilitating trade ties with the above mentioned three countries along with Bangladesh.  The plan of a possible Kunming-Kolkata road route via Myanmar and Bangladesh would also get a fillip. Secondly, the North East region will finally get integrated into the ‘economic ecosystem’ of South Asia. Finally, better infrastructure would help in the easy movement of troops in the border regions during times of security emergencies.

Economic and Political Diplomacy with the Neighbours

It was quite expected much before the official statement about Modi’s first foreign visit to Bhutan that he would begin his string of foreign tours with India’s neighbourhood. Thwarting all speculations, he decided to travel to Bhutan first, a country that is friendliest to India in its neighbourhood and whose economy is closely linked to that of India. Despite pressure from China, Bhutan has refrained from taking any step that could be detrimental to India’s interests.

Bangladesh was among the choices for his first foreign visit as well. According to Bangladesh News 24 hours, Modi might sign and implement the Teesta water sharing treaty after consulting all the stakeholders. Bangladesh also had its elections in January 2014 in which Prime Minister Sheikh Hasina returned to power. India considers her to be pro-India and the incoming government would also like to mend ties with Bangladesh.  Sheikh Hasina was one of the first leaders to congratulate Modi. He has reportedly accepted her invite to visit Bangladesh. But it is uncertain whether the land boundary deal would be implemented since there are many ultra-nationalist elements in his party, especially in the Assam unit, who are opposed to giving away more than 10,000 acres of land.

India’s bilateral trade with Bangladesh has been on the rise since 2008. Trade now stands at $ 5 billion, up from $ 3 billion five years back. Trade imbalance has reduced considerably in favour of Bangladesh. The Modi government could collaborate with its Bangladesh counterpart to develop key infrastructure between the two countries. The Kalaura-Latu rail route could be reopened while direct flights from Chittagong and Dhaka to Guwahati and Agartala could become a reality. A steamer service between Kolkata and Dhaka would certainly boost tourism and trade in both countries.  One big decision that would have long-term consequences is the revival of the Myanmar-Bangladesh-India gas pipeline – securing India’s future energy needs.

On the southern maritime front, while the UPA II surrendered to narrow electoral compulsions while dealing with its island neighbour, China made inroads into Sri Lanka by bagging various infrastructure projects. The $ 1 billion Hambantota port in Southern Sri Lanka and another $ 500 million port terminal at Colombo Harbour indicates China’s desire to expand its maritime foothold in the Indian Ocean. India even lagged behind China in providing aid to Sri Lanka. While China’s aid crossed $ 2 billion by 2013, India’s aid stood at a measly $ 298 million.

Modi could push for stronger economic ties with the island nation by increasing India’s investments, especially in infrastructure. India’s overall investment had already reached $ 1 billion in 2013. While India’s investments in Sri Lanka are significant and should be lauded, it is way behind China’s aggressive investments that have already crossed billions of dollars. Modi could undo many of the mistakes of the UPA government like declining an earlier offer to build the Hambantota port and prioritize investments in the post-war Northern Province.

While meeting Rajapakse, Modi raised the issue of repeated attacks on Indian fishermen and rehabilitation of war-ravaged Tamils, for whom he demanded full implementation of the 13thAmendment, underlining India’s deep concerns for Lankan Tamils. India and Sri Lanka share long historical and cultural relations, which have endured the test of time. But if humanitarian concerns become the only focus in Indo-Sri Lankan relations, India will see Sri Lanka drifting towards an assertive China.

On the Himalayan front, Modi has promised Nepal Prime Minister Sushil Koirala that he would visit Nepal soon. The BJP manifesto has promised to review India’s neighbourhood policy, alarming many journalists and civil society leaders like Kanak Dixit, who fear that Modi would threaten the secular transformation of the Himalayan nation. But the covert overthrow of a duly elected government by the world’s largest democracy looks improbable. Modi would prefer to deal with the centrist Nepali Congress rather than anti-India Maoists who are in the opposition.

Just like in Sri Lanka, China has spread its economic influence in Nepal in the past few years by heavily investing in key infrastructure projects such as dams. Between July and December of the previous fiscal year, it surpassed India as the largest contributor of FDI in Nepal. India, wary of this fact, would concentrate on increasing its investments in an attempt to keep Nepal under its sphere of influence.

With China, a SAARC observer, Prime Minister Modi shares a close relationship. As Gujarat’s Chief Minister, he had visited China in September 2011. Just after winning the elections, the Chinese establishment compared him to former President of the U.S., Richard Nixon, who was instrumental in warming up to Maoist China. The Chinese establishment feels that just like the late U.S. President, the BJP leader would usher in a new era in Sino-Indian relations. The Chinese government has already begun its diplomatic engagement with foreign minister Wang Yi arriving in New Delhi on June 8.  His bilateral meeting with External Affairs Minister Sushma Swaraj and Prime Minister Modi will focus on deepening economic ties between the two countries. India and China have come a long way since 1962 – the year of the India-China border war. Now 51 years later, China has become its biggest trade partner. While modernisation of the military could take place in the background, Modi’s focus would be on greater economic ties with China than military belligerency. This would mean a balancing act by India. Respecting the mandate he has received, which is for economic revival and not war mongering, Modi would encourage more bilateral trade between the two countries – from $ 70 billion currently to over $ 100 billion by the end of 2015. Bridging the trade deficit with China – at around $ 30 billion – would be among the Indian government’s priorities, which it could do by encouraging more exports to world’s second largest economy.

Shifting focus towards India’s North West, Afghan President Karzai’s meeting focussed on India’s developmental efforts in the war-torn nation and the Herat consulate attack that was repelled with the help of the local forces. With the U.S. President Barack Obama announcing his plans to withdraw the U.S. troops by the end of 2016, Afghanistan could well go the Iraq way, where militants have wreaked havoc ever since the U.S. withdrew its troops in 2011. India, wanting to avoid such a situation, should increase its involvement in the training of the Afghan security forces. With an eye on economic infrastructure, India’s investment is expected to only increase in the coming years. Indian companies have already invested $ 2 billion while New Delhi has already pledged $ 1.5 billion in aid. Afghanistan will also become crucial to India’s energy needs once the new Turkmenistan-Afghanistan-Pakistan-India energy corridor, which is aided by the Indian PSU GAIL, is completed in 2017.

While the majority of war-mongering Indians feel that Modi would attack Pakistan, there is no reason he would want to take such a step. Modi could take a more hard-line stance against infiltration from Pakistan Occupied Kashmir (which the Centre is now reportedly proposing to rename as Pakistan-Occupied Jammu and Kashmir) by stalling peace talks if cross border terror continues. In his interviews to various news channels, he repeatedly said that terror and talks cannot go hand in hand. This is similar to what the UPA also maintained.  Modi should continue Vajpayee’s Pakistan policy. A statesman like Vajpayee continued peace talks despite the Kargil war and parliament attack as he prioritised a peaceful future for the neighbourhood, not an uncertain one.

With Ajit Doval as the National Security Advisor (NSA), the government probably will adopt a tougher security policy against Pakistan.  The reason – the former Intelligence Bureau (IB) chief, who spent six years in Pakistan – is said to be deeply suspicious of Pakistan.

Modi’s image as a ‘development man’ will also reflect in his dealings with Islamabad. During his meeting with Prime Minister Nawaz Sharif, Modi pushed for full trade ties with Pakistan and also raised the issue of granting Non Discriminatory Market Access (NDMA) status to India. Many Pakistani businessmen had already clamoured for deeper trade ties with India. South Asia is one of the least economically integrated regions in the world and building commercial relations is the first step towards integrating the two big countries. The Woodrow Wilson International Centre for Scholars, a U.S. think-tank, suggests that normalised trade relations will bring the official cross-border exchange to $ 40 billion, from today’s $ 3 billion. The report also suggests a win-win situation for both the countries as Pakistan can increase its exports eight-fold whereas Indian companies will be able to penetrate a brand new market. While terrorism and 26/11 dominated the talks between the two leaders, and would continue to do so in future bilateral meetings, economic relations will be the new way forward.

Heralding a New Era in India’s Foreign Policy?

Narendra Modi’s first day in office was unique for a new Indian Prime Minister. Never has a newly sworn-in Prime Minister begun his tenure meeting the SAARC leaders. International issues rarely find a place in India’s political discourse, except when political leaders show jingoism towards Pakistan and nowadays even towards China and Sri Lanka. It has been a too inward-looking country – plagued by its own problems of food, clothing and shelter – to care about events happening beyond its boundaries. But India has to evolve into an outward looking country to become a global superpower. With globalisation interlinking the world economy, events unfolding in one corner of the world affect India’s economy, making international affairs along with economic diplomacy indispensable in today’s world. Focusing on deeper economic relationship with India’s neighbours will give the initial fillip to India’s ambitions in South Asia; before it can go global.

Disclaimer: The views expressed in this article are personal.

Originally published in stsfor.org in June 2014.