April 11, 2022The Intersectiongeoeconomicsgeopoliticsdefence

India’s geoeconomic interests are with the West and the rest

India must deepen its engagement with its important trading partners and avoid aligning with China and Russia

Mint This is from The Intersection column that appears every other Monday in Mint.

Over the past few weeks, I discovered a marked difference in attitudes towards the Ukraine war between those of my friends who had spent time in the New Delhi establishment and those who hadn’t. The Delhiwaalas—diplomats, economists, journalists and veterans—were more likely to argue that reports of Russian losses were part of information operations, the West was to blame for provoking Vladimir Putin, we depend on Moscow for critical defence equipment, and that India ought not take any position that would hurt Russia. This was the case across the political and ideological divide: as long as they were Delhiwaalas, they more or less held this view. I was thus not surprised when opposition parties mirrored the government’s position on this issue, revealing a rare non-partisan consensus in these polarized times.

The picture was however quite different when I spoke to well-informed and thoughtful people in Bengaluru, Mumbai and Chennai. There was a greater diversity of opinion on how much Russia is to blame, but almost everyone agreed that India’s relations with the US and Europe should not become a casualty of this war. Many pointed out that the growth and employment engines of the Indian economy are largely fuelled by customers in the West.

So I asked my colleague Sarthak Pradhan to correlate India’s trading partners and their United Nations votes on Ukraine-related issues. His results took even me by surprise. The chart shows that more than two-thirds of our trade is with countries that have explicitly voted against Russia. The abstainers—China, Bangladesh, Iraq, Iran and South Africa among them—constitute a minority. None of our trading partners, save Russia and Belarus, support Russia. India’s geo-economic interests, therefore, are squarely with the West and the rest of the world.

Rebalance imports

Which is why proposals for a Russia-India-China’ bloc make little sense, whether or not there is a new Cold War underway. It would mean distancing ourselves from our biggest markets and joining a grouping where one member is a minor economic partner and the other a major political adversary. It also means kowtowing to China and accepting its imperial influence on our economy and in our politics.

The government plans to procure 68% of its capital equipment from indigenisation from 2022-23, up from 58% last year. Also, it is not only Russia that sells us important defence goods. The US, France and Israel do so too.

What about defence? Pradhan created another chart at my request. The second one confirms the widely-held belief that Russia is our single biggest foreign supplier of defence equipment. But what it also shows is that over 60% of the procurement is from domestic suppliers and almost all our other foreign suppliers voted against Russia. Numbers do not tell the whole story; what New Delhi buys from Russia is more relevant than how much. Yet, if it is these purchases that restrict India from pursuing its geo-economic interests, then they constitute a dependency that fatally undermines our strategic autonomy.

In fact, the current moment gives New Delhi an opportunity to fix the problem. India’s negotiating power will be at its highest only until such time that the Ukraine war ends one way or the other. This can be a moment for a new strategic deal bigger and better than those negotiated during the Vajpayee-Bush and Manmohan Singh-Bush years. Recall that the US has decided to supply Australia with nuclear submarines and hypersonic missiles to influence the balance of power in the Indo-Pacific region. From the US perspective, India is on the same side of that balance. It will be interesting to see if imaginative minds in Washington can make some game-changing offers during the 2+2 meetings among the foreign and defence ministers of the two countries this week.

I have been arguing this point for over a decade now. But the political economy of indigenisation’ often ends up privileging Russian vendors.

In any event, India can no longer afford a lopsided relationship with defence and energy supplying countries. India should purchase these strategic goods only from countries that we trade with broadly, and require our defence and energy suppliers to substantially raise their imports from India. This might mean that arms and energy become more expensive in the short term, but that premium is the price of strategic autonomy.

Nearly all my Delhi friends accept that rapid economic growth is in India’s supreme national interest, ranking only above the survival and independence of the country. It follows, then, that India’s foreign policy must follow its geo-economic interests. Like the trade agreement signed with Australia this month, we need to intensify political engagement with our trading partners. Our geopolitical choices cannot be disconnected from this imperative.

What position should New Delhi take in the strategic conflict between the West and Russia? How I answer this question.

Let me be clear. This is not about Ukraine and its rights and wrongs. This is not about which side we belong. It is about how best to ensure that India is in the most favourable position to write the rules of the post-war, post-pandemic world.

I had a long conversation with K Subrahmanyam on a wide range of topics. Download (pdf) the May 2008 issue of Pragati to read it.

I am reminded of my interview with K. Subrahmanyam in 2008 where he laid out the realist calculation very succinctly. Until we could change the US-Europe-China triangle into a rectangle that includes India, he said, it is in our interest to help America to sustain its pre-eminence. After all, in a three-person game, if America is number one, China is at number two and we are lower down, it is in our best interests to ensure that it is America that remains number one.”

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