Economic Implication of PM Modi's Foreign Policy

By Gopal Krishna Agarwal,

There is no doubt that Prime Minister Narendra Modi has been able to leverage India’s economic advantages to improve international relations and vice versa. His government has recognized that the country’s leverage is dependent primarily on the size of Indian economy, its growth trajectory and the ability of the strong government at the center to address challenges.

India’s ambition to become $10 trillion economy and to create 175 million jobs by 2032 will depend on the internal reforms initiatives. Linking India’s Foreign policy to domestic transformation, his policy seeks to attract foreign capital. The policies are geared towards regional stability, peace and prosperity. Some important issues such as climate change, conservation of water resources, renewable energy, robust economy defense procurement and manufacturing, which have simultaneous risk and opportunities, are Modi ji ’s vision for a modern India.

Along with this the personal rapport established by PM Narendra Modi with international readers have significantly enhanced India’s profile and given it a confidence never seen before even to the extent of balancing superpower to our own advantages, as can be seen from the recent G20 Summit. There was visible tension between the US & China, but both were at ease and supportive of India’s concerns. India Cushions itself from not becoming marginalized in the larger US-China context. Beijing has committed S20 billion investments in India in many Industries. The US is also supportive of all over initiatives.  

Modi ji has been successful in overcoming doubts in the minds of the international community that India will realize its true potential of economic power. He has removed apprehensions with regard to corruption, transparency, ease of doing business and commitment to reform in tax laws, corporate law, resource allocation, government clearances, removal of bureaucratic hurdles and retrospective taxation. Two major apprehensions under UPA regime. Policy paralysis and large-scale corruption have been effectively checkmated.  Government has embarked on economic growth with initiatives such as Make in India; Digital India; Smart Cities: Clean India; Clean Ganga;  Ease of Doing Business, Tax reforms such as GST; Bankruptcy law; and project clearances & revival of stalled projects. India has become one of the most open economics with regard to FDI policy.

In International Business arena; over the years, bilateral trade relations and agreements have gained enormous significance than multilateral pact such as WTO, GATT, etc. It is becoming more and more difficult to bring developing countries to common agreeable points at multilateral platforms and therefore small trade blocs such as ASEAN, SAARC, BRICS AFRICAN Nations and bilateral free trade agreements (FTAs) have gained prominence.

Modi ji has very well leveraged this to India’s economic and strategic advantage. Over the span of two years, He has visited more than 42 countries and held bilateral talks, focused and nurtured  new developmental and economic blocs. His initiatives for Act East Policy, connecting Bhutan Bangladesh India Nepal (BBIN) through GPS and common licensing policy building a road corridor from North East to Myanmar, etc., are commendable.

Bilateral initiatives

Quickly ratified the long pending Land Border Dispute Agreement (LBA) and the Maritime Boundary dispute with Bangladesh. Government has been wise to fast-track India’s developmental projects in Afghanistan. India’s participation in the development of the chabahar port a trilateral pact to build a land transit and trade corridor through Afghanistan are stepping stones for bigger future involvement. His visit to Iran shows the understanding of the changing context of Iran, which is now a stable and resourceful country and important for our energy security. India- Japan relation are at an all time high in the joint statement of India and Japan 2025- India side expressed hope to attract $5.5 billion of investments and support in our infrastructure development. Building Good rapport with German Chancellor Internationally, Germany is the key provider of high-end technology and has surplus capital investment. Even for National Mission for Clean Ganga (NMCG), we can learn a lot from the river Rhine experiment; In Partnership with France, India has established the International Solar Alliance with head office in Gurugram (Haryana). This alliance has the membership of 120 countries for better harnessing of the solar power potential. Modi ji reconnect to Central Asia is crucial; Uzbekistan has strong cultural ties. Turkmenistan is rich in energy there is huge hydro potential in Kazakhstan and Tajikistan has historical significance.

Arica offers India a massive opportunity to expand our global economic footprint. The continent is an important market for Indian economy. The 54 African states have a combined GDP which is slightly larger than that of India. The third India Africa Summit in New Delhi in November 2015 had a focus on this engagement. Another important visionary step was leveraging powerful Indian diaspora across the world, in the process empowering them in their own countries, as well as coordinating with them for advocacy and influence for better diplomatic and economic relations with India PM Narendra Modi’s visit to United Arab Emirates (UAE), Seychelles, Mongolia and Fiji has given fillip to Indian exports, Direct connect with  NRIs was very innovative, the first such gathering of 15000 NRIs was at New York’s  iconic Madison Square Garden in Beijing he attracted a crowd of about 5000 people at Wembley Stadium over 60000 people gathered, Similar was the case in Australia, Inward remittance flows to India, according to the World Bank, totaled S72 billion in 2015, Making India the largest remittance-receiving country which is about half of our current account deficit. 

Some positive results of Foreign Policy initiatives India is the world’s top destination for FDI flows in 2015, helping overcome many of its key growth constraints, particularly technology, energy and infrastructure attracting investment commitments of close to S20 billion from foreign investors. In 2014 India’s total exports were 20.7 percent and imports were 25.2 percent of GDP. Total trade was 46 percent of GDP, suggesting a moderate degree of integration with the rest of the world. India plans to double its aggregate global trade over the next decade. Our target for 2019 to become the top start-up destination in the world, achieve a top 50 ranking in the global ease of doing business, achieve 60 percent digital penetration and increase the share of manufacturing from 16 to 25 percent of GDP by 2022.

Currently, complex project financing services are undertaken abroad. We have to develop capacity to perform international financial services domestically by introducing some innovative Structured Financial Product. Recently The Reserve Bank of India (RBI) has introduced ‘Masala bonds’. We have been strengthening the institutional structure for both commercial and strategic engagement with the rest of the world. India has been advocating governance reforms in International Monetary Fund (IMF), The World Bank, Asian Development Bank, African Development Bank and the inter-American Development Bank An ongoing negotiation for the Regional Comprehensive Economic Partnership (RCEP) is a case in point. The Minister of Commerce has merged two bodies that handle anti-dumping and import safeguard actions in the Director General of Trade Remedies (DGTR) for improved and coordinate negotiations. India’s vigorous quest for Nuclear Suppliers Group (NSG) membership and becoming the member of Missile Technology Control Regime (MTCR) are also very significant. Modi ji has been leading the international debate on many issues- tax information exchange, transparency, corruption we were mostly defensive earlier at G20 summit, He said , G20’s efforts should be for zero tolerance for corruption and black money. Zero barriers and full commitment to action.

Fitting corruption black money and tax evasion were keys to effective financial governance. We need to eliminate safe havens for economic offenders, track down and unconditionally extradite money launderers and break down the web of complex international regulations and excessive banking secrecy that hide the corrupt and their deeds, “PM Modi said. This is the position of strength that we have gained at international forums.