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Many knots to untangle

The world became more complicated during the months India was in election mode.

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Sandeep Dikshit in New Delhi

The world became more complicated during the months India was in election mode. The clear majority for PM Narendra Modi should give him considerable elbow room and accommodation from partners to play the altered diplomatic chessboard. India is in a particularly challenging position because of its policy of equidistance from both the US and its opposing line up of Russia and China. This necessitates a deep examination of its current position in the world because of the zero-sum approach of US President Donald Trump — a variation of George Bush’s “either you are with us or against us” — and China’s coming of age as an economic and military power.

While the elections were on, the US refused to give India a waiver from its sanctions for it continued to purchase Iranian oil. The Russian deals for military hardware have also come under the American scanner as these violate a US law that prohibits countries from entering into arms deals with Russia. India has entered into three big-ticket deals with Russia — S-400 missile defence systems, leasing a nuclear submarine and setting up a factory to make Kalashnikovs.

The US has offered no cheer to India on the trade front. It remains unmoved to Indian pleas to continue with the zero-duty regime for its exports worth Rs 40,000 crore to the US. Given the current unforgiving mood in the White House of reducing the trade deficit with all partner countries, it is unlikely that India will get a fresh avenue to push its exports now that the IT boom has hit several speed-breakers. China has warmly congratulated Prime Minister Modi on his victory but Xi Jinping’s effusiveness masks the Chinese frustration to get India aboard on its One Belt One Road project or to wean it away from the US-led naval alliance that aims to constrict space for a growing Chinese navy.

As soon as PM Modi takes office for the second time, the Iran, US, China and Russia files will demand his immediate attention. As will the neighbourhood, especially Pakistan, Sri Lanka and Nepal — all of which are showing inclination to sign Beijing’s project for communication links. The most important relationship that needs retuning with intervention from the Prime Minister himself is the US. And it needs a Modi-Trump face-to-face meeting to iron out several wrinkles.

On the bilateral level, there are trade disputes that India deliberately kept on the backburner because of the ongoing elections. Then there are implications of American displeasure with Iran and Russia that is causing collateral damage to India’s national interests. India also needs to determine for itself how far it can afford to tango with the ‘Quad’ (a grouping that includes the US, Australia and Japan) in the maritime domain around China.

India can well comply with US directions to turn its back on Iranian oil. But unlike Japan, the oil ties are not India’s only relationship with Tehran. India is also participating in two major transportation projects running across the heart of Iran. This will help it overcome the Pakistani refusal to allow India transit access through its territory. PM Modi will be stretched in collaborating with Iran to develop its port of Chabahar and extending a rail link into Afghanistan and Central Asia while maintaining a distance on the oil relationship. 

A similar situation confronts India with respect to Russia. Here, purchasing oil is not a problem but the US has threatened to impose penalties on countries entering into arms trade with Russia. Just before the elections, India had struck three major arms deals with Russia. Making the US acquiesce to these aberrations is a knot PM Modi has to untangle.

While ensuring that its arms trade with Russia continues unhampered, PM Modi’s next major challenge will be to keep the US military-industrial complex satiated with a steady stream of orders. It remains to be seen how PM Modi manages to fit in its Make-in-India policy in an environment where no arms-exporting country is willing to enter into a co-designing, co-production type of an arrangement. 

The third big relationship that needs a  relook is China. As per indications from Beijing, Modi and Xi will have a round of confidential, trust-building conversations in India later this year. The Sino-Indian interplay on security and economic fronts will also impact New Delhi’s ties with countries such as Japan, Vietnam and Australia that are suspicious of Chinese intentions.

The challenges of bilateral ties mask the sluggishness in exports which are putting strains on India’s balance of payments’ position, and thereby crimping its room for flexibility. The multilateral system, especially of the WTO and the UN, too, needs fixing. 

A tight national purse and the perception that India is a willing recipient for foreign goods put fetters on its options, especially in the neighbourhood where China has been generous with its purse strings. 

PM Modi will have to make structural changes in India’s economic and security outlook as the current model seems to have run into the law of diminishing returns.

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