Economic Diplomacy in India: Changing Contours in Policy Agenda

The idea of globalisation has radically altered the contours of international economic relationships and economic diplomacy between countries, throwing up new set of challenges and complexities in the spheres of economy, society, politics and culture. With rising global connectivity, dependency and market integration an increasing number of players strive to influence the outcome of economic relationships; and economic diplomacy therefore has assumed immense significance and posed new challenges to diplomats around the world and for the emerging economic power like India. This transformation encompasses an evolution of modus operandi with widening and deepening dimensions of diplomacy. In today’s outward-looking, liberal, macro-economic framework, terms like non-state diplomacy, corporate diplomacy, business diplomacy, NGO diplomacy and track two diplomacy have found their place in the lexicon of economic diplomacy. Economic diplomacy thus has risen to the top of international policy agenda, driven by a mix of political and economic factors. Economic diplomacy includes the promotion of trade and investments, management of aid and other financial flows, tourism promotion and the management of all the regulatory issues that affect a country’s external economic policy; it is handled by the foreign and the economic ministries, and involves contributions by non-state actors.

The policy on India’s economic diplomacy has undergone paradigm shifts from sheer trade diplomacy, which was initiated in the post-independent period to networking in 1980s and then to country promotion and engagement in post-liberalized period. Thus during 1947 to 1984, India witnessed a phenomenon in government-industry relations guided by regulation and control. The year 1985 was the beginning of the U-turn and change, when Rajiv Gandhi, the then Prime Minister, took a decision that a delegation from Confederation of Indian Industry should accompany him on his first-ever State visit to Soviet Union. Such evolution of relationship between government and industry was a process which really never looked back. Later in the five years of P V Narasimha Rao’s Prime Ministership, CII accompanied him on several occasions, most prominently to Singapore and Vietnam in September 1994, heralding the start of the Look East Policy of India and initiated strategic dialogues or ‘Track II Diplomacy’ mechanisms, which CII continues even today in a much larger scale with many more nations.The year 1991 was crucial, as India’s most aliened post-independent partner, Soviet Union collapsed and disintegrated, Indian economic diplomacy made strategic shift with focus on regional partnership. ‘Look East Policy’ was initiated to re-build her relations with fast growing Southeast Asian Nations that was lost during colonial period. India urgently felt the necessity of having new regional and sub-regional partners beyond the SAARC zone. Today, as Look East policy has entered into its third phase, India’s economic diplomacy remained remarkable by becoming a full dialogue partner with ASEAN and by raising trade, tourism and FDI shares significantly. 

Along strategic shifts, the conduct of economic diplomacy within government also has become increasingly dispersed with various departments interfacing with their foreign counterparts and seeking facilitation and support of country’s Missions. Among the non-state actors, multinational corporations are now powerful pressure groups with profound penetration into systems of international economic policy formulation. Apart from this, research institutions, media, environmental groups and other non-governmental organisations also influence the shape of the international economic agenda. Such endeavours have given impressive growth rate, high foreign exchange reserves, increasing exports, rising foreign investment. India has established itself as a major global player in information technology, biotechnology, pharmaceuticals, telecom and other areas and negotiated for greater market access for her products under the Doha Development Round in the WTO and pursued strategy of forging trade and commercial alliances in the form of bilateral and regional free trade agreements and comprehensive economic partnership agreements. India’s contribution to the world economic and financial architecture through various groupings like the G-20, IBSA, SAARC, World Bank and IMF among others is well known. In this scenario, the role of diplomats in facilitating and supporting the efforts of the business community has become more pronounced.Through dialogue, they need to actively reach out to investors and partner with other organs of the government and the private sector to promote trade, foreign investment and technology flows. There are many instances where the strategic dialogue has been extraordinarily helpful in building and shaping mutual appreciation, especially in Iran, Iraq, Bangladesh, Myanmar, China and ASEAN. As the perceptions about Indian policy are very often rooted in history of isolationist, inflexible, low growth, anti-private sector, over-regulated, protectionist, such dialogues enable these old perceptions to be addressed. India’s policy attempt to facilitate economic diplomacy by expanding its role beyond diplomatic services continues towards relevant areas like industry through innovative methods by which people can come on deputation. Indian existing diplomatic service is relatively small in size with 700 IFS cadre officials, which needs to grow given the rising demand of economic diplomacy. On the public diplomacy initiative of the ministry of External Affairs, Mr. Salman Khurshid mentions that, ‘It is essentially an outreach to add to capital diplomatic instruments and diplomatic exercise we take. It is to show what we are doing and making it more effective and add different dimension as greater public participation takes place.’

The journey towards such policy endeavours needs to continue more vigorously amidst contemporary global economic crises, so that India can sustain her domestic economy. Economic diplomacy also needs be a powerful instrument to end age-old conflicts of cross-border terrorism, illegal trade, trafficking, border and political disputes with her neighbouring nations; and should usher hope for a new horizon with regional and sub-regional cooperation. As two of her eastern neighbours Bangladesh and Myanmar are transitioning, it is time for India to explore her economic diplomacy deeply within its Look East Policy frame to outmanoeuvre China, resolve Northeast geopolitical issue, and turn this entire security-sensitive region to a vibrant economic hub with space for people to move without fear and with hope for future. As ‘Hope cannot be said to exist, nor can it be said not to exist. It is just like roads across the earth. For actually the earth has no roads to begin with….but when many people pass one way, a road is made.’

Rakhee Bhattacharya