India Using its Economic Clout to Reshape International Relationships

Ever since former Prime Minister P.V. Narasimha Rao reshaped India’s foreign policy in the 1990s under the so-called ‘Look East’ policy India has strengthened ties with Southeast Asia. The current government of Prime Minister Narendra Modi has unequivocally said that it is keen to progress from the ‘Look East’ policy to ‘Act East.’

The post-Cold War world has compelled India to reshape relations with important countries, such as the US and Japan. India’s increasing economic clout has also meant that the outside world has paid greater attention to it.

Since the 1990s, India has moved from being a sectoral partner of ASEAN to being a dialogue partner. Trade between India and ASEAN is tipped at US$76 billion (as of 2013–2014), which — while far below its potential — is up more than 20 percent compared to a decade ago. Facilitating this has been the India–ASEAN free trade agreement (FTA) in goods. Bilateral trade is likely to increase further, with both sides setting a target of US$100 billion by this year.

In the strategic sphere too, India has strengthened ties with Vietnam and Singapore. India has been carrying out joint naval exercises with Singapore near the Andaman Islands for two decades. India signed a military agreement in 2003, which includes joint exercises and training. And in September 2014 the two countries decided to strengthen cooperation in the context of counterterrorism.

India has extensive strategic ties to Vietnam, which include interactions between defence services and assistance in the maintenance of defence equipment. During Indian President Pranab Mukherjee’s visit to Vietnam, signing a US$100 million line of credit between the EXIM Bank of India and Vietnam’s Ministry of Finance, specifically for defence procurement.

India is also no longer ambivalent about its role in Southeast Asia, especially in regards to the South China Sea dispute. This was evident in Modi and US President Barack Obama’s joint statement. Modi also stated, ‘We have a shared interest in maritime security, including freedom of navigation and commerce, and peaceful settlement of disputes in accordance with international law’.

India has begun to place special emphasis on Cambodia, Myanmar, Laos and Vietnam. It has ramped up financial aid and development assistance, and has set up a special desk at the Ministry of External Affairs. India is now assisting these countries in areas like information technology as well as English-language training.

Steps are also being taken to enhance both land and sea connectivity with Southeast Asia. Myanmar is the only gateway through land to South East Asia. Discussions include a trade zone connecting Behiang in Manipur with Myanmar’s Chin province, while a land customs station at Zawkhatar in Mizoram is likely. Chief Ministers of north Indian states are involved as key stakeholders, not just in the context of ties with Myanmar but the overall Act East policy.

India is also seeking to build closer maritime links with Southeast Asia. The Shipping Corporation of India initiated a bi-weekly container shipping service to Myanmar in October 2014. It is likely that similar services will extend to Vietnam and Cambodia.

But if India wants its Act East policy to be successful it needs to take a number of further steps.

First, India must strengthen important infrastructure projects such as the trilateral highway linking India–Myanmar–Thailand and infrastructure on land borders with Myanmar.

Second, India needs to utilise its diaspora more effectively. So far, it has engaged only with the Indian diaspora in Singapore, Malaysia and to some extent Thailand. India needs to pay greater attention to the Indian community in Myanmar.

Third, there is scope for greater engagement with countries like Indonesia and the Philippines. There is immense potential for strengthening India–Indonesia relations not just due to their common past, but also due to the similar backgrounds of Modi and Indonesian President Joko Widodo, who were both strong regional leaders before becoming heads of state.

Finally, a large number of Indian states are beginning to engage with Southeast Asian countries, especially Singapore and Malaysia. While it is logical to make northeastern states key stakeholders in the Act East policy, it is also important to rekindle ties between other Indian states and ASEAN countries.

Indian cities that share a common history and heritage with countries in ASEAN can deepen relations based on religious history. For instance, the Buddhist site of Sarnath near Varanasi receives a large number of tourists, many from Thailand. There are a number of sites in Madhya Pradesh such as Mahurijhari that link to ASEAN countries. Links can build between cities in states such as Kerala, which were part of the Spice route. Already, UNESCO and the government of Kerala signed an agreement in 2014 to revive the Spice Route Project.

There is immense potential for India finally to play a greater role not just in South Asia but also in Asia as a whole. (East Asia Forum)