Wednesday, June 11, 2014

A doctrine of economic levers, soft power

Those who had expected the Modi foreign policy doctrine to be defined by a new muscularity will probably be disappointed. Instead, it suggests a thoughtful understanding of smart power, an integrated approach that will best serve India in a complex, interdependent world
Power is the ability to influence the behaviour of others. In international relations, as the Harvard academic, Joseph Nye, reminds us, power can be exercised in three ways: by threatening or actually using military force, by offering economic incentives or imposing economic sanctions, or by building what Nye famously dubbed “soft power.” That is, the “soft power” of nations to persuade others based on the attractiveness of their technology, politics, culture, ideas or ideals.
Modi doctrine’s five elements
If President Pranab Mukherjee’s opening address to Parliament is anything to go by, the foreign policy of the new government under Prime Minister Narendra Modi will likely employ a nuanced combination of all three of Nye’s instruments of international influence. All those who had expected the Modi foreign policy doctrine to be defined by a new muscularity or even machtpolitik — the wielding of the conventional stick — will probably be disappointed. Instead, there will be a renewed emphasis on using the carrots of economic levers and soft power. This suggests a thoughtful understanding of the importance of what Nye terms “smart power”: a clever combination of the tools of conventional hard, or military and economic, power and soft power. It is this integrated approach that will best serve India in a complex, interdependent world, which is defined as much by conflict and competition as it is by cooperation and the need for greater coordination in confronting common global threats.
The incipient Modi doctrine has five key elements. First, and most important, is the idea that a strong, self-reliant and self-confident India will pursue a foreign policy of “enlightened national interest.” National interest is a contested term; enlightened national interest even more so. Often national interest is defined as raison d'├ętat, or “reason of state,” and can be viewed as the selfish pursuit of national ambitions, mostly as defined by the government of the day. Enlightened national interest adds a moral prism to the policy. When Alexis de Tocqueville wrote his masterly, Democracy in America, in the early 19th century, he described enlightened self-interest as that which made the United States unique: the ability of its citizens to work for the common good because the pursuit of a better life for everyone serves the self-interest of all.
In international diplomacy, enlightened national interest is arguably the recognition that the narrow pursuit of self-interest in an interdependent world can lead to suboptimal policy outcomes. In Asia, Japan — a nation Mr. Modi clearly admires — has used the term enlightened national-interest to define many of its policies, including those steering its overseas development assistance. Through supporting other nations via giving and via attractive development funding and loans, Japan has greatly increased its regional influence. The concept opens up the possibilities of creating cooperative outcomes for many issues, even those traditionally seen as difficult, zero-sum conflicts by realists in the establishment.
An interlinked neighbourhood
Within the Indian tradition, this sense of enlightened national-interest is captured in this verse from the Mahopanishad, “... Ayam˙ bandhurayam˙ ne¯ti ganana¯ laghuce¯tasa¯m uda¯racharita¯nam˙ tu vasudhaiva kutumbakam” or “Only small men discriminate by saying ‘one is a relative, the other is a stranger. For those who live magnanimously the entire world constitutes but a family’.” Its essence, it may be recalled, can be found in the Bharatiya Janata Party’s manifesto as well. And, while Mr. Modi may not be comfortable with this notion, his idea of enlightened national interest sits at ease with Nehruvian thinking. After all, it was Jawaharlal Nehru who believed that while foreign policy must be rooted in a spirit of realism, it should not be stymied by the narrow realism that lets you look only at the tip of the nose and little beyond.
Second is the idea that India will help to build and strengthen a democratic, peaceful, stable and economically interlinked neighbourhood. This, of course, is not particularly new thinking. In the past, the Gujral Doctrine was perhaps the strongest articulation of a policy of reaching out to the neighbourhood, even through gestures that did not demand reciprocity. What was both novel and encouraging, however, was the presence of heads of government or senior representatives from all the South Asian countries at the swearing-in of Mr. Modi and his cabinet, effectively turning the ceremony into a regional celebration of democracy. In the recent past, India has not been explicitly seen as a champion of democracy in the region. Whether or not the strong links in other parts of the world between mature democracies — and absence of conflict — are mirrored in South Asia, it is clear that the strengthening of democracy in the region is the first step toward building what the political scientist, Karl Deutsch, described as a security community. That is, a region in which the large-scale use of violence has become unthinkable!
That said, it must be recognised that only a strong and economically resurgent India can lead the process of South Asia integration and so much will now depend on how quickly India’s economy can be revived. Meanwhile, enlightened national interest will demand that India considers making unilateral gestures to serve longer-term self-interest. For instance, arriving at an accord on the sharing of the Teesta river with a stridently India-friendly regime in Bangladesh would clearly be an important step that should not be undermined by the capricious behaviour of one leader from West Bengal.
Third is Mr. Modi’s emphasis on soft power explained though yet another Modi alliteration of 5Ts: trade, tourism, talent, technology and tradition. For this to translate into reality will require real effort. For a start, the Ministry of External Affairs will need to be restructured and every major mission abroad would need to include a trade, scientific and cultural counsellor knowledgeable in the relevant domains. In addition, the role of the diaspora in the future development of India has been emphasised. One clear step that would ensure deeper engagement between India and the diaspora would be to allow non-resident Indians (NRI) to carry dual passports. For many Indians, continuing to hold an Indian passport is a badge of honour which they will not give up for any convenience, glory or money. Allowing dual citizenship for NRIs carries virtually no additional risk; and indeed most countries in the world allow their citizens this privilege.
A ‘multi-alignment’ policy
Fourth, the incipient Modi doctrine moves beyond the former delineation between “non-alignment,” “non-alignment 2.0,” and “alignment” to suggest that India could follow a policy of what Mr. Shashi Tharoor may describe as “multi-alignment” with all the great powers. This was emphasised in the President’s address that explicitly stated that the government will work with China to develop a strategic and cooperative partnership, work with Japan to build modern infrastructure, build on the firm foundations of the relations with Russia, pursue the relationship with the United States with renewed vigour and make concerted efforts to achieve progress in key areas with the European Union.
Finally, there were only about 50 words of the address devoted to what may have been seen, pre-election, as the most vital part of a future Modi government’s foreign policy: the willingness to raise issues of concern at a bilateral level (read Pakistan) and the uncontroversial claim that stability can be built in the region only if there is an end to the export of terrorism. Clearly, concerns about Pakistan have deliberately not been emphasised as this may still be a work in progress. Or perhaps the Modi government recognises that there is much merit in the adage: carry a big stick, but speak with a soft voice. For, in the past, as my colleague Ashok Guha once remarked, “India has carried a toothpick, and shouted from the roof top and from television studios.”
If the government can deliver on the promises within the President’s speech, Mr. Modi will make history. If he lets himself be distracted by divisive social issues or is provoked into adopting zealous nationalism, he will prove his critics right. As the election results were announced, I was interviewed by a Chinese Radio station. The first question they asked me was whether Mr. Modi would be India’s Deng Xiaoping. I replied tentatively that it was too early to tell and that, in any case, India was a messy democracy and not an authoritarian state. However, if Mr. Modi does want to be like an Indian Deng, it is well worth recalling the great Chinese leader’s “24-Character Strategy”: “Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership.” In other words, India requires stability within and peace in our neighbourhood and beyond for at least the next decade to emerge as a great power of some standing. During that period it is best not to get dragged into external conflicts, assume leadership or prominence on the international stage, or attract too much attention. That is Mr. Modi’s biggest challenge.

 (Source: The Hindu)

Monday, June 2, 2014

Prof Mattoo at the IEC Australia-India Networking Event 2014

The Indian Executive Club event “Australia-India Update” was held on 9 May at the Melbourne Cricket Ground (Jim Stynes Room). Apart from Prof. Mattoo, the other guest speakers included Mr. Hans Kunnen, Senior Economist, Bank of Melbourne  and Mr. Jason Mifsud, Head of Diversity for AFL.

Click at the link below to listen to Prof Mattoo's speech:


Friday, May 23, 2014

Can Narendra Modi Reshape India?

Narendra Modi's landslide victory at the Indian general elections speaks volumes to the fact that the majority of Indian people have pinned their hopes to him when it comes to reshaping India into a better place.

Widely seen as a pro-business figure, Prime Minister Modi is expected to apply his experience gained from his days as chief minister of the Gujarat state to the rest of India. Having risen from a commoner, it is also believed that he widely appreciates what the general Indian people need and possesses a strong willingness to hand Indians a higher standard of living and tackle corruption.

Modi did not elaborate on his foreign policy stance during his election campaign. But some believe he may pursue a hard line toward disputes based on the track record of his party, the BJP. Others contend that he may soften up when he starts to think in the position of the Prime Minister.

So how do Indians look at the electoral victory of Prime Minister Modi? What changes, be they in economy, social welfare or foreign policy, do people expect Mr. Modi to bring to India?

Prof. Mattoo spoke to China Radio International's Zheng Chenguang in Beijing to discuss some of these issues. To listen in, click on the link below:

(Source: China Radio International)

Wednesday, May 21, 2014

PM must make India a priority

AFTER five years of policy paralysis under a dysfunctional coalition government, India, with a newly elected leadership, promises to once again become a major player in the Indo-Pacific region.
As it does so, Australia is uniquely placed to become a key strategic and business partner of India — if Canberra can reach out quickly to the new government.
Tony Abbott must visit New Delhi as soon as possible and use the opportunity to sign the nuclear safeguards agreement, negotiations for which are well advanced.
Signing the agreement does more than just set the rules governing lucrative uranium sales: it will symbolise the end of the years of mistrust that undermined bilateral relations, and the arrival of a new era.
The victory of the Bharatiya Janata Party and its prime ministerial candidate, Narendra Modi, was so overwhelming because the party was challenging what was perceived to be a weak, corrupt and increasingly directionless coalition led by the Congress Party.
On almost every economic indicator during the past few years, India has been doing poorly: growth has stalled, investor confidence is eroded and the fiscal deficit has increased because of poorly thought out, populist welfare schemes.
In the past year, credit rating agency Standard & Poor’s has rated India BBB-negative — just above junk.
Amid this general stagnation, one of the few states to do exceptionally well has been Gujarat, led by its four time-elected chief minister, Modi, who during the next few days will be sworn in as prime minister of India.
At the Vibrant Gujarat summit I attended last year at the state capital, Gandhinagar, every captain of Indian industry, including Ratan Tata and the Mukesh Ambani of Tata and Reliance, India’s two biggest companies, spoke of the investor-friendly environment in Gujarat and the remarkable turnaround Modi had brought to the state.
Despite his decisive victory, Modi comes to his new office not without controversy. Riots in 2002, in his early days as chief minister, continue to disconnect him from a strong section of India’s liberal intelligentsia.
But that negative legacy may turn out to be a positive: it is precisely why Modi will seek to focus on the economy and demonstrate that he can deliver good governance, rather than continue to pursue socially divisive issues that remain a pro forma part of his party’s manifesto.
As India begins to undertake path-breaking reforms under a newly decisive leadership, it will open up new opportunities for the world. It is an opportunity Canberra must seize.
The long shadow of the Cold War, India’s autarkic economic policies and Canberra’s decision not to transfer uranium to India, have kept the two countries apart for several decades. But this is now history.
Today, there are few countries in the region with which Australia has as much in common, by way of values and interests, as India. Apart from being two English-speaking, multicultural, federal democracies that believe in and respect the rule of law, both have a strategic interest in ensuring a balance in the Indo-Pacific and in ensuring that the region is not dominated by any one hegemonic power.
It is, however, the economic opportunities that the Modi government promises to bring that could provide the cement to bind Australia and India closer together. Two sectors stand out: mining and higher education, including vocation educational and skills development. Both are at the centre of Modi’s policy radar.
For decades, the mining sector in India has been poorly governed and badly regulated. According to a 2012 McKinsey report, India’s mining sector has the potential to contribute $40 billion annually to government revenue and create, directly or indirectly, an additional 2.3 million jobs.
As the report points out, despite having the top five or six reserves globally in many commodities such as iron ore and thermal coal, the mining industry is small and contributes only 1.2 per cent of gross domestic product.
Modi has emphasised that he wants urgently to reform the mining sector.
In Australia, the end of the mining boom presents challenges in particular for the mining services sector, and it could benefit from the opening up of India’s mining sector.
The Australia India Institute has recently set up a task force to explore the huge win-win potential if Australia and India work together.
With investment in mining falling in Australia as India’s need for investment, technology and skills is growing more pressing, we could soon see Australian mining services companies replacing local demand by working in India, and India using Australian skills to unlock its mineral resources.
Similarly, reform in higher education, particularly vocational education, is vital for the Modi government as it attempts to realise the country’s so-called demographic dividend from its 500 million young people aged under 25.
The state of the higher education sector in particular is an abiding reminder of the deadening effect of India’s planned economy up until 1990, the so-called licence-permit Raj, which stunted India’s global ambitions.
The previous government introduced several bills to reform the sector but, with insufficient support and political will, all were stalled in parliament. The Modi government will make sure these reforms are carried out.
This will present an opportunity for Australian universities, which are faced domestically with several challenges, to take advantage of the biggest market in the world.
The Australia-India relationship is clearly an idea whose time has come. But it can only live up to its potential if Abbott starts planning his visit now.

(Source: The Australian)

Monday, May 19, 2014

Modi election win could open up business opportunities for Australia

Professor Amitabh Mattoo says Narendra Modi's election win in India could open up enormous business opportunities for Australia, but the personal relationship between the leaders of the two nations will be critical.

To listen in to Prof. Mattoo's conversation with ABC's Eleanor Hall, click on the link below:

(Source: ABC)

Sunday, May 18, 2014

Indian Election Results

The world's largest democratic election is over with Indians voting in Narendra Modi and their new Prime Minister. What were the factors that led to such a comprehensive victory and what does he have in mind for the country? Listen in to Prof. Mattoo in conversation with Jonathan Green on ABC Radio National's Sunday Extra.

Click on the link below to listen to the interview:

(Source:  ABC Radio National)

Friday, May 16, 2014

The man who dines alone

Love him or loathe him, there is no denying that only Narendra Modi can claim credit for the landslide victory of the Bharatiya Janata Party in India’s just-concluded 16th General Election.
The BJP fought the election on the basis of just one issue: the personality and track record of Modi. Modi spoke at nearly 400 public rallies during the campaign, and at each rally he was treated – as the journalist Swapan Dasgupta put it – like a rock star. A decisive, clear-thinking leader, Modi had a simple message: the magic of the Gujarat model of development (a state he has ruled for more than a decade) and how it can be replicated in the rest of India.
He communicated this forcefully to an impatient young India (600 million people under the age of 25) angry with the establishment and the ruling Congress Party for letting them down, and looking for hope. In contrast, the much younger heir apparent of the Congress, Rahul Gandhi, seemed disconnected, elusive and unable to defend his government, which seemed – at least in the last five years - directionless and massively corrupt.
There was, in reality, no contest. You could have predicted this election many months ago, when you saw every captain of Indian industry pay their obeisance to Modi at the Vibrant Gujarat summit in January last year, and when you saw rage in the eyes of the young and the helplessness at the massive movement against corruption in 2011.
But Modi is a classic Manichean figure. He invites awe, admiration and devotion amongst his followers; and deep fear and even hatred amongst his detractors. While Modi seems to have united, in this election, more than 80 percent of Hindus (85 percent of the population of India) across caste, linguistic and regional divisions, there are few amongst the Muslims (13 percent of the population; about 140 million) who trust him.
As chief Minister of Gujarat or as a prime ministerial candidate he could afford to ignore the minorities. No longer so as the Prime Minister of India. One of his first tasks will be to reassure the minorities that they can be safe, secure and successful in Modi’s India. The best way to do this is by focusing on the agenda for economic growth and good governance (and the opening up of new opportunities for young people) that has made Gujarat the envy of other states. Modi must pay a little heed to many within and outside his party who may want him to advance potentially divisive social and political issues.
Narendra Modi famously likes to dine alone. If as Prime Minister of India he learns to break bread even with his detractors, and delivers on the faith that young India has reposed in him, he will ensure that his party will stay in power even beyond this election.

(Source: The Conversation)