Modi: Charting a New Foreign Policy Course

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Narendra Modi’s first month in office has seen him deftly handle India’s neighbours, accept an invitation to visit Washington, enhance relations with Bhutan and accord due importance to China. In the same manner, Modi will also have to move quickly and firmly to reassure foreign investors of the dependability of India’s fiscal environment

By Seema Sirohi

The India story has resumed, slowly but surely. The sentiment among foreign investors is undoubtedly bullish. Even the normally acerbic Economist has declared “How Modi can unleash India,” barely six weeks after advising Indians not to vote for Narendra Modi. World leaders seem to want India in their corner once again.

So far Prime Minister Modi hasn’t put a foot wrong on the foreign policy front. He has surprised just about everyone – those who thought he would sulk and hold a grudge against the United States over the visa issue, act tough with neighbours and be chummy only with Japan ­– have all been proven wrong.

His invitation to India’s neighbours for the swearing-in ceremony was a brilliant move. Seemingly magnanimous but Chanakya-like in potential, especially in relation to Pakistan, the decision couldn’t be criticized for any reason. If Nawaz Sharif had not attended because of domestic compulsions, he would have seemed churlish. Either way, it was a win-win for Modi.

Choosing Bhutan as his first foreign destination may be a riddle to some, but as a friend of impeccable standing, why not Bhutan?  An early embrace sends a signal to China of a friendship much older than Beijing’s more recent attempts. For neighbours, Chinese overtures always come tagged with territorial claims and with Bhutan, it’s no different. China lays claim to 4,500 square kilometers of land in the north and west of Bhutan and wants its borders eight kilometers deeper inside Bhutan. This brings China even closer to India and makes New Delhi nervous.

Modi then travels to Japan, a country he sees as crucial to India’s infrastructural needs. He shares a rapport with Shinzo Abe and is one of Abe’s only three Twitter buddies. But India’s friendship with Japan is older than most commentators want to acknowledge and whether they approve or not is another matter. The dissenting voice of Indian Justice Radha Binod Pal at the International Military Tribunal after World War II is still remembered with fondness in Japan.

But by welcoming the Chinese Foreign Minister Wang Yi in New Delhi before Modi made his first foreign visit, New Delhi has given Beijing what it sought – a measure of importance but not an exorbitant amount. Foreign Minister Sushma Swaraj deftly used the opportunity to slip in a demand that China consider a one-India policy as a fair exchange for New Delhi’s one-China policy. The presence of Lobsang Sangay, Tibet’s prime minister-in-exile, at Modi’s swearing-in – possibly on the insistence of the BJP hardliners and assorted Sangh Parivar members – is part of the same orchestration.

On the western front, where all has not been quiet, Modi has again shown foresight in simply accepting President Barack Obama’s invitation to visit Washington. When Obama called him to congratulate, after some had advised that a call from Secretary of State John Kerry would do, he probably didn’t really expect Modi to take it seriously. When invitations are issued – especially in language as laconic as “let’s meet at a mutually agreeable date” – they are generally pro forma.

No one, including the most perceptive analysts of India-U.S. relations, expected Modi to agree on a visit to the American capital so soon after taking office. If he had asked for inputs from his diplomats, they may have advised caution and delay. Even former U.S. ambassador to India, Robert Blackwill, who helped turn around the bilateral relationship and is one of the strongest supporters of the Indo-U.S. partnership, had said that the relationship would be off to a “slow start.” This statement was made a day before news came that Modi would meet Obama in September.

But things are moving at the speed of light in terms of diplomatic time. Modi’s foreign calendar is not just full, it is crowded. And that is all for the good. As the newest actor on the world stage, he is engaging on all fronts simultaneously while lighting a fire under his bureaucrats to get with the programme. How he plays the balance between China and Japan, between the United States and Russia, and between China and the United States while keeping East Asia happy remains to be seen. The failures of UPA II included trying to be something of value to the two big players and in the process losing both.

The reset in Indo-U.S. relations is much needed for both strategic and economic reasons. Modi can turn the American business lobby from foe to friend once again with clear, transparent policies, especially on taxation. At a meeting held last month in Washington DC, CFOs, unanimously named India as the country that worries them the most on taxes, with Brazil coming a close second. The mood of foreign investors seems to be changing, but everyone is moving with caution. The NDA government is sending out the right signals with the Minister of State for Industry Nirmala Sitharaman promising to repeal the UPA government’s “tax terrorism.”

It is a given that Modi and his government needs to correct India’s distorted policy environment and send a clear signal that the old practice of protecting favoured Indian companies will stop. His ministers must work through the cacophony of complaints by U.S. industrialists and separate legitimate grouses from exaggerated demands.

If the overtures made by the Indian side are reciprocated with the right kind of signals from the Obama Administration, especially from the U.S. Trade Representative, India and the United States can start where they left off. At the end of the day, Obama too needs a foreign policy success.

Seema Sirohi is a Washington-based analyst and a frequent contributor to Gateway House: Indian Council on Global Relations. Seema is also on Twitter, and her handle is @seemasirohi

This article was originally published by Gateway House on June 18, 2014.

The opinions expressed in this article are those of the author, and do not necessarily reflect the views of India Briefing or Asia Briefing Ltd.