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The Nehruvian origins of India’s post-independence foreign policy outlook followed a reasonably inferred non-alignment strategy. The broader reason to do so, was to enable India as a young independent nation then, to create its own position in the geo-economic and political landscape, without taking any sides.
This was true of the US-Russia cold war decades too, even though under the years of Indira Gandhi as Prime Minister during the 70s, the tilt in India’s ties to support Russia and much of the communist world (Cuba included) positioned against the US was made more explicit. Post-liberalisation reforms of the 90s, a tilt in trade alignment happened more extensively towards the US.
Fast forward to post 2014, under Modi, India’s post-independent Non-Aligned strategic stance has observed a dynamic shift towards a Multi-aligned strategic interest, one which the External Affairs Minister S Jaishankar often highlights while emphasising on the need for “New India” to prioritise “India’s interests” over anything else to compete in a multi-polar world.
As seen in the Russia-Ukraine war situation, India is likely to pay the moral and maybe an economic cost in the future of supporting a nation such as Russia that breached another nation’s (Ukraine’s) territorial integrity— a stance that has invoked a lot of criticism against India’s ‘debatable’ position on the war and in explaining its “abstention votes” in the United Nations.
Notwithstanding India’s position on the Russia-Ukraine war and its likely impact, a good way to get a sense of deconstructing India’s vaguely defined multi-aligned stance (as termed by Jaishankar) is to (geo)economically study India’s trade relations with some of the countries that seems to be otherwise competing (or pitted against each other): say, Taiwan-China, United States-Russia, UK-EU (post Brexit)
India’s total export of 275,488,744.93 in thousands of USD and total imports of 367,980,363.48 in thousands of USD has lead to a negative trade balance of -92,491,618.55 in thousands of USD. It’s trade growth has been around -8.75% compared to a world negative trade growth of -3.91%.
A weaker rupee is adding to India’s woes while expanding the current account deficit, making imports more expensive in merchandise.
The US surpassed China to become India’s top trading partner in 2021-22, reflecting a strengthening of ties between the two economic giants.
According to recent data released by the Ministry of Commerce, bilateral trade between the US and India stood at $119.42 billion against $80.51 billion in 2020-21. Exports increased to $76.11 billion in 2021-22 from $51.62 billion in the previous fiscal year while imports rose to $43.41 billion as compared to about $29 billion in 2020-21.
Russia has been one of India’s largest arms suppliers and a key strategic ally in much of its post-independent history. More than half of India’s arms imports between 2016-2020 were from Russia.
As Sadanand Dhume argued in The Wall Street Journal: “Many Indian foreign policy elites also view what’s officially called the country’s ‘special and privileged strategic partnership with Russia as a totem of Indian strategic autonomy. India shares Russia’s goal of a multi-polar world. It is a member of the Russian and Chinese-dominated Shanghai Cooperation Organisation, and of BRICS, a loose grouping of Brazil, Russia, India, China and South Africa.”
India’s relationship with China ever since the 1962 war has remained a complicated one. On trade, more recently, India’s dependence on Chinese goods remains more pertinent than ever before despite the border tensions that persist.
During 2021-22, India-China trade aggregated at $115.42 billion as compared to $86.4 billion in 2020-21.
65% of India's imports from China is limited to three product groups — electronics (30% share), machinery (20%) and organic chemicals, including APIs (15%).
Here are some products whose imports grew big during January-August 2022: mobile phones, telecom equipment, parts ($4.57 billion, a growth of 14.7%), solar cells ($4.3 billion, 110%), laptops, PCs ($4.3 billion, 16%), laptop memories, ICs, parts ($3.6 billion, 16.8%), lithium-ion battery, etc, ($1.4 billion, 103%).
Here are a few more products along with the value of India’s imports from China during January-August 2022: textiles and apparel ($1.7 billion), fertilisers ($1.2 billion), antibiotics ($895 million), glassware ($590 million), furniture ($534 million), paper and board ($469 million), shoes ($236 million).
The bilateral trade between India and Taiwan is on the rise. It has increased from $2 bn in 2006 to $5.7 bn in 2020, registering a 185% growth.
The latest monthly trade data also demonstrate healthy growth rates in Indian exports to and imports from Taiwan. However, the volume of bilateral trade remains underwhelming, given the potential. This is evident from the minuscule exports and imports share.
On the investment front, around 106 Taiwanese companies—with a total investment (actual and proposed) of about US$1.5 billion were operating in India in various sectors including information and communication technology, medical devices, automobile components, machinery, steel, electronics, construction, engineering, and financial services, by the end of 2018.
According to Abhijit Mukhopadhyay of ORF Delhi, in the last few years, India has been actively promoting cooperation with Taiwan in trade, investment, tourism, culture, education, and people-to-people exchanges. Both countries have also constituted teams for the expansion of fruitful collaboration in education and skill development.
“Indian Space Research Organisation (ISRO) and the Indian Institute of Space Science and Technology (IISST) are already collaborating with Taiwan’s National Space Organisation on different projects. Another possible area of cooperation exists in green energy. India is an energy-deficient country but needs to make the transition from fossil-fuel based energy to renewable green energy. On the other hand, Taiwan is one of the major Asian players in green energy and may turn into a gamechanger for India in this transitory phase," argues Mukhopadhyay.
The Free Trade Agreement(FTA) talks currently between India and Taiwan are strongly pivoted around the proposal to build a semiconductor manufacturing facility in India. The Indian government has reportedly proposed several sites for the hub and negotiations are on to rope in one of Taiwan’s leading semiconductor manufacturers.
Names of companies like Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) have come up in media reports as possible candidates for implementing this mega project.
If implemented, India will be the second hub of Taiwanese semiconductor manufacturers after the USA. However, the choice of location may be a difficult one as semiconductor production entails necessities like a pollution-free environment, an uninterrupted power supply, and the constant availability of a large amount of water.
On 17 June 2022, the European Union relaunched negotiations with India for a Free Trade Agreement, and launched separate negotiations for an Investment Protection Agreement and an Agreement on Geographical Indications (GIs).
The EU has been India's third largest trading partner, accounting for €88 billion worth of trade in goods in 2021 or 10.8% of total Indian trade. India is the EU’s 10th largest trading partner, accounting for 2.1% of EU total trade in goods.
Trade in services between the EU and India reached €30.4 billion in 2020.The current round of trade negotiations aim to remove barriers and help EU firms, especially smaller ones, to export more. Secondly, to open up services and public procurement markets. These also mean to ensure protection of geographical indications and pursue ambitious commitments on trade and sustainable development, and lastly, making sure, the agreed rules are enforceable.
The investment protection negotiations also seek to put in place an effective and state-of-the-art dispute settlement mechanism to enforce such rules.
India-UK total trade in goods and services was 21.5 billion GBP from October 2020-September 2021. See figure below:
Of this 21.5 billion (GBP), total UK imports from India amounted to 13.8 billion (GBP) while exports to India amounted to 7.7 billion (GBP). India has been the UK’s 15th largest trading partner. The UK exported goods worth 4.1 billion (GBP) and services worth 3.6 billion (GBP) to India during the period, and imported goods worth 7.7 billion (GBP) and services wither 6.1 billion (GBP) from India. The trade deficit for UK with India is roughly 6.1 billion (GBP).
India’s largest trade volume is with US and China. Rise in exports to the US and imports from China in a single year (from 2020-21 to 2021-22) reflects the complexity of trade ties, necessitating a multi-aligned trade scenario, where India needs to leverage its relationship with Taiwan to reduce dependence on Chinese imports.
At the same time, balancing its relationship with Russia politically and economically, during wartime, will have consequences for its medium to long term trade ties with US and it’s other allies (including countries like the UK and EU).
All three— US, UK, EU are strategically and economically vital to India’s multi-aligned trade strategy. Other vital countries with whom India trades extensively include Saudi Arabia, UAE, Iraq, Indonesia, Singapore, Australia and Hong Kong.
A vaguely defined multi-aligned strategic convergence may sound rhetorically appeasing to some, but in closer scrutiny, geo-economics compulsions offer little in hope and realisation for India, if it remains unable to define its interests more coherently both for its foreign policy outlook in the near future and in defining its terms of trade with most of its trading partners, especially in the aftermath of the Russia-Ukraine conflict.
(Deepanshu Mohan is Associate Professor and Director, Centre for New Economics Studies, Jindal School of Liberal Arts and Humanities, OP Jindal Global University. He is Visiting Professor of Economics to Department of Economics, Carleton University, Ottawa, Canada. This is an opinion piece and the views expressed are the author's own. The Quint neither endorses nor is responsible for them.)
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