Over the past few years, New Delhi has developed a keen desire to be part of the geopolitical developments in the Indo-Pacific and has gone about it with great aplomb. It has managed to emerge as a major pivot of the global Indo-Pacific grand strategic imagination, avoided the temptations to militarise/securitise the Quad (Australia, Japan, India and the United States), and has ensured that the Association of Southeast Asian Nations (ASEAN) states do not feel uneasy by the ever-increasing balance of power articulations in the Indo-Pacific.
What New Delhi is missing
And yet, New Delhi’s vision for the Indo-Pacific appears half-baked and unsustainable in the long term, given the inadequate attention New Delhi is prepared to give to the geoeconomic developments of the Indo-Pacific. Policymakers in New Delhi today do not appear to appreciate the inescapable linkages between geopolitics and geoeconomics. Put differently, even as contemporary great power behaviour has moved beyond the classical geopolitical imageries, thereby emphasising geoeconomics as the foundation of geopolitics, New Delhi continues to be stuck in the old binaries.
India’s decision to take to the Indo-Pacific and Quad in a big way while unwilling to join two of the region’s key multilateral trading agreements goes to show that geoeconomics and geopolitics are imagined and pursued parallelly in New Delhi, not as complimenting each other. The most recent example is India’s refusal to join the trade pillar of the Indo-Pacific Economic Framework (IPEF) while deciding to join the three other pillars of the IPEF — supply chains, tax and anti-corruption, and clean energy.
India’s move to stay out of IPEF, a U.S.-sponsored soft trade arrangement at best, comes two years after India walked out of the negotiations on the Regional Comprehensive Economic Partnership (RCEP) which came to effect earlier this year. Both the agreements lay at the heart of the Indo-Pacific and could potentially shape the economic character of the broader Indo-Pacific region.
India’s decision to stay out of the IPEF is surprising because it seems out of sync with the recent enthusiasm in New Delhi about foreign trade agreements. When the Narendra Modi government took office in 2014, it immediately began reviewing existing trade agreements and paused any new free trade negotiations, a policy that continued for close to seven years. Modi 1.0 showcased an unambiguous lack of policy interest in promoting external trade and engaging in free trade negotiations.
And then all of a sudden, in the wake of COVID-19, New Delhi began exhibiting a new enthusiasm to rethink the country’s external trade policy. Modi 2.0 started warming up to free trade agreements (FTAs). For instance, India concluded an FTA with the United Arab Emirates earlier this year, signed Early Harvest Agreements with Australia and the United Kingdom, and several more agreements are being negotiated. However, the recent decision to stay out of the IPEF shows a clear policy direction in New Delhi: by not becoming a part of the IPEF and RCEP, and signing FTAs with individual states, New Delhi has made it clear that it favours bilateral agreements, and is not keen on multilateral, plurilateral and even soft agreements such as the IPEF.
A regressive step, China factor
There are several reasons why New Delhi’s decision to stay out of various regional trading agreements is a regressive policy decision. For one, the absence of the world’s fifth largest economy from various regional trading platforms will invariably boost China’s geo-economic hegemony in Asia. Given the growing fear in India about the negative implications of China-India trade, it is important to have a nuanced view of this. For one, the fear in India of China dominating the Indian market is not entirely unreasonable. To be more precise, there is a fear in India that a deeper Sino-Indian economic partnership could be weaponised by Beijing for geopolitical purposes. And yet, the only viable option to deal with such a challenge is to prepare for and face the challenge, even if it means incurring costs in the short term, so as to eventually overcome the challenge.
The reality is that despite the military stand-off on the Line of Actual Control, India-China trade has only increased in the past year. Therefore, if it is not possible for India to avoid trading with China; it is better for India to deal with the issue sooner rather than later and in a comprehensive manner. Perhaps this is also an opportune time to do so. There is an attempt, however feeble, by countries such as the U.S. to economically decouple from China, and to create forums without China on board, the IPEF being one such example. In other words, India must not shy away from trading with China as part of multilateral arrangements while at the same time joining arrangements which have no Chinese presence.
The second reason why staying out of IPEF is a bad idea is because for India, it would be hard to integrate itself into the regional and global supply chains without being a part of important regional multilateral trading agreements.
Third, we have no option but to address some of the deeper challenges plaguing the investment and business environment in India. Consider the fact that even those firms that have left China, albeit not many, due to the so-called U.S. decoupling from China, have not turned up at India’s doorstep. Most of them went to countries such as Vietnam thereby highlighting the fact that we need to get our house in order; joining some of these multilateral trading arrangements will force us to do precisely that.
Fourth, if India is indeed serious about its maritime grand strategy, which cannot be solely military in nature, it needs to get the states in the region to create economic stakes in India (something China has done cleverly and consistently) and vice-versa. More so, without creating economic stakes with the states of the region, India’s ‘Act East’ policy will revert to its earlier avatar — ‘Look East’. For sure, India does have an FTA with the ASEAN (which the Modi government has reservations about), but it is also important for India to become part of trading arrangements which have major non-regional states so as to become a major part of the region’s supply chains.
Yet another impact of India’s hesitation about joining regional multilateral trading arrangements is its potential regional economic isolation. The less India engages with the region economically, and the more China does so, and given the Sino-Indian rivalry, India might risk getting economically isolated in the broader region.
Contrary to conventional logic, it is possible that the more India is economically ‘isolated’ in the region, the more China would be able to weaponise trade against India during times of major bilateral standoffs, should they occur.
Missing Indo-Pacific moment
Let us get back to the argument about the inherent relationship between geoeconomics and geopolitics. The most important long-term consequence of New Delhi’s decision not to join the RCEP or the IPEF is that India will miss out on the unfolding Indo-Pacific moment in a big way. The Indo-Pacific and the Quad are not military arrangements; India has been very clear about it. If they are not military arrangements, what are they? At the risk of oversimplification, they could be characterised as geoeconomic instruments which will allow its key members to pursue their geopolitical interests. If so, by deciding not to be a part of two of the Indo-Pacific’s key trade agreements, New Delhi may have effectively undermined the pursuit of its own geopolitical interests in the region.
The door is still open
New Delhi should rethink its geo-economic choices if it is serious about enhancing its geopolitical influence in the region. Given that India has not closed the door on the trade pillar of the IPEF, we have an opportunity to rethink our position. In fact, India should also rethink its decision not to join the RECP and seek to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) from which the U.S. walked out and China is seeking to join. If joining all three is too radical for New Delhi, India should start with the IPEF and the CPTPP, both of which do not have China on board. India should also proactively lobby to become a part of the Minerals Security Partnership, the U.S.-led 11-member grouping to secure supply chains of critical minerals.
If indeed, India seeks to be a part of the Asian century and its economic growth story in particular (China’s share in global trade today is 15% and India accounts for 2%), it must let go of its historical hesitations and phobias regarding multilateral trading arrangements. To that extent, the current policy of pursuing geopolitical ends without geoeconomic ballast is ill-thought out.
Happymon Jacob is Associate Professor, Centre for International Politics, Organisation and Disarmament, School of International Studies, Jawaharlal Nehru University, New Delhi