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New highways to economic growth

Prime Minister Narendra Modi made two crucial points in the context of India’s foreign policy on August 15, during his Independence day address, and August 16, during the inauguration of two important infrastructural projects in Maharashtra.

On Independence Day, Mr. Modi spoke about the need for the South Asian Association for Regional Cooperation (SAARC) countries to fight poverty together, rather than being engaged in meaningless conflict. The next day, speaking after the function to lay the foundation stone of the Jawaharlal Nehru Port Trust special economic zone at Nhava Sheva, he highlighted the need for State governments to become more active in exports and Foreign Direct Investment (FDI). “We at the Centre have to team up with the State governments for export promotion and the States should also work hard individually to help drive exports.” The Prime Minister also made the point that States should have their own export promotion councils and be more proactive in attracting foreign investment.

Early initiatives

Mr. Modi’s statement on August 16 does not come as a surprise as when Chief Minister of Gujarat, he took the lead in reaching out to the outside world, especially to countries in Asia, like China, Japan and Singapore. During his Chief Ministership, not only did he visit these countries, but also began the “Vibrant Gujarat Summit,” an annual event to showcase Gujarat’s achievements. Diplomats from a large number of countries attended this event, which began in 2003. During the election campaign in 2014, as well, he made some interesting suggestions with regard to foreign policy. He spoke about the possibility of having representatives of State governments in other countries for promotion of trade and commercial relations, a practice followed by many countries, including the United States. A number of U.S. states have trade offices located in different parts of the world. Seventeen states have trade offices in China. In addition to this, sister city programmes have been used effectively by the U.S. ever since the programme was introduced in the 1950s.



“For closer trade relations and increased connectivity, border States sharing contiguous borders with neighbouring countries need to become important stakeholders, not just those which are politically significant or are well-represented in Parliament.”



Over the past two decades, China, a country Mr. Modi looks up to, has also granted a reasonable amount of autonomy to provincial governments, with provinces having two organisations handling foreign relations. Chen Zhimin et al in an article titled “The Provinces and China’s Multi-Layered Diplomacy: The cases of GMS and Africa” (2010) written for the Hague Journal of Diplomacy have explained the functions of both these organisations. While the Foreign Affairs Office (FAO) headed by the governor promotes people-to-people relations with other countries and handles issues such as visits by overseas delegations, economic ties with the outside world are handled through the Foreign Economic and Trade Commission (FETC). The trend of Chinese provinces being proactive in economic diplomacy began after the economic reforms of the 1970s; the period of the 1980s and the 1990s were witness to visits by Chinese governors to other countries including the U.S., and frequent exchanges at the provincial level.

Potential roadblocks

State governments reaching out to the outside world began in the 1990s, post-liberalisation of the economy, when Chief Minister of Andhra Pradesh, N. Chandrababu Naidu reached out to the U.S., and was able to attract investments from IT giants like Microsoft which began investing in Hyderabad. The Karnataka Chief Minister, S.M. Krishna, also made an effort to woo foreign investors. The efforts by Mr. Naidu and Mr. Krishna helped in promoting Hyderabad and Bangalore as investment destinations. While Hyderabad was on the itinerary of U.S. Presidents Bill Clinton and George W. Bush, Bangalore was on the schedule of former Chinese Premier Li Peng, in 2001.

While Mr. Modi’s ideas with regard to State involvement in external relations are interesting, he is likely to face a number of roadblocks.

First, while the Modi government may encourage interactions with countries like Europe and Southeast Asia, it remains to be seen how Mr. Modi will view the participation of border States like those on the west (Punjab, Rajasthan and Gujarat) vis-à-vis Pakistan, and those bordering Myanmar in the northeast. There is a strong possibility that in the case of countries like Bangladesh and Pakistan, security issues will overshadow matters pertaining to trade and people-to-people contact. This would be unfortunate, because over the past few years, some border States have been willing to play a constructive role in enhancing land connectivity and strengthening economic connectivity. In this context, Tripura (bordering Bangladesh) and Punjab (Pakistan) clearly stand out. For closer trade relations and increased connectivity, border States sharing contiguous borders with neighbouring countries need to become important stakeholders, not just those which are politically significant or are well-represented in Parliament.

Ensuring balanced development

Second, Mr. Modi’s real success would be to ensure that States that are not industrialised develop links with the outside world and benefit from these linkages economically. Currently, it is only a handful of economically developed States like Delhi, Gujarat, Haryana, Tamil Nadu, Karnataka and Andhra Pradesh which have reaped the benefits of economic diplomacy with the outside world. Atri Mukherjee, in a report titled “Regional Inequality in Foreign Direct Investment Flows to India: The Problem and the Prospects” (2011), written for the Reserve Bank of India (RBI), says that for the period between 2008-2009 and 2011-2012, these six States received 70 per cent FDI; Delhi and Maharashtra between themselves accounted for 50 per cent FDI.

To get over this inequality, it is important not just to develop other States which have been left behind, but also encourage their participation in reaching out to the outside world.

Sub-national models

Here, Mr. Modi would do well to take a leaf out of the book of both the U.S. and Chinese models of sub-national participation in economic diplomacy, where provinces which were not developed were given special attention. In the U.S., James C. Cobb and William Stueck in their book, Globalization and the American South (2005), make the point that the southern states took the lead in reaching out to the outside world, as a consequence of which southern states began to lure a large number of foreign businesses by the 1980s and 1990s. If one were to look at the case of China, the catalyst for greater sub-regional participation in foreign policy was the opening up of the economy promoted by Deng Xiaoping and the 1982 Constitution which granted greater authority to provinces. It is not just the coastal provinces which benefited from greater authority in economic matters but also border provinces like Yunnan, which share borders with Laos, Myanmar and Vietnam. Only last year, a pipeline connecting Myanmar (Kyaukpyu) with China which passes via Ruili in Yunnan became functional. Over the past decade, Yunnan has also emerged as an important economic hub. Kunming, the capital of the province, has been twinned with many cities including Kolkata.

Third, while Mr. Modi has spoken about national interest being paramount and there being no discrimination against States, it remains to be seen whether State governments not being administered by the Bharatiya Janata Party (BJP) or its allies are allowed to reach out freely to the outside world. Here, Mr. Modi will have to build political consensus with Chief Ministers from other parties including the Congress.

Role for diplomats

Finally, foreign service officers should take short sabbaticals where they work closely with State governments; something along the lines of the Pearson Fellowship introduced in the U.S., where diplomats actually work in provinces and understand the legislative process in Washington would be handy in this context. An understanding of the local sentiment with regard to foreign policy issues pertaining to the neighbourhood will come in handy in ensuring that sensitive issues are dealt with in a nuanced manner where all stakeholders are on board. While the Ministry of External Affairs has set up branch secretariats in various cities, these are not active enough and have not been granted enough powers. The number of branch secretariats should be increased and their roles increased. Issues like the visits of foreign delegations to States can be handled by these branch secretariats in tandem with State governments.

While economic diplomacy in India has been going on for two decades, Mr. Modi’s test is to ensure that the number of States which reach out to the outside world increases, and that sub-regional linkages within South Asia get strengthened through political will.

(Tridivesh Singh is a Senior Research Associate with The Jindal School of International Affairs, Sonepat. He was a Public Policy Scholar at The Hindu Centre for Politics and Public Policy from November 2013 to March 2014.)

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Printable version | Aug 8, 2020 12:04:53 AM | https://www.thehindu.com/opinion/lead/lead-article-new-highways-to-economic-growth/article6388743.ece

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