In the few weeks he has been at India’s helm, after an unexpected landslide victory in the general elections, Narendra Modi has raised hopes around the world, including the United States and China, that Delhi is ready for a productive engagement with its external partners. These expectations are rooted in the nature of the mandate that Modi won, his reputation for economic pragmatism as the chief minister of Gujarat province, which he ran for more than a decade, and the structural opportunities that have long presented themselves to India on the international stage.
Modi’s predecessor, Manmohan Singh, was widely liked and respected abroad as a wise elder statesman. Singh, who had no prior foreign policy experience, instinctively understood the extraordinary opportunities that awaited India after a period of sustained high growth rates from the early 1990s, when he had launched reforms as the finance minister of the nation. His first year as Prime Minister saw the unveiling of a historic civil nuclear initiative and a new framework for defense cooperation with the United States in 2005. Equally significant were an agreement on the principles to settle a boundary dispute with China and a opening up of a back channel negotiation with Pakistan to resolve the intractable problem of Kashmir. In 2005 India joined the newly formed East Asia Summit and began to engage fully with the geopolitics of Asia, from which it had excluded itself for decades.
Singh presided over unprecedented growth rates of close to 9 percent in the middle of the past decade; the rare prospect of improving relations with both China and the United States; the resolution of India’s longstanding territorial disputes; and the reclamation of its role as a major power in Asia. There was a worldwide perception that India’s long-awaited rise was inevitable, and most major nations vied with each other to deepen ties with India.
Tragically, this rare moment in India’s international relations evaporated over the next nine years of Singh’s decade-long tenure as Prime Minister. The lack of economic reforms and the drift toward populism in the earlier years of UPA rule were compounded by the global economic crisis. India’s growth rate soon plunged to five percent and below. The political drift within the government left it unable to advance bilateral relations with major powers, including the United States. Regional initiatives toward Pakistan and China sputtered, and hopes that India would play a larger role in Asia were dampened.
If Modi’s landslide victory was in large measure due to the failure of the Singh government, he now faces a big challenge and a huge opportunity. It is indeed impossible for any leader of a large and diverse country like India to fulfil all the demands that are being made on Modi. On the other hand, the drift under Singh has left much low-hanging fruit for Modi to pluck. Even small steps that restore a sense of political purposefulness in Delhi could significantly improve India’s image and generate much space for the new government to operate on the international stage. Modi’s success in securing an absolute majority for his party after a gap of thirty years has the potential to end the prolonged rule of weak governments in Delhi. If the compulsions of coalition politics limited Delhi’s ability to make bold economic reforms and significant foreign policy initiatives, Modi has the mandate to do both.
On the economic front, Modi appears prepared to bite the bullet. The depth of Modi’s commitment to reform will be visible after his government presents the budget for the year in mid-July. Those in the West looking for wholesale privatisation or dramatic expansion of market access, however, might be disappointed. He will rather attempt to craft a reform agenda that is sustainable in the complex Indian political environment. That agenda will emphasize shoring up India’s economic fundamentals and creating the right environment for investment by domestic and foreign capital.
Modi is perhaps the most business-friendly Prime Minister India has ever had. Yet he will have to fend off the long-entrenched suspicion of the private sector within the political class, including his own party, which is full of nativists and economic populists. Even modest success on the economic front is bound to generate greater space for Modi to improve relations with India’s immediate neighbours, narrow the growing strategic gap with China, and make Delhi an important player in shaping the balance of power in Asia, the Indian Ocean, and beyond.
Modi’s unabashed celebration of India’s cultural nationalism and his reputation as a Hindu nationalist and Pakistan-basher, however, had raised concerns at home and abroad, especially in the West, that he might adopt a tough and muscular approach toward Islamabad and precipitate a military crisis. In power, though, Modi took a very different tack. He invited the leaders of the seven South Asian neighbors, including Prime Minister Nawaz Sharif, to participate in his swearing-in ceremony. That all of them accepted and came on very short notice underlined the fact that India’s neighbours have long been waiting for a credible interlocutor in Delhi. Although the talks between Modi and Sharif were positive and the two sides have agreed to resume their dialogue, few expect a breakthrough. Many agreements have been negotiated but not implemented under the UPA government. These include pacts on normalization of trade relations and visa liberalization. Among other possibilities discussed were the export of electricity and diesel from India to Pakistan. If there is no major terror incident in India emanating from across the border in Pakistan, and if Sharif’s powerful army allows him to move forward, a positive phase in bilateral relations might be at hand. But these are big “ifs.”
Beyond Pakistan, Modi appears to be keen to reclaim India’s primacy in the Subcontinent. China’s emergence as the principal external player in the Subcontinent has raised concerns in the Indian strategic community. This in turn demands that India resolve disputes with its neighbors and deepen economic integration under the aegis of Delhi. There is some recognition of the latter in the Modi government’s emphasis on strengthening the South Asian Association of Regional Cooperation, the main regional forum. Modi has also underlined the emphasis on neighborhood diplomacy by making tiny Bhutan his first foreign destination. His Foreign Minister, Sushma Swaraj, chose Bangladesh for her first trip abroad. Delhi’s effort to deepen ties with the neighbours over the past few years was stymied in part by opposition from provinces, such as those bordering Bangladesh and Sri Lanka. The strategic community in Delhi has agonized over the federalization of Indian foreign policy, and Modi’s strong mandate promises to reverse this unfortunate tendency. While affirming Delhi’s prerogative to conduct foreign policy, Modi has promised to expand consultations with the state chief ministers and make them partners in crafting national policies. While creating more political space at home for dealing with the neighbors, Modi is expected to press them hard to show greater respect for India’s regional interests. In any case, a vigorous South Asian policy has become central to the principal strategic challenge that India faces—the rise of its giant neighbour to the North.
China’s emergence as a great power has also presented an opportunity for India in East and South East Asia. China’s growing assertiveness in its Asian territorial disputes has led many of Beijing’s neighbours to seek stronger strategic partnerships with India as part of an effort to maintain an effective balance of power in the region. One of the first foreign destinations for Modi outside of the Subcontinent will be Tokyo, where Shinzo Abe is enthusiastic about building a stronger economic and strategic partnership with Delhi. Many ASEAN nations that have been disappointed by Delhi’s inability to carve out a larger role in Asia would be pleased if Modi pursued a more vigorous diplomatic and security engagement with the region. Already, he explicitly has underlined the importance of stronger defense ties with the smaller countries of Asia and the Indian Ocean. Given his party’s strong commitment to national defense, Modi is expected to raise India’s defense spending, which had fallen below 2 percent of GDP; accelerate weapons procurement, which had stalled under the previous government; facilitate foreign direct investment in the expansion of India’s domestic defense industrial base; and step up arms exports.
China also emerges as an important factor in India’s relations with the United States as Washington copes with the rapidly changing balance of power in Asia. China, locked in a confrontation in East Asia, has been sending positive signals to India. Well before the West had taken notice of Modi, China found him a valuable economic partner in Gujarat; it laid out the red carpet for him when he travelled to Beijing some years ago. At the same time, Modi would not downplay the security threats from China. During the election campaign, Modi visited the northeastern frontier claimed by China and denounced Beijing’s “expansionist mindset.”
In power, then, Modi is outlining a twin track policy toward China. He has proclaimed a strong interest in expanding economic cooperation with China; he has agreed, for example, to set up industrial parks for Chinese investments, which would also hopefully address the problem of the expanding trade deficit with Beijing. On the security front, he is actively clearing the way for long-delayed projects to modernize the Indian military and to improve Delhi’s defenses on the disputed frontier with China. He is also reminding Beijing that he has the requisite domestic political strength to negotiate a boundary settlement with China.
As a realist, too, Modi is quite conscious of the fact that India needs a strong partnership with the United States to successfully pursue India’s economic and foreign policy interests, including the challenge of balancing China. Given that he has been denied a U.S. visa since 2005, under unproven charges that he did not do enough to stop the anti-Muslim riots in Gujarat during 2002, there is much discomfort between Modi and Washington. During the campaign, Modi had repeatedly stated that his personal issues with Washington would not be allowed to affect India’s important relationship with the United States. Overruling the widespread sentiment within his party and the strategic community that he should not travel to Washington without a formal apology from the United States on the visa issue, Modi quickly accepted an invitation from the Obama Administration for a White House meeting in September.
For his part, Modi is eager to put the past behind him and seek a productive relationship with the United States. But the Obama Administration has much work to do. For one, Washington must demonstrate genuine political warmth to Modi and assuage the deep, personal hurt on the visa issue. For another, Washington will have to recognize that India is on the cusp of significant internal change and must be prepared to make the best of it.
Modi’s arrival allows the two states to make a fresh start, to overcome the accumulated frustrations of the last few years and lay out a bold agenda for bilateral cooperation. The premises of 2005, when India and the United States took big steps toward a strategic partnership, continue to hold. A strong India makes it easier for Washington to sustain a balance of power in Asia that is favorable for America. Delhi, on the other hand, needs the full support of the United States to emerge as a great power on the world stage. A decade later, thanks to the relative weakening of both United States and India in relation to China, Washington and Delhi need each other more than ever before.