India’s leadership faces a more complex international economic environment as they attempt to raise their profile on the world stage, which has implications far beyond traditional state diplomacy.
China poses one of India’s greatest challenges, as leaders perceive them to be an aggressive lender and threat along the disputed border. Demonstrating that India stands strong without heightening tensions should bolster national pride and popularity.
Traditional state-to-state diplomacy has proven ineffective at dealing with the complexity of international economic relations, so the new paradigm necessitates more sophisticated economic diplomacy to advance India’s interests and capitalize on opportunities offered by an interdependent globalized world order.
The Focus of Diplomacy Needs to be on Five Areas:
1. Trade, Investment and Technology Flows
To sustain India’s economic engagement with the US and other countries, its government must work towards steady increases in trade, investment, and technology flows – particularly those related to agriculture, clean energy and public health – between them and India. In particular, the US must remain an important partner here while exploring opportunities in other regions, such as Africa as well. Furthermore, India should take proactive steps in seeking access to advanced technology for defence and nuclear energy sectors but this should not at the cost of bilateral agreements on other advanced technologies in areas like agriculture clean energy or public health among other countries such as Agriculture Clean Energy or Public Health which could offer mutually beneficial trade agreements or agreements on other advanced technologies not related to military or nuclear energy fields but must not compromise bilateral agreements on other advanced technologies that are potentially valuable trade deals or agreements that exist between two parties involved such as in defense and nuclear energy sector agreements in such fields such as agriculture clean energy or public health with other countries for mutually advantageous trade agreements or bilateral agreements that further advance bilateral agreements without taking advantage of bilateral agreements such agreements between India and other countries in other fields like agriculture clean energy technology exchange agreements, clean energy etc etc…
The Role of Indian Business and Industry in Economic Diplomacy
To strengthen India’s economic diplomacy, its government must enhance interactions between MEA and Indian industry and trade bodies such as IIMs and IITs; strengthening these links between MEA and these bodies may assist MEA with analysis, advocacy and dispute resolution services as well as internship programs for foreign company executives in India or encouraging direct participation by them directly in India’s economic diplomacy activities.
2. Multilateral Economic Diplomacy
Newer issues like climate change, energy security and sustainable development offer new avenues of multilateral economic diplomacy; MEA must reorient itself to participate in these initiatives.
As India enacts its economic diplomacy policy more aggressively, MEA must ensure they have enough specialised and talented diplomats. There is an imbalance in terms of generalists to specialists; MEA should address this imbalance with an approach that integrates the economic and commercial objectives of India’s global engagement into its overall policies.
Under Modi’s governance, India has successfully repositioned itself as one of the premier investment destinations worldwide, with an increase in foreign direct investments (FDI) flowing in from foreign sources. But for sustainable economic growth to occur and ensure sustainable economic development, much work needs to be done concerning deepening investment ties with the US and other countries and regions – this may require reconsidering economic diplomacy activities that combine diplomatic skills with economic tools to further foreign policy goals.
India must go beyond traditional government-to-government negotiations and agreements to meet its development objectives. Instead, India will need to build a broad coalition that includes private sector firms, academia, philanthropic institutions and civil society, allowing India to promote its own development interests while simultaneously addressing global concerns like climate change and food insecurity.
Additionally, it will be essential to focus on cultivating the next generation of innovators both within the US and globally. Many young Indians have begun their entrepreneurial careers early by migrating to Silicon Valley, where they can develop their homegrown skills while creating new opportunities – this talent influx could yield long-term gains for both countries.
Establishing a clear regulatory and legal framework is also key to any bilateral investment treaty, helping investors avoid regulatory unpredictability that may stall major projects. This will be especially crucial in high-growth markets like the US, where infrastructure and technology capacities must expand in response to growing demand.
Economic diplomacy hinges on India convincing its partners that investing in India is safe. In the past, Heads of Mission often focused primarily on political work while leaving economic diplomacy to specially appointed commercial representatives; now, more diplomats are dedicating a portion of their time towards this effort – so it is vitally important that we support this trend and allocate our best talent accordingly.
India is the third-largest economy, a top provider of pharmaceutical drugs and a major purchaser of information technology products. India’s rapidly expanding domestic market provides US technology companies with an immense user base; many have seen benefits from relaxations of import rules into India by the government; however, there remain barriers related to sector-specific sensitivities within India as well as mobilization efforts by narrow political constituencies that exert significant influence over trade negotiations – evidenced by US medical device and dairy industries for instance).
India must overhaul its economic diplomacy for 2024 to remain competitive against Asian neighbours and emerging markets and overcome institutional roadblocks that impede our ability to leverage economic strengths effectively.
India should prioritize strengthening economic ties with the US, which remains its principal source of foreign investments in India; however, this should not become an excuse to neglect other key partners like Europe or Japan.
Additionally, it is necessary to strengthen the commercial/economic wings of Indian missions abroad. This can be achieved by arming diplomats with state-level information regarding investment opportunities and encouraging them to play an active role in promoting Indian businesses overseas and encouraging foreign investments into India. MEA may wish to consider opening liaison offices with business associations within target countries, such as the Federation of Indian Export Organisations or the Chamber of Commerce and Industry.
Indian Heads of Mission have traditionally concentrated on political work, delegating economic work to specially appointed “commercial representatives”. Now, more Indian HOMs are taking an interest in economic matters directly; MEA should support this trend and offer an intensive training programme that equips new and current diplomats to handle these tasks efficiently – this may include modules covering state information and an investment opportunities portal online.
5. Standards & Regulations
India should ensure that trade and investment treaties reflect its high governance standards, particularly those related to energy, technology, or finance, which could tarnish its image. This is especially pertinent when entering international agreements in areas like these where reputational risk exists.
India should use economic diplomacy to influence norms at a multilateral level rather than simply engage in bilateral agreements, for example, by being a key player in shaping global energy security and clean technology standards.
India can leverage international organizations like the UN Framework Convention on Climate Change, International Solar Alliance and Coalition for Disaster Resilient Infrastructure to further its economic interests. Setting such norms becomes even more essential as globalization unfolds further and becomes ever more interdependent.
India, as a dynamic democracy with vast resources and diversity, holds great promise as an influential voice for global South issues such as sustainable development, debt relief and other areas of mutual interest. Furthermore, it must leverage its role as an investor in developing countries while simultaneously supporting domestic growth and development.
India faces numerous hurdles to its efforts in this area. Bureaucratic structures frequently hinder such efforts; compartmentalized ministries cannot adequately grasp the wider ramifications of advocating certain policies. Furthermore, India should increase engagement with private sector partners like business councils, chambers of commerce and trade associations.
Although India has made considerable strides with its neighbours under the Modi administration, more must be done to establish strong economic and institutional ties between India and the nations in this region. This should include setting up more embassies and consulate offices within these nations as a form of economic diplomacy that will further cement India as a regional power in years to come. The COVID-19 pandemic has altered the global economy and politics and must be approached differently when engaging with world communities.
Strengthening International Trade in 2024 for India
Even as COVID-19’s impact has eased, bilateral trade in goods and services remains resilient, an encouraging sign as India remains relatively protected against global growth spillovers.
Politicians remain mindful of an agrarian crisis and call for loan waivers and increased subsidies via Minimum Support Price subsidies.
1. Strengthening India’s Digital Economy
India’s digital economy is revolutionizing how its citizens work, live, and play. India is investing significantly in broadband infrastructure, technological innovations, and lower data usage costs; all these measures accelerate digitization among its relatively young population.
National efforts have begun laying the groundwork for their digital economy with Aadhaar, which assigns individuals unique biometric IDs that are being used to digitize financial transactions. This represents the initial layer of India Stack, which will ultimately provide comprehensive digital identity, payment and data-management systems.
Data access and control have become key drivers of economic growth, equity and stability (see the recent Brookings India policy brief on “Data: A Pathway to India’s Next Economic Miracle”). India’s next government must navigate three megatrends–global offshoring, digitalization and energy transition–that are set to have profound effects on citizens’ lives; at the same time, it must address various regulatory concerns that come along with these changes.
2. Boosting India’s Manufacturing Sector
India’s 75 million Micro, Small, and Medium Enterprises (MSMEs) are essential in addressing regional imbalances while creating income at the grassroots level. MSMEs also contribute significantly to India’s GDP, merchandise exports, employment levels and job creation.
However, their competitiveness has been diminished by supply chain delays. According to the World Bank’s India Development Update report, logistical challenges caused by regulatory impediments in states can increase truck transit times by as much as 25% and put Indian manufacturing firms at a disadvantage with international competitors.
Logistics will be pivotal in strengthening India’s manufacturing exports and overall growth. To accomplish this goal, India needs to increase infrastructure spending, improve road and rail connectivity, foster innovation in manufacturing sectors, promote creativity within manufacturing sectors and offer time-bound conditional localization incentives to foreign companies looking to set up factories here, all of which could position India to become a global manufacturing hub.
3. Boosting India’s Services Sector
India’s service sector (also referred to as its tertiary economy) is the primary contributor to economic profit and employs millions. This industry encompasses banking and finance, energy sector services, information technology services, telecom, storage & communication providers, retail industry stores & industries for education/training courses/hotel industries, etc.
The Indian services sector remains attractive to foreign investors and has significantly strengthened India’s balance of payments position. Yet, growth has slowed since the COVID-19 lockdown and social distancing measures were instituted in March this year.
However, recent PMI figures demonstrate that India’s service sector is expanding at one of its quickest rates since 2002. The S&P Global India services PMI reading stood at 61 in September – well beyond 50 to indicate expansion – marking another month where expansion occurred for seven consecutive months – an encouraging sign for India’s services economy – particularly when considering exports of higher value-added services like hospitality and elderly care that have shown strong expansion across advanced economies with adverse dependency ratios.
4. Boosting India’s Trade with the United States
The leaders welcomed increased cooperation between their countries in various areas, such as semiconductors, sustainable agriculture, global supply chains, critical and emerging technologies and the Indian diaspora. Furthermore, they highlighted the significance of having strong commercial relations and stressed working together on global challenges together.
Even amid recent tension over trade issues, bilateral economic cooperation remains a cornerstone of the strategic partnership between India and the US. Both nations will explore new avenues of collaboration relating to supply chain resilience as they work on creating sustainable supply chains while developing innovative, clean technologies.
The United States and India have long had differences over tariffs, foreign investment restrictions and intellectual property protection. Still, leaders of both nations confirmed their resolve to address these matters through dialogue and negotiations and agreed to reconvene their High-level Trade Policy Forum before 2023 ends.