Quad and an opportunity to define India’s economic statecraft
In the last week of April, India, Japan and Australia formally launched the Supply Chain Resilience Initiative (SCRI) to build resilient supply chains in the Indo-Pacific region to reduce their dependence on China. This development comes against the backdrop of the Joe Biden administration, in its first 100 days, expanding the scope of the Quad grouping from a limited conventional security grouping to one with an economic dimension through multiple trade, aid and supply chain initiatives.
In the month of March, President Biden hosted the first-ever Quad summit with leaders of Japan, Australia and India, committing to provide one billion doses of Covid-19 vaccine to South East Asia. The salient feature of that commitment was the division of roles — India will manufacture, Japan will finance, the United States (US) will provide the technology and Australia will assist with the logistics. This division of roles sets a template for future economic cooperation among the Quad nations and one for India to define its economic statecraft in the region.
The shifting patterns of aid
Economic statecraft is the use of economic means such as foreign aid, trade and commerce to attain foreign policy objectives. Since India’s independence from British rule, India has been the recipient of such foreign aid and trade privileges. While it continues to be a recipient of those aid and privileges, the size and scale of aid received has significantly dropped over the past 20 years (despite the current, enhanced level of dependence due to the second wave of the pandemic) and India has evolved into a conferrer of aid and medical supplies.
Furthermore, it is no longer a mere spectator of world affairs but an active participant, if not a leading voice on issues of global concern – pandemics, climate, terrorism, and cyber security. As the second most populous nation in the world with a talented labour pool, India can leverage the Quad security grouping to address its national security threats, in particular China by using tools of economic statecraft.
China’s exponential rise and its use of its own economic statecraft to win friends in India’s neighbourhood have the potential to morph into a perennial national security threat. From the shores of Hambantota to the hills of Papua, China has successfully used its state owned enterprises (SOE) and development banks to grant aid, loans and provide infrastructure to countries of South and South East Asia as part of its flagship trillion-dollar Belt and Road Initiative (BRI).
To give credit where it is due, India has responded proactively by building its own connectivity programmes through its East and Northeast states with initiatives such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and through maritime infrastructure initiatives such as the Sagar Mala project to enhance India’s logistics capabilities.
However, as with any government project in India, the pace, scale and execution of these initiatives have been the major impediments to mounting any form of significant challenge to the China led Initiative. In order to rise up to the challenge of taking on China’s SOEs , the Indian government should engage its vibrant private sector.
Quad and Indian industry
Prime Minister Narendra Modi has been a vocal proponent for supporting India’s enthusiastic private sector leaders. And in the past few weeks, India’s industrialists have proved that they can address the government’s deficiencies and step in during a time of crisis by converting their industrial oxygen into supplies for the ones in need. India’s vaccine behemoths have a role not just in inoculating the Indian population but also serving foreign policy objectives by manufacturing for over 70 countries, including the ones in South East Asia part of the Quad Initiative.
In the past, India and Japan have worked together on projects in Sri Lanka, on development initiatives in India’s Northeast, and the US has played a vital role in creating a coalition of nations to address China’s overtures in the Indo Pacific region. The Gujarat-based Adani group is involved in the port project in Sri Lanka, and is building the container terminal along the Yangon river in Myanmar. The New Delhi-based GMR has been working on infrastructure projects in Nepal, Indonesia and the Philippines and Tata Group is engaged in several energy and infrastructure projects in Vietnam. While it is not new for the Quad nations to partner on infrastructure projects in the Indo-Pacific, a concerted effort on a much larger scale with the Indian private sector will prove to be an effective strategy in countering China’s foray into these markets.
Zaibatsu or Chaebols and not Soviet Era Oligopolies
Over the course of 30 years, East Asian economies of Japan, South Korea and Taiwan have successfully leveraged aid and their private enterprises to attain foreign policy goals. While the model could be emulated by India, the Modi administration in particular would have to tread the path carefully with it already being accused by its critics of favouring few conglomerates such as Adani Group and Reliance Industries. To avoid further criticism, the government should select companies that do not have highly leveraged balance sheets and create a consortium of India’s Navratnas or best managed companies such as the Chennai-based Larson & Tubro (L&T), Tata Power and Wipro, to name a few.
India shaping its economic statecraft using the Quad security grouping and its private sector will first, revive and sustain Indian infrastructure companies by providing the much needed capital infusion to take on greenfield projects that are capital-intensive and also reduce their risk exposure through public-private partnerships with the Quad nations. Second, it will integrate India into the Asian trade architecture without having to commit to a China centered trade bloc such as the Regional Comprehensive Economic Partnership. And third, it will pose a formidable challenge to China’s Belt and Road Initiative acts of economic coercion in the Indo-Pacific region.
The Biden administration’s measures in its first hundred days in office have set the stage for India to capitalise on its geo-economic and geopolitical comparative advantages in the Indo-Pacific region. There may not be a more opportune time and a more strategically favourable region than the Indo-Pacific to shape its economic statecraft.
Akhil Ramesh is a Fellow at the Pacific Forum, US
The views expressed are personal
Please sign in to continue reading
- Get access to exclusive articles, newsletters, alerts and recommendations
- Read, share and save articles of enduring value