7 February 2017

India: Political and Foreign Relations Outlook

Lindsay Hughes Research Analyst Indian Ocean Research Programme

Summary

The world’s largest democracy will continue to grow in strategic and economic importance

and the reform undertaken by the government of Prime Minister Narendra Modi should

stand the ruling Bharatiya Janata Party (BJP) in good stead at the next general election.

India’s foreign relationships, in general, are predicated upon its growing economy and

strategic reach and the BJP will want to continue that narrative. While the Trump era holds

Key Points

The governing Bharatiya Janata Party will be re-elected to office at the

next general election, due in 2019. The party should expect to have a

reduced majority, however.

The political coalitions and issues, as well as communal tensions, which

are encountered after the next election will almost certainly be the same

as those that are present today.

While few of India’s top-tier decision-makers subscribe to the idea of the

“String of Pearls” theory, China is nonetheless seen as the main strategic,

regional and economic rival.

Australia recognises India’s growing regional clout and importance and

seeks to align itself with a major regional power, while India recognises

the economic and strategic benefits that could be accrued from a closer

relationship with Australia. It wishes to develop the relationship further,

even if that development occurs at a relatively slower pace.

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many unknowns, it is not inconceivable that India may be able to leverage the new

administration’s distrust of China to the benefit of its foreign and trade policy objectives.

Analysis

India’s Political Environment

The Republic of India is the world’s largest democracy and is composed of twenty nine states

and seven union territories, the latter are administered directly by the centre. India’s

Constitution came into force on 26 January 1950 and defines powers of the federal

government, the state governments and those that are shared by both. The nominal head of

the country is the President, who is obliged by the Constitution to act on the advice provided

to that office by a Council of Ministers that is appointed by the Prime Minister. While that

office is, to a large extent, ceremonial, it plays a significant role if, for instance, there is no

outright winner in a general election. Parliament is bi-cameral and structured along the

British model, with policy enacted by the lower house, the Lok Sabha or “People’s House”.

The members of this House, which consists of 545 seats, are elected directly by Indian

citizens every five years. The members of the Rajya Sabha or Upper House, which comprises

245 seats, are elected every two years by the Legislative Assemblies of the states. One- third

of its members retire every year and elections for these seats are, therefore, not held

concurrently with general elections.

The current Prime Minister is Narendra Modi, whose Bharatiya Janata Party (BJP) and its

National Democratic Alliance partners won office in 2014. The BJP won 282 seats in the Lok

Sabha, the first time any political party in India had won an outright majority by itself since

1984. Modi was elected on a platform of economic development and good governance. It

could be argued that the BJP won the general election by default, the electorate being fed

up with the corruption displayed by the then-ruling party, the Congress Party of India. It is

likely that the electorate dismissed any fears of electing a hardline, nationalist party to

power because of the antipathy felt across the country towards the Congress Party. Modi

ran his election campaign on the basis of his economic successes as the Chief Minister of the

western state of Gujarat, promising to bring about those successes nationally and to take a

hard line against corruption. Critics, however, charged that he had ignored or done little to

prevent the mass killings of Muslims during the religious riots of 2001.

Modi appears to have a singular political ambition, which is to put an end to the BJP’s main

political rival, the Congress Party. He sees two concurrent paths to achieving this goal – first,

by destroying the reputation of the Nehru-Gandhi dynasty, the Congress’s traditional leaders

and, second, by growing India’s economy in order to make India the superpower he believes

it ought to be and contrasting that growth with the Congress Party’s abysmal record. In

order to destroy the reputation of the Nehru-Gandhi dynasty, the BJP has targeted the

current de facto leader, Mrs Sonia Gandhi, the widow of ex-Prime Minister Rajiv Gandhi and

daughter-in-law of Indira Gandhi, and her son, Rahul. The BJP has few compunctions, it

would appear, in highlighting Sonia Gandhi’s Italian heritage and in alleging that her

children, Rahul and Priyanka, are Italian citizens. There have been attempts to conflate the

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family’s wealth with corruption and illegal arms deals. The general perception of Rahul

Gandhi’s indifference to politics is also underscored.

The emphasis, however, is on developing the economy. As part of this process, Modi has

tried to put an end to the parallel economy (or “black market”, as it is called in India) by

demonetisation. He has banned the use of India’s two largest and most commonly used

currency notes, the five hundred rupee and one thousand rupee bills, and replaced them

with newer five hundred and two thousand rupee notes with a view towards ridding the

economy of “black money” and eventually moving towards a cashless economy.

It is likely that, absent a major issue, the BJP will be re-elected to office at the next general

election, due in 2019, albeit with a reduced majority as the initial euphoria wanes. It is

equally likely that the Congress Party will gain a few seats in Parliament although not

sufficient to make any great difference to its present situation. It is just as likely that current

political coalitions and issues will continue after the next general election barring an

unforeseen occurrence. Communal tensions, especially between Hindus and Muslims, will

continue and hardline Hindu nationalists will continue their opposition to Christian

evangelists by pressuring their elected parliamentarians to take steps to prevent the

conversions of members of India’s lower castes from Hinduism to Christianity. It is just as

likely that the BJP will continue to pressure social and environmental NGOs in order to ram

through Parliament Bills relating to energy security and infrastructural development.

It is difficult, again, to foresee major change occurring between this time and the next

general election.

India’s Foreign Relations

India has, since independence in 1947, seen itself as a major power in the making and has

worked towards achieving that goal. It was a founding member of the Non-Aligned

Movement, an international grouping that sought to distance itself from close alignment

with any power bloc. It is a member of the United Nations and, because of and as part of its

strategic rise, seeks to become a permanent member of the Security Council of that

organisation. New Delhi has made efforts to expand its relationship with the Association of

South-East Asian Nations (ASEAN) and with the East Asian Summit. It was granted full

dialogue partner status with ASEAN in 1995 and made a member of the ASEAN Regional

Forum in 1996. It presently is working towards acquiring membership of the Asia Pacific

Economic Co-operation organisation. Based on its growing economy and, simultaneously, to

enhance it, India also seeks a more prominent role in forums such as the World Trade

Organisation and the G20, primarily to secure access to energy supplies and to boost its

economy, which was a key electoral platform of the Modi Administration.

India is the de facto hegemon in South Asia, a situation that does not rest easily with China

or its “all weather friend”, Pakistan. India’s relationships with its neighbours, nevertheless,

set the tone of regional relations. New Delhi has shown it can – and has the will to – isolate

Pakistan, its regional antagonist, in regional forums, including in the South Asian Association

for Regional Co-operation, in which forum both countries are active. India is also a member

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of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation and

the Brazil, Russia, India, China and South Africa (BRICS) group.

Whereas in earlier times, India was perceived in terms of its relationship with Pakistan, it has

more or less de-hyphenated itself from that country – and prevailed upon other countries,

such as the United States and Russia, to do likewise – on the basis of its economic growth. It

sees China as its main strategic, regional and economic rival. While few of India’s top-tier

decision-makers subscribe to the idea of China’s “String of Pearls” theory – the notion that

China seeks to encircle India in order to contain it – they show hardly any restraint in

describing each new missile developed in the country in terms of its effect upon China. Thus,

for instance, the nuclear-capable, intermediate-range ballistic missile has been described as

a “China killer”.

India has developed a strategic relationship with Russia, which is based upon common goals

and needs. In recent times, India has depended upon Russia for its military technology,

including know-how for its nuclear submarines programme and its BrahMos missiles and its

front-line fighter aircraft. India has also sought access to Russian energy supplies and, even

more recently, to developing Russian oil and gas fields. Russia is also seen as a strategic

partner vis-à-vis China, one that could help India balance an aggressive China.

Despite this relationship, India has been gravitating slowly but surely towards the US. It

seeks access to US markets for its IT services and, in turn, to acquire technology – military

and otherwise – and energy products. India sees the growing friction between the US and

China as a factor it could leverage to reach its own goals. It has, therefore, signed an

agreement with the US whereby both countries will provide each other with logistical

support and it is likely that two other “foundational” agreements will be signed sooner

rather than later. On the issue of trade and commerce, it is likely that, should the incoming

Trump Administration hold to its stated objective of developing bilateral agreements instead

of multi-lateral ones, India-US trade could increase. Although issues remain in areas such as

intellectual property rights, insurance, retail trade and legal services among others, these

will likely not impede a closer trading relationship. The appointment of Robert Lighthizer, a

strong critic of current US trade relations with China, to the office of US Trade

Representative, along with Secretary of Commerce-designate Wilbur Ross and Peter

Navarro, head of the newly-created White House National Trade Council, both of whom are

equally vociferous in their opposition to current US-China trade relations, could see US-India

trade grow. These individuals have a common goal: to strengthen the US’s manufacturing

base and help stop the exodus of jobs from there to other countries. As Lighthizer wrote as

long ago as 2011 in relation to Trump’s views on trade, ‘On a purely intellectual level, how

does allowing China to constantly rig trade in its favour advance the core conservative goal

of making markets more efficient? Markets do not run better when manufacturing shifts to

China largely because of the actions of its government. Nor do they become more efficient

when Chinese companies are given special privileges in global markets....’ These factors

could herald a further strengthening of trade relations with India since, in general, India is

more concerned with service delivery to the US rather than taking manufacturing jobs from

it, à la China.

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India continues to share a fractious relationship with Pakistan. This stems from

disagreements over Kashmir. The growing relationship between Pakistan and China could,

however, see New Delhi attempt to isolate Pakistan diplomatically at various international

forums. New Delhi will be increasingly worried about China’s rapidly-growing strategic

relationship with Islamabad, and investments in and the transfer of military equipment and

technology to Pakistan, as it views these acts as an attempt by Beijing to constrain its

(India’s) growth. There could be a kernel of truth to this perception. At a time when Pakistan

requires investments in its energy production and in its food and water security, purchasing

fighter aircraft and attack submarines from China ought to take a much lower priority. The

argument that the fighter aircraft are required to fight against domestic terrorism does not

stand up to close examination.

India has, however, made attempts recently to repair its relationships with neighbouring

countries such as Bangladesh, Nepal, Sri Lanka and the Maldives and seeks to further its

relations with Afghanistan, Iran, Saudi Arabia and Israel.

Its relationships, in general, are predicated upon its growing economy and strategic reach,

the latter being an outcome of its economic growth, which makes it a valuable market,

strategic ally or both. Australia sees India as a market for its mineral and energy resources as

well as a source of income from tourists and higher-education students. It also sees India as

a potential regional security partner that could help balance an increasingly aggressive

China. India is Australia’s tenth-largest trading partner and fifth-largest export market.

Australia is, in turn, India’s twenty first-largest export market, accounting for 1.2 per cent of

its exports, and its fourteenth-largest source of imports at 2.4 per cent in 2015. Both

countries are working towards enhancing their bilateral economic relationship through a

Comprehensive Economic Co-operation Agreement (albeit there appears to be some minor

disagreement regarding this title) and, similarly, security relations through the Framework

for Security Co-operation.

Australia’s exports to India amounted to around $9.6 billion in 2015-16 and its imports from

that country around $4.75 billion. Its major exports included coal ($5 billion), vegetables

($0.74 billion), gold ($0.68 billion) and copper ores and concentrates ($0.5 billion). Imports

from India over the same period included refined petroleum ($1.6 billion), pharmaceuticals

($0.3 billion), pearls and gems ($0.27 billion) and jewellery ($0.175 billion). In 2015, Australia

exported services worth around $3.2 billion to India and imported services of around $1.7

billion from there.

Trade aside, the Foreign Ministers of Australia and India meet annually at the Foreign

Ministers’ Framework Dialogue. The Trade Ministers of the two countries also meet annually

for the joint Ministerial Commission and their Ministers for education meet for the India-

Australia Ministerial Dialogue on Education Co-operation. The Defence Ministers meet

regularly and the Australian and Indian Ministers for Industry hold an annual Energy Security

Dialogue.

In short, Australia recognises India’s growing regional clout and importance and seeks to

align itself with a major regional power. India, in turn, recognises the economic and strategic

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benefits that could be accrued from a closer relationship with Australia and wishes to

develop the relationship further, even if that development occurs at a relatively slower pace.

Conclusion

India will continue to grow in strategic and economic importance, mainly because of the size

of its population, their increasing desire and ability to purchase goods and products

unavailable to them previously and India’s gradual move towards becoming a larger

consumer society. It is India’s surging economy that will emphasise its importance as a

growing market and as a strategic partner to many regional and extra-regional countries.

Barring unforeseen circumstances, there is little reason why the Indian economy will not

continue to grow and the country to prosper.

*****

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of

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