New Indian PM is doing the rounds, and look what he’s getting out of it

Narendra Modi has just visited the US. Was he as successful there as he was with his Asian neighbours? AAP

The recent flurry of official visits by the leaders of India, China, Japan and Australia suggest a collective regional juggernaut designed to transform India and draw lines between friend and foe.

But that’s too simple a conclusion in a world where strange bedfellows are the norm rather than the exception. India’s regional dance with major players is no different. Prime Minister Narendra Modi is determined to forge ties presumably for the benefit of India. Now he has met President Barack Obama in the US, what is the world offering India?

The visit by Japanese Prime Minister Shinzo Abe as the chief guest at India’s Republic Day celebrations on January 26 and a subsequent visit by Prime Minister Modi to Japan soon after taking office in May 2014, was soon followed by the visits of Australian PM Tony Abbott and Chinese President Xi Jinping to New Delhi.

All these visits yielded gifts: Abe promised to invest $35 billion in India over five years, while Xi partially matched it with $20 billion. Abbott offered uranium. Economic and strategic partnerships were the focus of discussions between Modi and Obama. The large Indian-American community has made a mark in the US and is bent on improving India’s rightful recognition by the US.

The bilateral gallivanting is mostly driven by economic interest. India needs investment, period. Modi is desperate to see this happen because this was a major platform before and after the election.

Is China’s prosperity a threat or a blessing?

Following the advice of Chinese revolutionary Deng Xiaoping that it doesn’t matter if the cat is black or white as long as it catches mice, India welcomes China’s help. Foreign investment is welcome to build and maintain India’s expanding but hopelessly inadequate infrastructure, generate jobs for its vast youth population, and position India in a more muscular way in the world economy.

A popular perception is that the rise of China comes at the expense of other countries, including the US, Japan, and India. A closer reading of the situation suggests that it is far more complex than that. It is true that China out-competes many low-wage countries, including India, its largest trading partner, with its sheer manufacturing prowess.

Witness India’s trade deficit with China, representing 200% of India’s exports to China. However, it is also known that China’s export surplus is being recycled in American treasury bills, thereby contributing to lower interest and inflation rates. American and other foreign investment has transformed Chinese manufacturing and contributed to its status as the workshop of the world.

China is a manufacturing powerhouse. AAP

China, far more than India, with its remarkable record of reducing poverty from 84% to 12% over three decades, has contributed substantially to the falling global poverty rate. Even Japan, China’s nemesis when it comes to historical memory, benefits substantially from Chinese labour and markets. And where would Australia be without the resource demand and investments linked directly to Chinese prosperity?

That said China does pose a quandary. The global uncertainty and instability associated with China’s rise complicates the world.

It is not that the world economy has not accommodated rising powers or absorbed instability before. In fact even hegemonic leaders have come and gone and the world has moved on. Rather there is uncertainty about whether China’s public announcements of a “peaceful rise” and their “harmonious society” will be true in reality.

First, the fusion of a single-party state government pursuing aggressive economic growth with a capitalist state is an enigma in a world that has witnessed the downfall of multiple authoritarian governments. China also sits uncomfortably in a world where capitalist success is often (erroneously) attributed to democracy.

Second, disputed borders, territories, seas and islands have put Asian countries on high alert. If, when and how these will be resolved is anyone’s guess. In the meantime, however, tensions continue to mount even as China bristles and the world becomes increasingly entangled and dependent on the Chinese economy. Witness the border tension along Ladakh during Xi Jinping’s India visit.

Japan could use a little help from India

It is in this geopolitical context that the relationship between India and Japan has taken on a new significance. The India-Japan relationship has been mostly trouble-free. More pragmatically, however, Japan missed the India growth bus unlike the American IT and Korean manufacturing businesses.

Japan also suffers acutely from a demographic catastrophe in the making with a less-than-replacement fertility rate and ambivalence toward increased immigration. India, with its large supply of technical talent could fill this void.

But, but … we thought Australia was Japan’s best friend? AAP

Consistent with Modi’s vision, Japan has promised to invest in smart cities, industrial corridors, power generation, bullet trains, manufacturing and even nuclear technology for civilian use. Japan remains India’s largest official development assistance provider and Japanese high-technology businesses have quietly been making inroads.

The Comprehensive Economic Partnership Agreement with India is another element of this cooperation.

Australia too can benefit from the Indian market should Modi’s magic work. Skill transfer, science collaboration and education revenues, among other things, are possible benefits.

What did Modi bring back from the States?

As anticipated Modi has returned with a lot of good willand joint visions, some pressure to unshackle the Indian economy with more reforms to allow the entry of financial, insurance and retail business in a growing lucrative market, and possibly defence technologies. The US is preoccupied with far too many foreign entanglements to shape a more coherent partnership.

Its economy, job growth and infrastructure are not in good enough health to offer much more at this time. A strategic partnership is a work in progress and it’s too early tell what exactly will transpire. However, as expected, the Indian diaspora in the US gave Modi a rock star’s reception and rallied behind him with the promise of capital and knowledge transfer. American CEOs showed keen interest as well.

The world has much to offer and India has much to be grateful for. The real question is if all of this globetrotting and the promises on the external front will create an India that is visionary, safe and inclusive, and not just muscular and self-congratulatory on the global stage.

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