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CENTRE for POLICY ANALYSIS

 

OPINION
BENNY KURUVILLA | 18 MAY, 2014

UPPING THE ANTE: ECONOMIC DIPLOMACY UNDER THE NDA REGIME

In India shifts in foreign policy take place incrementally, often over decades, and one year is too short to glean a Modi imprint, a punishing travel schedule notwithstanding. When it assumed power in May 2014, the National Democratic Alliance (NDA) government inherited complex and multiple challenges on the domestic and external front. Domestically, the Indian economy was beset with weak macro-economic fundamentals and serious structural infirmities, the manifestations of which included a deep-seated agrarian crisis, stagnating industrial production, declining public services and rising unemployment. This was of course a legacy of India steadily shifting gears to the right from 1991. Since then coalition governments (of various hues) at the centre, have doggedly pursued policies of economic liberalisation that brought increased foreign investment and high growth rates, albeit with rising inequality and marginal impacts on decent jobs and social indicators.

Externally, India was implicated on several counts. In the post-2008 financial crisis world, growth continued to be sluggish in Europe and the United States. The World Trade Organisation (WTO) is crippled by a two-pronged impasse. While free trade apologists have jettisoned it for bilateral and regional free trade and investment agreements, developing countries are hard pressed to show benefits on long-pending issues such as access to northern markets for industrial and agricultural products. Democratisation of the World Bank and IMF continues to be a non-starter. This situation has also opened the door for institutions proposed by the BRICS such as the New Development Bank (NDB) and the Contingency Reserve Arrangement (CRA) to counter the Bretton Woods twins. Fifty-six countries, including India, have joined the China-led Asian Infrastructure Investment Bank (AIIB) that was launched in October 2014. An assessment of the NDA’s foreign policy needs to be situated within this context.

Trade and Investment Liberalisation

Agriculture continues to be the key to break the WTO Doha Round logjam. Flawed rules under the Agreement on Agriculture (AOA) allowed rich countries in the OECD subsidies upto $258 billion in 20132. In a travesty of justice, developed countries are using the same AOA to challenge the ability of developing countries to subsidise their poor farmers through price support for food security purposes. At the Bali Ministerial in December 2013, India won the right to use a ‘peace clause’ that would then pave the way for a permanent solution on food security3. It also refused to sign a deal on trade facilitation (TF) unless both deals were part of a single package with similar time frames. Inexplicably in November 2014 (after Prime Minister Modi’s visit to the US), the NDA government inked a bilateral agreement with the US on both food security and trade facilitation4. Close to 200 global civil society organisations had cautioned against rushing to sign the TF agreement without a clear commitment on issues of interest to developing countries. They argued that the TF would lead to further privatisation of ports and impose regulatory and cost burdens on developing countries with the main beneficiaries being transnational shipping and logistics firms5. With the next WTO Ministerial slated for December 2015 in Nairobi, news from Geneva indicates that major developed countries, led by the US and the EU, have taken intransigent positions, clearly indicating that they will not allow a permanent solution on food security any time soon.

This article has appeared in the Newsclick.

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