Indian diplomacy’s moment is a recognition of its incipient rise and growing economic and geopolitical stature. That is why today there is greater emphasis on the economic component of India’s foreign policy. Globalization and the digital revolution have made trade and other economic interaction, including movement of capital and labour across countries, more important for India’s development. Economic liberalization has raised the stakes and the influence of businessmen, industrialists and entrepreneurs in foreign affairs. Foreign policy has to promote trade, create jobs (both in India and abroad), bring in needed civilian and defence technologies and promote inward as well as outward investments. It also has to ensure India’s energy security, since India depends hugely on imported oil, gas and coal, as well as many other raw materials and natural resources.
Today, an increasing number of Indians, particularly the younger generation – students, professionals, and businessmen – have global interests. Millions of Indians travel abroad for business, education or tourism. An equally large number of Indian citizens and people of Indian origin live and work abroad. Looking after the welfare of all these groups of Indians is a very important task of Indian foreign policy.
Relations with the United States (US) appear to be on cruise control. Positive ties with Washington have propelled strategic partnerships with Japan and Australia, both Quad partners. Indeed, the Quad’s turn to address transnational issues like global health, climate change, and digital issues gives New Delhi an opportunity to contribute to regional public goods in the Indo-Pacific.
European Union (EU)-India relations have been on the ascent, driven by a shared desire to enhance economic security. Importantly, dissonance with such major powers on Russia’s invasion of Ukraine has not dented or slowed their diplomatic prioritisation of India. India has also pivoted to seize diplomatic opportunities in the Middle East, Latin America, and Southeast Asia. Countries such as Israel, Egypt, the UAE, Singapore, and Brazil are forming partnerships with India to improve economic ties and help address regional challenges.
World Bank estimates suggest that China is now the biggest lender to low and low middle income countries (LMICs) but Beijing’s disinclination to provide meaningful debt relief has given India a diplomatic opening to address difficulties in a region on which its own development hinges. India has the opportunity to use the G20 to not just reduce debt burdens across the Global South but also encourage other governments, especially China and the US, private firms, and multilateral development banks like the World Bank to support more equitable debt burden sharing to ensure the current crisis does not engulf countries. Nearly 60% of LMICs stand at the precipice of default which makes the situation precarious. India can use the G20 to move multilateral development banks to provide more concessional financing to LMICs that allows these countries to offset external outflows.
The efficacy of a geo-economic foreign policy fundamentally hinges on how credibly India manages and sustains economic policy. Despite optimistic prognostications on the economy, difficulties in establishing and adhering to a predictable economic policy framework could dent the use of economic instruments to achieve foreign policy goals.
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