GROWING ECONOMIC DIMENSION IN EXTERNAL RELATIONS
S.Sethuraman *
In the post-liberalization
era since the l990s, India’s image has gradually undergone a radical
transformation as an emerging economic power given its huge potential
and established skills of its vast technical manpower. Political
and macro-economic stability have reinforced overseas perceptions
of India as a leading country to do business with. Having become
an outward-oriented economy, India has not only to be internationally
competitive in goods and services but also evolve strategies for
higher levels of trade and investment flows that would contribute
to sustained higher growth over the coming decades.
In this context,
the Government’s recent initiatives to strengthen and expand trade
and economic links with nations of the East and West have assumed
great importance. The "Look East" Policy has produced
tangible gains with framework accord for a Free Trade Arrangement(FTA)
with ASEAN (Association of South-East Asian Nations) at its Bali
Summit in October 2003. India is also pursuing bilateral deals
with Singapore and Thailand, key countries in a dynamic region,
with a significant share of world trade.
The Asian market
presents considerable opportunities for India to tap with its
own booming IT sector and specialization in financial services,
pharmaceuticals, health care and entertainment industry. Pending
the realization of FTA by 2012, India-ASEAN trade is projected
to rise, in the first instance, from the present 12.5 billion
dollars to 30 billion dollars by 2007. India’s tariffs have been
lowered over the years and would soon level off with ASEAN. India
has also welcomed more investments from the South East Asian region.
More than half
of India’s exports go to Western Europe and USA. The European
Union(EU) is India’s largest trading partner taking 25 per cent
of its goods. The three-decade old economic cooperation between
India and EU, largely confined to trade and development aid, has
entered a new phase with greater emphasis on investment and technological
collaboration. India is no longer aid-dependant and has dispensed
with taking loans from several countries and is already prepaying
part of the past bilateral and multilateral assistance. India
has also written off debts of some of the poorer countries. For
some years the country has been shifting toward non-debt creating
capital flows, mainly foreign direct investment.
The European
Union has been India’s largest partner in both trade and investment
and has also been an important source of technology in critical
sectors and a major destination for service providers. At the
Fourth India-EU Summit in New Delhi on November 28-29, Prime Minister
Vajpayee made a forceful plea for the European Union, which takes
a mere two per cent of its imports from India, to open its market
wider for goods and services. He desired that the Indo-EU bilateral
trade should be doubled from its present level of 27 billion euro
(roughly 30 billion dollars) within five years.
The Prime Minister
also urged EU businessmen to avail of the large opportunities
for investments in infrastructure projects and outsourcing of
business processes in India, given its large, highly skilled manpower
and software specialization. He called for a more liberal regime
for free movement of professionals and service providers in the
proposed WTO agreement on services. India has already become the
principal global centre for outsourcing of services by several
US-based Fortune 500 companies. Most expert studies of late have
projected a substantial growth in India’s software and related
IT services turnover in the coming years.
Politically,
India and EU, bound together by values of democracy and pluralism,
share a common outlook on most major international issues. A joint
statement at the end of the Summit said as global leaders in a
multi-polar world, India and EU remain committed to strengthening
the role of the UN in development field and in the maintenance
of international peace and security. They also reaffirmed their
determination to work together to strengthen multilateral institutions.
This declaration is significant in the context of certain developments
which have tended to sideline the UN or weaken multilateralism.
The European
Union has warmly welcomed Prime Minister Vajapyee’s initiatives
for friendship with Pakistan and normalization of relations as
well as the latest cease-fire along the Line of Control in Jammu
and Kashmir and the international border as steps towards settlement
of their bilateral disputes. India and EU are also to strengthen
efforts to check cross-border crimes and combat international
terrorism.
India and EU have
identical approaches on a number of international issues that
dominate the headlines. They called for a central role for the
UN in the rehabilitation and reconstruction of post-war Iraq and
a realistic time-frame for allowing the Iraqis to determine their
own future. Common positions were also set out on Afghanistan,
settlement of Israeli-Palestinian conflict, and on furthering
the peace process in Sri Lanka and Nepal.
The Summit, taking
place in the context of efforts to revive the deadlocked world
trade negotiations (Doha Round), provided a timely opportunity
for India to place its views on the key issues of agriculture,
market access and services and secure a better understanding from
the EU of its concerns of a developing country with some six hundred
million people dependent on agriculture for livelihood.
Support for agriculture
in poorer countries is inescapable and the hope is that EU would
now show greater appreciation of the needs of a developing country
when the member-countries of WTO resume their deliberations in
Geneva in mid-December on the modalities for negotiations on agriculture
and other key issues in the Doha Round. Both sides evinced their
interest to advance the trade negotiations in a cooperative spirit
towards a successful conclusion.
The Summit decisions
included the launching of a programme to enhance trade and investment
flows through simplification of administrative and regulatory
regimes, starting of negotiations for India-EU Maritime Agreement
and bringing into force the successfully concluded Customs Cooperation
Agreement. Reflecting its advances in the field of space, India
will collaborate with the EU in the Galileo Project to explore
new frontiers of technology.
For its part,
India is also set to lower its trade barriers for greater trade
within the South Asian region. Prime Minister Vajpayee has agreed
to attend the next SAARC Summit in Islamabad in January and, with
the process of normalization under way, it is expected that the
region would at last begin to march towards a preferential trading
arrangement. India is already in the process of a comprehensive
economic cooperation agreement with Sri Lanka, expanding the scope
of the present free trade accord. More countries closer to India
are reportedly showing interest in such a cooperation.
India’s trade
with China is also growing and should hit the ten billion dollar
mark within two years. India, Brazil and South Africa, which took
the lead in promoting the G-20 developing country grouping for
multilateral negotiations, are expected to set up a Trilateral
Commission when they meet in New Delhi in March next. Economics
has thus come to the centre stage in India’s external relations
and the Government has demonstrated its willingness to expand
trade and investment and even to commit resources for achieving
broadening of areas of cooperation with all developing countries
both within and outside the South Asian region.
*
Senior Freelance Writer
