Distinguished Lectures Distinguished Lectures

Foreign Policy Challenges for National Development

  • Amb (Retd) Pinak Ranjan Chakravarty

    By: Amb (Retd) Pinak Ranjan Chakravarty
    Venue: IIM, Kolkata
    Date: February 19, 2016

Respected Director,
Distinguished Faculty Members,
Dear Students,
Friends,
Ladies and Gentlemen,


I am delighted to be here since I have never been in this campus before. Thank you for inviting me. It is a privilege and honour to speak to this elite audience – the best and the brightest - and future policy makers and managers of our country’s destiny. Beyond graduation, many of you will go forth and eventually assume leadership positions in your respective workplaces in the next 30-40 years. As managers and leaders of the future, you will have to expand and integrate your knowledge horizon for national development, corporate or organizational goals. Your skill bank must include a general understanding of India’s foreign policy in your knowledge template.

The link between foreign policy and national development is relevant, as we live in an increasingly integrated world, where cause and effect are quickly transmitted globally and nimble footed decision making can make a huge difference for desired outcomes.

I hope some of you are motivated to join the Civil Service and I, personally, would hope that some of you will eventually join the Indian Foreign Service. Having spent almost 37 years as a diplomat, I can say with confidence that I have not regretted my decision to pursue a career in diplomacy, though my subject was Physics and Astrophysics at the Masters level in the University. I am delighted that scientists have finally proven that Gravitational waves do exist -100 years after Einstein had postulated his General Theory of Relativity. Very few people understood it then. The famous Physicist Eddington was once asked how many people understood Einstein’s theory; he rubbed his cheek and said I am trying to think who could be the 3rd.

Over the years, we have welcomed several IIM graduates into the Foreign Service we would be happy to welcome more, at a time when the Government of India has set in motion an ambitious expansion of the cadre of India’s professional diplomats.

In my remarks today, I will touch upon on some general issues and then focus on a few that are changing the way we think and operate in our contemporary world and attempt to link some developments to the topic I have chosen. I hope to leave enough time for a Q @ A session because a monologue never brings out what you are thinking and I don’t want to make this a dull session.

The role of foreign policy in national development is not widely understood or recognized. The traditional role of foreign policy in furthering a nation’s goals has changed enormously over the decades. The primary driver of this change has been changing national requirements and the pace of integration of the world via new technologies, increasing international trade and greater movement of people. As diplomats implementing India’s foreign policy, we have been acutely conscious of this evolving changes, assessing their impact and navigating India’s external engagement, to ensure that it remains in sync with national development goals and aspirations.

Traditionally, India’s foreign policy, in its broadest definition, like that of any other country, seeks to preserve and expand our country’s policy options across the board in all sectors. From the primary and pressing objective of preserving and securing our nation’s post- independence new borders and concentrating on rehabilitation of refugees and national development in its multifarious forms, foreign policy in its strategic orientation and implementation methods has evolved over the years. The bottom line, as it were, is that India’s foreign policy aims to create an appropriate external climate to ensure that India’s national developmental goals are achieved, so that we can, collectively, meet our country’s critical challenges of ensuring poverty eradication, food and energy security, eliminating illiteracy, providing healthcare, creating employment and infrastructure and a host of other developmental needs. Foreign policy therefore, seeks to dovetail into our national effort of transforming India into a modern and prosperous nation.

Foreign policy is a sub set of a nation’s national policies and is symbiotically linked to national goals and objectives as defined by its political order. It follows priorities set by the government of the day but also transcends ideological leanings of parties in certain domains that remain non-partisan. It is driven by demands of development, as you would all know in this Institute. For instance, IIMs were established because India needed professional managers for the large numbers of Public Sectors organizations during the 1950s and 1960s. The then Planning Commission decided to tap foreign expertise in setting up the IIMs and also the IITs. Indian diplomats of that era were instrumental in making this collaboration happen by connecting with foreign governments and institutions to facilitate setting up these institutions which have helped enormously the course of development, not just in India, but also provided management professionals to global corporates.

There are any more such examples in almost all domains of our country’s development – the Green Revolution – Food security, White revolution (self-sufficiency in milk and milk products), Energy security, Space, Steel, Mining, Manufacturing, Services, Defence, acquisition of technologies, IT etc. The quiet work of Indian diplomats over the decades have contributed to the progress in all these fields in the overall context of national development. I can tell you from my experience as a diplomat serving in Israel the work we were tasked to do in the domain of Agriculture, Defence and Defence technologies.

Having set the context of my argument, let me move on to some general issues on foreign policy and strategy. The renewed global interest in India started since the beginning of the economic reforms in 1991 which led to the gradual globalizing of the Indian economy. With high rates of economic growth during the last two decades, almost 7.5% on the average, India’s global trade expanded manifold and today contributes almost 50% of its GDP, as compared about 3% before. In PPP terms, India is the world’s third largest economy after the USA and China. India’s growing profile on the international stage has naturally led to questions about the role India seeks to play or should play regionally and internationally. Clearly, the world expects India to play a larger role, commensurate with its size and growing power. Consequently, the question has arisen about our own perception and assessment of our international role and the nature of our global engagement. This process has led to a changing consensus and nuancing of our foreign policy thinking and objectives and how they relate to national development.

The role of strategy in policy planning, whether foreign policy, education policy, management policy or corporate policy or any other policy, is crucial. Without strategic planning there cannot be simply tactical decisions which are bound to be ad-hoc and lacking in coherence. In the foreign policy domain this is particularly important and requires a great deal of diverse inputs and coordination before the implementation stage can be initiated.

The Western World believed and perhaps, still does, that historically, India has lacked the ability for strategic thinking. This is based on the lack of a coherent compilation on strategy from the secular perspective in Indian historical writings. I wonder how many of you can recall what Thomas Macaulay had to say, when it was being debated whether to use English as the medium of education in Bengal by the East India Company. This is what he wrote in 1935 and I quote:

"I have no knowledge of either Sanscrit or Arabic. But I have done what I could to form a correct estimate of their value. I have read translations of the most celebrated Arabic and Sanscrit works. I have conversed, both here and at home, with men distinguished by their proficiency in the Eastern tongues. I am quite ready to take the oriental learning at the valuation of the orientalists themselves. I have never found one among them who could deny that a single shelf of a good European library was worth the whole native literature of India and Arabia. The intrinsic superiority of the Western literature is indeed fully admitted by those members of the committee who support the oriental plan of education.” Unquote.

Macaulay’s was an arrogant utterance of an arch imperialist, viewed through the prism of the white man’s burden. More recently, American scholars, like Dr George Tanham, started a furious debate in the early 1990s on lack of strategic thinking in India. While this is not the forum to discuss or debate this issue, suffice it to say that it is, indeed, quite a sweeping generalization to say that India, with its ancient civilization, had not developed any strategic thinking.

The strategic content in Indian epics like the Ramayana, the Mahabharata and the Puranas has been examined threadbare. Admittedly, much of ancient Indian discourse was oral, embedded in religious literature and epics. The lack of a written coherent work on pure strategy cannot be found in one collection. But strategy is embedded in our epics and ancient writings, though not always in a secular sense.

I cannot help but mention that the first substantive written grand strategy in Indian history is Chankaya’s or Kautilya’s Arthashastra in the 4th century BCE. This period also witnessed the first sub-continental Mauryan Empire. Kautilya, often called the Sun-Tzu of India, after the famous Chinese strategist, composed the Arthashastra, a treatise that goes much beyond strategy. The chapter on foreign policy in this treatise is quite remarkable. Kautilya, a hard-nosed realist, regarded war not an extension of diplomacy (as Clausewitz argued later), but regarded every aspect of diplomacy as "subtle war”. Diplomacy, according to Kautilya, does not seek to avoid war, but to ensure victory in warfare, i.e. if victory is assured then one should go to war, setting aside any agreement or treaty signed previously.

Kautilya advised that even during peacetime, a nation should constantly wage "hidden war”, consisting of sowing discord among the enemy’s leadership. My favourite example, albeit on a lighter note, is Kautilya’s advice to send extremely beautiful women spies to foreign capitals to win the favours of the enemies' generals and turn them against one other. As a final option, such spies could be tasked to assassinate key figures, preferably with poison. No wonder the famous 19th Century sociologist Max Weber said this of the Arthashastra : "Compared to it, Machiavelli’s The Prince is harmless.”

Kautilya’s most significant contribution to foreign policy making is his famous ‘mandala theory’, wherein he postulates that neighbours are most likely to be enemies, while states on the other side of one’s neighbours will be friends. It is fascinating to note that Kautilya’s ideas would appear in the West, centuries later. Should we then remain rooted in all theories of Western origin or question the "Western” origin of today’s existing theories and acknowledge the profound contributions thinkers such as Kautilya have made?

The geographical India, or the ‘Indian sub-continent’ was a fragmented region, comprising various kingdoms and a few empires spread over several millennia. Assuming ‘India’ to be a monolithic entity in the context of strategic thought is a wrong place to begin. India’s journey as a modern nation state begins from 15 August 1947, whereas India as a distinct geographic entity, or the "sub-continent”, has been well-known since ancient times. This could be classified as the "Idea of India”.

Numerous instances can be marshalled for strategic thinking of the the Kalingas, the Mauryas, the Cholas, the Mughals, the Marathas and other major kingdoms or empires. The maritime expeditions of the Kalingas and the Cholas to South East Asia are well documented examples of strategic outreach. Strategic thinking also brought about the confederacy of the southern Rajputs to defeat an Arab invasion at the Battle of Navsari in 738 CE (AD) in today’s Gujarat. Strategic thinking of the Mauryan, Mughal and British Indian empires led them to create a buffer zone in the region where Afghanistan is located.

It is also true that no one thought of building a Great Wall like the Chinese, to keep out invaders, coming into the subcontinent from the trans-Indus mountain passes. Neither did the Southern kingdoms build an adequate navy to confront the Portuguese. The Marathas did not realize the immense significance in 1803 of the Battle of Assaye, near Ajanta which led to the collapse of resistance to British domination of India. Maj Gen Arthur Wellesley’s (later the Duke of Wellington) admitted that this was the most hard-fought battle. The Maratha kings, if they had strategic vision, could have deployed an army and their formidable navy under a unified command which their numerical superiority, good organization, arms and training might have thwarted British conquest of India.

It is instructive to look at an introductory paragraph written by American scholar Dr Timothy Hoyt, Professor of Strategy and Policy at the US War College, in a recent study on India’s Grand Strategy and I quote:

"India’s emergence as one of the great economic powers in the international system and its military strength, position it to be a major player in the international system in the twenty-first century. However, its current policies, rooted in a vision of India’s role in the international order that once reflected a consensus of Indian elites, appear to reflect a mismatch between its growing means and its overall role in international affairs. The emergence of "new thinking” and debates are gradually breaking down the consensus of India’s founding generations. Drivers of change are many, but it remains to be seen which tips India from a passive regional power to a more assertive global one.” Unquote.

Let me now move on to expand on the argument that foreign policy and national development have to contend with a global situation that is currently in a state of flux. Adapting to the change that is taking place all around us will be a challenge for you when you eventually get to your workplace. Given the limited time, I will focus on what I believe are game-changing trends globally and how they are all related to our foreign policy and national development goals.

In the last 6 decades the most important vector that has influenced almost all aspect of human civilization is the march of Technology. This inexorable advance and the pervasive influence of technology will continue and affect all aspects of the economy and our own lifestyles. One city in China, that I am aware of, has started making separate walking lanes for those texting and walking. The advance in robotics and 3-D printing and manufacturing, may well usher in a 4th Industrial Revolution that makes manufacturing much less dependent on human labour. Will manufacturing return to the developed world with the development of robotics? I think you will face this issue in your careers.

Some observers talk of disruptive technologies that will continue to ambush the status quo. Added to this are fundamental changes that are creeping up upon us in the in the form of new international trading blocs and financial structures on which all nations have depended since the end of the Second World War and since our independence.

The US-led Trans-Pacific Partnership (TPP) was signed in October 2015. The 12-country TPP aims at implementing new rules for conducting international trade. Stringent and uniform labour and environmental standards, stronger provisions for intellectual property rights (IPR) and limiting the competitive advantage of state-owned enterprises. The TPP excludes both China and India but includes Japan, Australia, Vietnam and other Asian countries. There are other mega regional trading agreements on the anvil; the TTIP or the Trans-Atlantic Trade and Investment Partnership is still under negotiation between the Eurozone and the North America. The RCEP which includes China and India is also still being negotiated. The impact of these agreements are still to be assessed and evaluated but it is clear that the TPP will cut into India’s exports when it comes into force. We have to think about India’s response to these major game-changing developments in the international trading system.

One overwhelming aspect of technology is the Cyberspace and the explosive growth of the digital economy. We are now slowly converting to accessing FLIPKART, SNAPDEAL, AMAZON, OLA, UBER and hundreds of applications on our Android smartphones to do a range of economic activities that no one imagined even a decade back. The social media has taken the world by storm, particularly the younger generation which is tech-savvy and hooked to their smartphones. For someone like me who joined the workplace during the era of manual typewriters and telex, this phenomenal shift has happened during my lifetime. Most of you students would not have seen a manual typewriter or a telex machine. I know what some of you may be thinking – this man is very old but that is not the case. We started using computers in the government in the early 1990s. The head long rush in technological innovation and its adaptation as economic instruments in the last 25 years will certainly demand your close attention in your future workplace.

Recognizing this trend, our foreign policy has re-orientated itself quite some time ago from the traditional economic diplomatic activity of promoting merchandise exports to include technology spotting, encouraging FDI, facilitating inflows of technology and other areas of vital interest to our national development. Naturally, these tasks are carried out by our diplomats in selected countries where such assets are incubated. As a result of these efforts, many major multinational companies have set up technology development centres in India, providing opportunities for employment for our youth and encouraging domestic innovation in the marketplace.

There is little doubt that the Cyberspace will increasingly dominate the global economy. By the end of this year the internet economy of the G-20 countries is expected to cross USD 4.2 trillion. No one can ignore the magnitude of this change. In our own country, mobile users may have reached around a billion and internet users over 300 million. Smartphone users are about 1/3rd of mobile phone users. This market cannot but increase. Evidence of this is staring us starkly. Flash sales of smartphones by e-retail portals exhaust their stock within minutes.

The regulatory framework for Cyberspace is still evolving. At the international level, on issues of internet governance no consensus has yet been built and issues of access remains to be resolved. Within India, the regulatory framework is also evolving and requires monitoring by those in the digital economy since innovations do not require licence or permits and descend on the marketplace with consequences that churn up the status quo. OLA and UBER are two outstanding examples of this churning of the city taxi services.

Take another example of technology overwhelming the status quo – the Post and Telegraph department. We could not imagine that we will be able to live without postal stamps, letters, telegrams, money orders and similar services. I recall that my appointment offer to the Indian Foreign Service reached me one early morning by Telegram. I have kept this Telegram framed in my home for display. Let us also look how the Post and Telegraph sector is coping, though slowly, as change comes slowly to all services in the public sector. Today the vast network of this sector is adapting to the last mile delivery of products from e-retailing companies in the rural areas. The impressive reach of a postman into homes in the remotest corner of India is a great boon for physical delivery of services, making this an exciting area for further growth.

Geo-politically and geo-economically, the most significant global change by far, has been the amazing transformation of the Chinese economy and its global impact. India’s economic progress has also been impressive but it is China’s rise that has shaken up the international status quo in a fundamental way. Never in human history have we seen a massive transformation of a country as large as China. The scale and impact of this change has been astonishing. This has led to a shift in the global economy that has diminished the hegemony of the developed Western economies. The economic transformation of China is clearly the most significant development since the economic reforms started in China in 1978. China’s economy soared and has since overtaken that of Japan. With GDP around USD 10 trillion it is catching up with the USA. China is today the largest merchandise exporter in the world, running huge trade surpluses with almost all the major economies.

For India, management of our relations with China has been an important foreign policy challenge, not just on the economic front, but also in the politico-security domain because of the unresolved border dispute and the China-Pakistan nexus. While China has become one of our largest trading partners, as a result of which some of our small and medium industries have been completely turfed out of business. We are running a huge trade deficit with China that stubbornly refuses to go away, posing a permanent challenge to our foreign and national policy.

It is important to keep your eye on China, as it may have reached the limit of its growth potential. Chinese economic growth has started to flatten out and declining, exerting pressure on the commodity market. Raw material exporting countries have begun to feel the effect of the contraction in demand in China. The stock market volatility in China has radiated instability in other stock exchanges across the globe. China intends to eliminate over 17% of its coal output. Production of steel has already been cut back by 150 million metric tonnes, almost 13% of capacity to combat pollution and encourage migration of industries to cleaner energy. China’s plans to downsize these basic industries will have a ripple effect globally.

As China enters a phase of economic restructuring it is attempting to integrate the Eurasian land mass via its massive One Belt One Road (OBOR) project based on infrastructure development. Recently, a train carrying Chinese goods reached Tehran via Central Asian countries. The ancient Silk Routes are being revived with modern infrastructure. The USD 36 billion China-Pakistan economic corridor can be a game changer for Pakistan, if it is successfully implemented. The question arises as to how it will affect India. This is an area which all of you need to watch in future. China’s influence is on the rise through these massive investments. There is always a strategic dimension to such projects. Does the economic slowdown affect manufacturing in China and will some manufacturing move out into India, to take advantage of the "Make in India” programme launched by the Indian government, is a trend that future managers will have to take into account in their strategic planning.

Our diplomats are grappling with these issues to examine and utilize opportunities being created for channelling FDI into India for the manufacturing sector. Many believe that inviting Chinese companies to invest in manufacturing in India can meet the national challenge of employment generation, on a scale that is commensurate with our huge working age population. China is already overextended in the infrastructure sector and would be willing to invest its money in India’s infrastructure projects. This is an area where the Indian government has opened up and you will find Chinese investment in India picking up.

One significant impact of the rise of China is the change that it has brought about in the strategic orientation of Japan, in both its economic and security dimensions. Other Asian countries have been impacted in a similar manner providing opportunities that India has to factor into its policies, giving foreign policy a crucial role in leveraging these opportunities. There is a slow and steady move towards increased cooperation between the large Asian democracies like Australia, India and Japan and countries like Vietnam. These trends can create business opportunities that future managers can leverage.

These fundamental shifts can also lead to conflicts. I believe that the huge interdependence between nations today will act as a deterrent to conflict between the major powers. The trend shows that managing conflict and cooperation simultaneously is the default norm of international relations today and this trend is likely to continue.

Another crucial area for national development with a key role for foreign policy is the Energy Sector. India’s economic growth has to depend on imported energy and this dependence is likely to increase to almost 90% of our requirement in the next decade and beyond. Fortunately, for a variety of reasons, principally the success of "fracking” technology in the USA and no cut back in production by the oil producing countries, there is a supply glut in the market and oil prices have reached a historic low. This situation is a huge boost for our balance of payments. One of foreign policy objectives is to tie up long term oil supply contracts, taking advantage of low prices. While this is a positive development, the lack of demand in the developed economies has constrained exports which have gone down steadily for almost 14 months. The Gulf countries host an Indian diaspora which is almost 7 million strong. Their wellbeing has been one of the top priorities of our foreign policy. India is the world’s largest recipient of foreign exchange remittances, mainly from the Indian diaspora.

The shift to renewable energy sources from the traditional fossil fuels has begun s direct result of Climate Change factors. The consumption of energy will grow manifold and the fields of solar and wind energy and other renewable energy resources will be an active arena of the economy providing opportunities for business.

Those among you who venture out into the financial world should note the shifts in global economic governance. The Bretton Woods institutions like the IMF and the World Bank have been used to perpetuate the financial hegemony of the Western developed countries. The skewed policy of generous and mild disciplines on European countries for economic structural adjustment programmes and imposing punishing financial disciplines on Asian and African countries, has led to the search for alternate financial institutions. These Western dominated institutions have resisted change for far too long and carried on with their neo-colonial approaches. The IMF has now accepted the Chinese currency in its basket and the weighted voting method has also accommodated higher quota to China and India.

This blatant exploitation of these institutions have led to the emergence of the BRICS new development bank and the Chinese promoted Asian Infrastructure Investment Bank (AIIB) of which India became a founder member. The Western developed nations led by the USA are now working hard to bypass the WTO and dump the Doha development round. The same tendency was evident at the Paris Climate Change Conference in December last year.

The international system built up by the victors of the Second World War led by the USA is now under challenge. More and more countries are exploring trade and oil deals which are not designated in dollars. Even today oil is quoted in US $ so that the energy market remained tied to the US currency, just as the US $ became the international currency. There is, however a huge question mark whether because of current doubts about the Chinese economy. There are dire predictions being made by some quarters in West. This may well be motivated to scare countries not to get too close to China.

The uncertainty in the international economic and security situation will pose challenges for Indian foreign policy and national development strategies in the coming decades. The scramble for resources is now entering the planet’s seas and oceans. This has been referred to as the "Blue Economy” which brings in aspects of environment, marine and coastal economy. The broad thrust is on sustainable development. We can, however, expect contestations among nations in this domain. Chinese attempts to develop and occupy islands in the South China Sea is basically to ensure that China can claim sovereign rights to exploit marine resources, apart from the strategic objective of controlling the Sea Lanes of Communications. India has been focussing on the Indian Ocean and the rim countries to promote economic and security cooperation. The Indian Ocean is a vital area of strategic interest to India. This issue has figured in the SAARC and the Indian Ocean Rim Association (IORA).

Now a few remarks about our neighbourhood and the "Act East” Policy - The SAARC countries have been attempting to create a South Asian Economic Union, realizing that freer flow of trade and investment remains the key to faster development. South Asia trades much more with the rest of the world than within the region. It would surprise you to know the regional trade in South Asia is only around 5% of the total trade of the SAARC countries. There are ambitious connectivity proposals that are being held up by the non-cooperation of Pakistan which seeks to hold all progress among SAARC countries to its bilateral disputes with India. This has led to India exploring sub-regional initiatives in the east with Bangladesh, Bhutan and Nepal, popularly known as the BBIN countries. The power sector, transmission lines, transportation by waterways, coastal shipping have emerged as new connectivity links.

The electricity grid of Bangladesh, Bhutan and Nepal are now connected with India. Power is imported and exported as per Power Purchase Agreements and can also be bought from the Indian National Power Grid. Railway connectivity projects are underway that will provide transportation links via Bangladesh to Agartala. India is exporting almost 1000 MW of power to Bangladesh.

While BBIN cooperation is picking up, there is stagnation in our relations with Pakistan which is playing a blocking role. Pakistan seems to have hitched its wagon to China and looking towards Iran for economic linkages. SAARC cooperation has been kept on hold since Pakistan perceives that its hostile relations with India gives it leverage with China which views adversarial India-Pakistan ties as serving its strategic interests. I, therefore, see little prospects of progress within SAARC.

In my view, SAARC will remain hobbled. Therefore, the BBIN option becomes the default option in our region. The Act East Policy’s fundamental objective is to promote create connectivity for trading corridors with Myanmar and Thailand, both member countries of ASEAN. Thus India has pursued the Tri Lateral Highway Project with Myanmar and Thailand, the Kaladan Project with Myanmar development of the Sittwe port in Myanmar and other connectivity projects. The political and security situation in the north-eastern states and Myanmar are problematic and create challenges for these policies to be implemented. These foreign policy initiatives have a direct bearing on the development of our north-eastern States. The strategic dimension of these options becomes clear when we consider that it is to the East that we see the rise of China and the contestations in the South China Sea, involving some of the ASEAN countries and Japan.

Having said all that let me conclude with the thought that for India to speed up the transformation that we seek as our national objective, it will require synergy between all arms of the state, in which foreign policy will play a pivotal role in fostering national development goals.

Thank you. I would be happy to answer questions.

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