Beyond the defence diplomacy, there is the economic diplomacy where India has consolidated its position as a key player in shaping global economic times. Sahil Sharma looks at various trade agreements, establishing that Trade Agreements are the bedrock of India’s economic diplomacy, meticulously crafted to forge meaningful connections across a spectrum of diverse geographical regions.
India’s economic diplomacy showcases strategic prowess and a nuanced approach to strengthening global economic ties. Today, India positions itself as a key player in the evolving global order where the economic diplomacy strategies include trade agreements, investment partnerships, and economic engagements with nations across the world.
Trade Agreements are the bedrock of India’s economic diplomacy, meticulously crafted to forge meaningful connections across a spectrum of diverse geographical regions. These agreements, akin to finely tuned instruments, orchestrate economic integration, propelling mutual benefits for the nations involved.
Trade agreements
The Comprehensive Economic Cooperation Agreement (CECA) with Singapore, the Free Trade Agreement (FTA) inked with the Association of Southeast Asian Nations (ASEAN) bloc, and the ongoing negotiations with the European Union stand as examples of India’s steadfast commitment to cultivating seamless trade flows and amplifying market access on the global stage.
India’s economic ambassadors have emerged as extremely adept at negotiating favourable terms that transcend mere economic transactions. Their strategic deployment is to stimulate not only economic growth but also to safeguard national interests. The recalibration of trade strategies undertaken reflects a nuanced understanding of the multifaceted challenges posed by the global economic landscape.
The CECA with Singapore, for instance, not only facilitates the exchange of goods and services but also promotes cooperation in areas such as investment, technology, and intellectual property. The India-Singapore CECA has four key components:
‘These are free trade agreement (FTA) in goods; an arrangement for boosting trade in services, including financial services; a package to promote investment flows and provide mutual investment protection; and a new agreement for avoiding double taxation. It also includes Mutual Recognition Agreements on quality certification of goods and services, liberalised visa rules for professionals, and undertakings to cooperate on several sectors like Customs, dispute settlement, intellectual property rights, education and e-commerce.’
Similarly, the FTA with ASEAN creates a framework where tariffs are reduced or eliminated, promoting a freer flow of goods and promoting an environment conducive for economic collaboration.
India has been navigating the ever-evolving dynamics of global commerce with finesse. The intricacies of these trade agreements, the diplomatic skills applied in their crafting, and the commitment to mutual benefit exemplify India’s role as a formidable player in the complex world of international trade.
Investment partnerships
At the heart of India’s economic diplomacy lie robust investment partnerships, positioning the nation as a beacon for foreign direct investment (FDI). This concerted effort is anchored in the vision of creating an investment-friendly ecosystem that not only catalyses economic growth but also fuels technological innovation and generates employment opportunities on a significant scale.
Initiatives such as the “Make in India” campaign and the liberalisation of Foreign Direct Investment (FDI) norms form the cornerstones of India’s commitment to creating an environment that attracts global investors. The “Make in India” campaign serves as a bold declaration of India’s intent to transform into a global manufacturing hub.
By streamlining regulatory processes, reducing bureaucratic hurdles, and offering incentives, the campaign seeks to attract investments across various sectors. It is not merely an economic initiative but a comprehensive vision aimed at elevating India’s status in the global economic landscape.
Along with this, India’s proactive efforts to boost FDI have resulted in presenting opportunities for foreign investors to actively participate in India’s economic growth story, especially in the sectors of defence, insurance, retail and aviation.
Economic rights
Bilateral investment treaties (BITs) serve as the backbone of India’s economic diplomacy architecture, establishing a framework that safeguards both investors’ rights and the nation’s economic interests. BITs are ‘reciprocal agreements between two countries to promote and protect foreign private investments in each other’s territories.’
Through meticulous negotiations, India has forged significant BITs with countries like the United States, Japan, and the United Arab Emirates. These agreements not only provide a legal framework for protecting investments but also promote an environment of trust and confidence in the global business community regarding the stability and transparency of India’s economic policies.
The United States-India Strategic Partnership stands as a testament to the strength of bilateral investment ties. The collaboration spans diverse sectors, from technology and innovation to defence and healthcare. Similarly, the Japan-India investment partnership has seen substantial growth, particularly in the areas of infrastructure development and technology transfer. The commitment to mutual growth is evident in the collaborative projects that leverage Japan’s technological expertise and India’s vast market potential.
The United Arab Emirates, a key player in India’s economic growth story, has witnessed increased investment flows through strategic collaborations. Bilateral investment agreements between the two nations have not only facilitated investments but also promoted economic cooperation in sectors such as renewable energy, infrastructure, and information technology.
Economic ties
Beyond the traditional realms of trade and investment, India is creating a strong framework of interconnectedness and collaboration on the international stage. This multifaceted engagement finds expression in diverse forums, such as the G20 and the World Trade Organisation (WTO), where India actively shapes discourse, advocates for inclusive growth, and collaborates with nations to tackle shared economic challenges.
In these multilateral forums, India has emerged as a key conductor, orchestrating dialogues that resonate with sustainable and inclusive economic growth. The G20, with its representation of major economies, provides a stage where India articulates its vision for a balanced global economic order. Within the BRICS framework, India collaborates with fellow emerging economies to champion shared interests and perspectives.
India, with its global vision, seeks to forge alliances that go beyond transactional engagements. Across the vast continent of Africa, India invests not just in economic ventures but also in development partnerships that uplift communities and further sustainable growth. Similarly, collaborative initiatives with Latin American nations become key points in the narrative of India’s commitment to building bridges and fostering a network of interconnected economies.
Looking ahead, India is already embracing digital technologies and implementing and promoting sustainable practices. Indian economic diplomatic efforts have reaped immense benefits in the past decade. Few challenges persist including overcoming global economic shocks, addressing trade imbalances, changing geopolitical variables and post-pandemic recovery tasks, but India has managed to overcome all.
In 2023, India’s G20 Presidency brought the attention of global players back on India. On the first day of the two-day G20 Summit was released the New Delhi Declaration. This document laid the path for future negotiations on key global economic issues such as climate financing, sustainable development, reforms in multilateral banks, etc.
Owing to the declaration, for the first time, funds have been allocated of the order of USD 5.9 trillion for the green financing requirements for developing countries. As part of the same declaration, it was ensured that there is effective implementation of the Black Sea grain deal that would lead to the unhindered deliveries of grain, food and fertilizers/inputs from the Russian Federation and Ukraine.
India is on the rise and the whole world is observing the country’s economic strides. There is a forecast of annual growth of 7.3 per cent in the fiscal year ending in March which is the highest rate of any of the major global economies in the world.