Manjeet Kripalani (MK): Secretary Ravi, you represented India at the recent BRICS Foreign Ministers Meeting in Russia and Prime Minister Modi returned from the G7 Meeting in Italy. Are these two groupings really in conflict with each other, and how is India straddling these two worlds?
Secretary Dammu Ravi (DR): India has been to G7 Summit four times continuously, which is much older than BRICS. The major difference between the two groupings is that BRICS comprises of emerging economies and the G7 comprises of developed economies. India is important for both. From 1975, the G7 negotiations were special but one-sided; it was an echo chamber where they discussed global issues among themselves. However, this was not enough and, at the beginning of the century the G7 outreach countries became a part of the dialogue with the realization that global problems cannot be solved only by developed economies. The narrative-building in the G7 has been mostly one-sided but this has changed with the influx of invited economies, who have influenced shifting of the agenda from global to development issues which has expanded to include climate change, security, debt etc., all of which are critical to the Global South.
BRICS on the other hand is relatively new; it started in 2006 and with South Africa joining in 2010 it became vibrant. It currently has 9 member states. Discussions in BRICS are purely economic; they cover issues that affect emerging economies, ranging from connectivity and infrastructure to energy. It is a formidable grouping, where member countries try to find convergence on issues dear to them. Several countries have also expressed their desire to join BRICS as full members, and currently the discussion in BRICS is about how to engage new requests of more than 30 countries. However, this must be done carefully because BRICS should not become anti-West or be viewed as competing with the West.
BRICS also has New Development Bank (NDB) which has served well so far. For instance, NDB is seen as an alternative to multilateral financial institutions like the IMF or The World Bank and since it does not impose conditions for accessing finance, it is becoming more attractive. Another topic of interest is BRICS currency. BRICS members believe it is not anti-dollar. Being a BRICS member state, India wishes to play a balancing role to ensure that the narrative doesn’t veer negatively within the group. Our ancient philosophy of seeing the world as one and working together for one future should be guiding us. This is how India wishes to influence the BRICS approach to global issues.
India is playing a constructive role in both groups. It has new things to bring to the conversation. At the recent G7 Summit, we highlighted the Mission LiFE and at BRICS we talked about our Digital Public Infrastructure program which provides low-cost solutions in the Global South. India is perceived positively by both the groups.
MK: Indeed, we shouldn’t be seen as anti-West, anti-dollar and anti-multilateral.
India’s external engagement has moved from political to economic. The focus will now be economic, which is why you’re in the hot seat. We’re getting involved with trade, global supply chains, etc. How does this manifest itself internally within the Ministry, do we have more commercial attachés, etc? And externally with multinational organizations, and with relevant partnership assistance programs?
DR: I’d like to answer this question with a slight background. In the 21st century, foreign policy is being largely underpinned by economic issues. In contrast, the 20th century for a significant part was dominated by global politics and security aspects. There was a gradual shift in thinking in the ’90s. For India, the economic reforms of 1991 marked this shift. India’s economy then boomed and continues to grow and expand significantly.
The term ‘economic diplomacy’ within the Ministry of External Affairs gained traction in the ’90s. India’s foreign policy is very much in sync with its economic growth. Economic diplomacy does not mean that a country should be externally engaged, for it to be vibrant it has to be domestically plugged in as well because domestic situation impacts foreign policy. Our approach should be long-term, requiring extensive consultations with think tanks and stakeholders like Gateway House, who provide new perspectives on issues around the world to assist in the policy making.
It is essential to create win-win situations because the business world is intrinsically interdependent where every partnership has several stakeholders. We wish to see that Indian industry become outward-looking. Before this, we were concerned about the safety of our economy so we guarded it in order not to encourage too much foreign participation for fear they might steal our markets. But the evolving situation tells us that India’s outward FDI in the last two decades is around $300 billion, and the cumulative inward FDI into India is nearly a trillion dollars.
Today, our ambassadors are knowledgeable on economic issues, investments, and business matters. They play an active role in setting up business events and facilitating delegation visits to help forge partnerships. Ambassadors also have robust knowledge of the technological changes and how to assist businesses to obtain them, as much as to promote homegrown technologies and make them commercially viable tools abroad. India’s digital public infrastructure is being promoted as a low-cost solution; for example, the Unified Payments Interface (UPI) can be an effective tool for ease of business. Several countries have expressed interest in UPI which is now a common item in bilateral negotiations.
MK: India’s biggest export is services, especially technology services. What efforts has India made lately to lead this discussion globally, to write the new rules, and include the new trade and investment agreements? This is true of many developing countries and if we lead this process, it will be beneficial for the Global South.
DR: We have a deficit in goods trade and a surplus in services trade. Oddly enough they are not balancing each other out because we remained focused on only two areas of services: IT and IT-enabled services. We have yet to focus on manufacturing computing hardware like circuit boards, machines, etc., which is now beginning to happen under the Production Link Incentive (PLI) Scheme. Once we invest more in hardware needed for various technologies like AI, semiconductors and electronics etc., the sector will naturally expand. But for that to pick up, we need talent which in turn requires investment in skills.
We also wish to lead in legal services like commercial arbitration. Recently, we set up the India International Arbitration Centre which has started operating. Now we are working on the PCA or Permanent Court of Arbitration Centre in New Delhi. These initiatives are meant to make India a hub for commercial arbitration and give confidence to investors.
Healthcare givers is another area with a lot of scope for services trade, post-COVID. But we need to look at language and people’s ability to provide services according to the needs of the recipient country.
Education has good potential too in the Global South because of the internet-enabled services where India has considerable expertise. All these concepts are slowly developing and I am confident that India’s services sector will grow exponentially in the near future.
MK: What more can India do to implement a Neighbourhood First policy in South Asia? This is very important for us and unless we get the ecosystem together in South Asia, we won’t become a China plus one country.
DR: India is a dominant economy and yet the trade within South Asia is small at around $35 billion, of which India’s share is 97%. Intra-South Asia trade constitutes only 5% of its global trade.
The Neighbourhood First Policy has been there for 10 years now. We executed several infrastructure projects under the Development Partnership Administration of MEA through grants and Lines of Credit with long-term repayment tenures. Our projects are recipient country-driven. Capacity-building programme is covered under the ITEC (Indian Technical and Economic Cooperation) Programme, which is MEA’s oldest flagship program.
There is a lot that is happening, but we need to put greater focus on economic integration with our Neighbourhood First. Doing projects is not enough; we should be engaging more intimately through economic and trade agreements to leverage our industries’ potential. Another element is connectivity; as India’s infrastructure grows, it must link intimately with its neighbouring countries through corridors, sea links, rail networks etc. Manufacturing should be diligently promoted in the neighbourhood for job creation and revenue generation. We are trying to encourage our industry to take calculated risks for manufacturing in our neighbourhood through collaborations. This is an extension of what I meant by economic diplomacy. If you must win, you must make your partner country a winner too. We should open the economy not just through FTAs like SAFTA (South Asian Free Trade Agreement) which are outdated but need more trade-facilitating FTAs that incorporate various elements into it. That is the only way we can do full justice to our Neighbourhood First policy.
Sven Östberg: Thank you very much for your presentation. I have a question with regard to the European Union. What is the Indian perspective of its relationship with the European Union?
DR: The India-European Union (EU) agreements have been around for long. We were very close to concluding the deal in the last round in 2013 and Brexit happened thereafter. This meant a whole new round of negotiations. India’s largest trading partner is the EU with which trade has increased substantially in the last decade both in Goods and Services. EU too made significant investments in India. So it should not be hard for India and the EU to strike a deal.
The EU is a region comprising of advanced countries. It has struck ambitious FTAs with countries such as Japan and Vietnam. India is not yet prepared for a high ambitious FTA with EU. New chapters that have not been done in the past such as gender, labor, climate, environment, data etc. are now part of the deal and India has kept an open mind on them.
Economic diplomacy also involves spending considerable energy educating industry on each other’s trading patterns and interests. It is not about who wins and who loses; we should be looking at how India can integrate with the EU and vice versa. The EU is a highly liberalised economy, but restrictive non-tariff barriers, the unseen walls of trade that prevent India’s exports to EU is a concern for our industry. The way out to close an FTA between EU and India is to provide space through the ‘best endeavor’ provisions on difficult chapters where India needs more time.
India has done well in the past decade; with increasing investment commitments coming in from different countries it makes a good selling point.
Aleksander Dańda: My question is concerned with the internal structure of economic diplomacy in the Indian state. Are the policies going to be executed by New Delhi, or is it going to be run by the states themselves? For example, the initiatives of vibrant states like Gujarat, Karnataka, and Telangana have contributed to the economic success of India. So, who will lead the structure of economic diplomacy?
DR: The government plays a facilitating role. There are numerous players involved in economic diplomacy such as central, state governments, industry bodies representing big and MSMEs, think tanks and academia, who all provide inputs for taking informed economic decisions.
The impression that the industry consultative mechanism in India is not vibrant and expansive is misplaced. During the RCEP (Regional Comprehensive Economic Partnership) negotiations we had exhaustive consultations with industry, states and various think tanks constantly at every level. It was a dynamic process. The challenge is to find the right balance. Interests are different for Medium, Small and Micro Enterprises (MSMEs) and big industries, the latter seeks protection while, to my surprise, the former sought free trade so as to access cheaper raw materials.
The Ministry of External Affairs does not negotiate FTAs, the Ministry of Commerce does. The Department of Economic Affairs negotiates investment chapters. Where does the Ministry of External Affairs fit in? We help departments and ministries understand the evolving geopolitical and geo economic developments, various cutting edge technologies and economic developments around the world that might impact India. MEA helps to position India on the global stage. Most states are unaware of the policy-level implications made by the center which is why MEA has set up States Cell to guide and similarly states are also increasingly establishing cells for engaging with MEA on diaspora issues.
Donnawit Poolsawat: In your opinion, should the BRICS expand its membership? And if so, what are the qualifications for the new members to join?
DR: This was discussed at the BRICS Sherpa and Sous-Sherpas Meeting recently. More than 30 countries have expressed their interest, and all these countries are aspiring economies. It is an aspirational expression and aptly reflects today’s multipolarity.
It’s difficult to say which countries are eligible. There is a criteria set for new members and accordingly, each member state will list 10 countries they wish to see as members and eventually through consensus arrive at a common set of countries. We are trying to find a safe formula and this work is in progress. We will have one more round of discussions before the Kazan Summit in Russia in October 2024.
We have to see to it that the character of BRICS is not diluted. Initially, the founding member states were a small group of emerging economies with similar interests. If we bring in more countries, it will change the economic agenda of BRICS. Political issues might take centre stage. Expansion is natural and we have to respect the aspiring countries’ desire to join BRICS, but common interests of member states, not unilateral agenda, must always take precedence.
Dammu Ravi is Secretary – Economic Relations, Ministry of External Affairs, Government of India.
Manjeet Kripalani is the Executive Director and co-founder, Gateway House: Indian Council on Global Relations.
This interview was exclusively conducted by Gateway House: Indian Council on Global Relations. You can read more exclusive content here.
For permission to republish, please contact outreach@gatewayhouse.in.
Support our work here.
©Copyright 2024 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorised copying or reproduction is strictly prohibited.