How India is challenging China's dominance in Africa

When Mahatma Gandhi started his career at the age of 24 as a barrister for supporting Indian traders in Pretoria in South Africa in 1893–which was the launching pad for his transformation as a civil rights activists upholding the cause of Indians in South Africa and later as a political leader in India leading the country to victory and freedom in its struggle against centuries-old colonial rule—he would not have thought of a scenario where Indian and the whole of Africa emerging as close trading partners.

Exactly 122 years after Gandhiji landed in the African continent, India is on the threshold of helping the continent shrug off its colonial past (similar to how it emerged from the shadow of British rule to be the fastest growing economy in the world) and emerging the biggest trading partner of Africa.
In fact, the shared colonial past and the strong desire and commitment to emerge as world leaders in trade create a level-paying field for India and Africa to formulating mutually beneficial and long-lasting business ties.

The unstoppable momentum gained by formerly colonised and downtrodden regions as possible future trade leaders is what makes the third India-Africa Forum Summit (the largest such summits even hosted by India where 40 heads of states from the African continent are attending) being held in New Delhi from October 26 to 29—seven years after the first summit was held in 2008—really significant.

Another key reason why this summit is important, especially for India, is the slowdown seen by China—its bigger rival from Asia—and the subsequent opportunity that offers for the country to prove itself as an alternative to the Chinese hegemony as the preferred investment destination and trade partner. In fact, Africa’s status as the world's fastest-growing population and a vast fountain natural resources is what prompting the Narendra Modi government to position India as a better alternative as it seeks to challenge the dominance of China as Africa‘s business ally.

India's appeal for Africa has surged over the past year due to its higher economic growth trajectory and international standing earned by Modi. With China no longer flourishing, India looks more attractive to Africans who are trying to cope with a lull in mineral exports to China and growing concerns about China's ability to keep investing in Africa.

However, though India has overtaken China in terms of the pace of economic growth, its economy is still one-fifth the size and it lacks the financial heft to challenge Beijing in a tuff contest for the African market—while trade between India and Africa grew from $ 2 billion 15 years ago to $72 billion in 2014, trade between China and Africa stands at a mammoth $200 billion—more than the GDP of the 30 smallest African economies combined.

Therefore, while acknowledging that it may not be easy to take China head on in the race to garner a larger pie of the growing African market, the Modi government wants to offer Africa a ‘choice’ by aggressively promoting its ‘Make in India’ campaign.

Also, as opposed to China’s exploitative approach wherein the world's No.2 economy has been sucking oil, coal and metals from Africa over the years to feed its industrial machine, India seeks a less transactional alliance and aims position itself as an ideal partner—leveraging Africa’s needs and India’s strengths—for overall development for the two regions that account for a third of the world's people, but seven in 10 of those living in poverty.

As a massive gathering of leaders from a rising continent debate on possible trade options with the largest democracy in the world, the event has not only proved to be landmark event in the history of relations among emerging powers, but also confirmed an elevated stature for India as a an emerging world leader.

The fact that India and Africa are emerging as decisive voices in the stage of world trade is effectively captured by the summit logo which features the African and Indian lions—the image points to the confidence and optimism that two landmasses that were once conjoined but now separated through geological drift are enjoying in their quest to realise their true potential. The imagery also encapsulates the courage and boldness of tow emerging lions on the prowl for larger trade and bilateral opportunities.

The biggest gathering of foreign dignitaries in the country since 1983 with some 1,000 delegates, the India-Africa Forum Summit also envisages to transcend usual trade talks and address issues of common concerns such as climate change and international terrorism.

Though much later after China, European Union and Japan held similar events, the meet gives Modi a chance to lead India to nullify its peers’ first-mover advantage and emerge Africa’s largest trade ally and in the process cement its growing status as one of the top global economic powerhouses.  

Why Iran nuclear deal may lead to windfall gains for India

The recent pact between Iran and the US, along with EU and other western countries, is hailed as US President Barack Obama’s biggest diplomatic victory as the western countries managed to coerce Iran to agree to a deal that is seen as the once-belligerent Tehran conceding defeat in its efforts to combat US’ efforts to strangle it economically for nursing nuclear ambitions.

Under the deal, Iran has agreed to limit uranium enrichment to only one facility, redesign a plant that refines plutonium heavy-water, convert another uranium enrichment site into a facility for production of medical isotopes and cut the number of centrifuges enriching uranium from 19,000 to about 6,000. More importantly, it has acceded to a rigorous inspection of its nuclear facilities in return for lifting the US, EU and UN sanctions. While the deal—started after the election of Hassan Rouhani as Iranian President in 2013 and mediated by Sultanate of Oman—helped restore diplomatic  relations between the US and Iran which have been hampered since the 1979 Iranian Revolution, it has significant implications for countries in Middle East and Asia, especially India.

As a major net importer of oil, India has already benefited from the US-led nuclear deal with Tehran. Oil prices have declined in recent days, driven largely by expectations of more Iranian crude hitting the market (India saves nearly $1 billion in import costs for every dollar drop in global crude prices).

In fact, India has been preparing for the deal—Prime Minister Narendra Modi recently met with Rouhani on the sidelines of the Shanghai Cooperation Organisation summit in Ufa, Russia where he invited Rouhani to visit India and expressed his desire to visit Iran. His desire to travel to Iran is seen as part of a calibrated strategy to visit the Middle East neighbourhood including Israel, Palestine, Jordan and Turkey in the second year in power after visiting countries in the immediate neighbourhood and Asia-Pacific besides G-7 partner countries within a year of coming to power.

The US-Iran deal will have significant impact on the energy and economic ties between Indian and Iran as India continues to be the world’s fourth largest energy consumer and imports more than three-quarters of its oil and an increasing amount of its natural gas.

A few years ago, 17 per cent of Indian oil imports were from Iran, which had become the country’s second largest supplier. Last year, Iran was seventh on the list, supplying only 6 per cent of Indian oil imports.

The enhanced volume oil that is expected to flow to India following the lifting of sanctions on Iran will help the country meet its burgeoning fuel needs as it embarks on an ambitious journey to solidify its position as the top economic power in the region along with China. This is particularly significant considering sanctions on the Iranians since 2003 have forced India to increasingly look at Iraq, Kuwait, the UAE and Saudi Arabia for oil imports.

The Modi government, which benefitted a lot from falling oil prices (when Modi came to power, the price for crude oil was $108.05 a barrel which declined to $57.19 a barrel on the day of the Iran-US deal), hopes that a possible oil glut following the re-entry of Iranian oil in global oil market—which has already inundated with increased Shale production in the US—will greatly benefit Indian oil refining firms.

Considering China’s role in developing and modernising the port of Gwadar in Pakistan and  with Pakistan not a feasible transit option, India sees the potential for Iran to serve as a transit route to Afghanistan and Central Asia. This has enhanced India’s desire to invest in upgrading the Iranian port of Chabahar. While talks over Chabahar have been halted over and over again, the nuclear deal has cleared crucial political and financial obstacles and India expects the port to be operational by the end of 2016. The deal may also lead to fruitful discussions over developing another transit corridor through Iran to Europe and Russia.

The deal will also enhance the relation between India and the US which has been under strain of late as US has been looking askance at India’s relationship with Iran and especially its oil imports. Indian energy firms like ONGC have also found their financial interests being hampered due to American sanctions as they have made considerable investments in Iran.

However, the deal is also going to hurt India—as India refused to fully take part in the US-led sanctions on Iran, it has emerged a key trading partner of Tehran in the recent past with Indian corporates making a windfall (exports to Iran nearly doubled to $3.3 billion between 2009 and 2013). However, once the sanctions are lifted, Indian businesses will begin to face stiff global competition in doing business in Iran. For instance, India has been a major exporter of automobile components, tools, motors and chemicals to Iran. Now Indian exporters will have to compete with Eastern European manufacturers who produce low-end products like spanners, hand tools and auto parts. The fall in the value of euro over the last few years is expected to further enhance the competitiveness of European manufacturers.

India's Look East Policy test: How to befriend Japan without antagonising China

Indian Prime Minister Narendra Modi’s visit to Japan could not have happened at a more opportune time. After years of sluggishness, Japan has started exhibiting signs of recovery, promising a steady climb in the economic growth curve and leading to a sense of euphoria that is shared by major markets across the globe. India, on the other hand, is said to have turned the corner after years of stagnancy, policy paralysis and debilitating scams and is about to embark on a path of resurgence, something amply reflected in the recent bull run in capital markets – this week, both 30-stock benchmark index Sensex and 50-stock Nifty crossed physiologically key levels of 27,000 and 8,000 points, respectively. And the Japanese government’s decision to invest $35 billion in public-private projects in India over five years shows how bullish Prime Minister Shinzo Abe is on India.

More importantly, Modi’s visit is a clear sign that India wants to revamp its Look East Policy. Originally initiated by Narasimha Rao in early 90s and pursued by his followers, the policy involves efforts to strengthen strategic and economic ties with Southeast Asian countries in a bid to counter the increasing regional influence of China—strategically, militarily and economically.

Renewed ties between India and Japan, amid similar ones with other SE Asian neighbours, assume importance considering the heightened military maneuvering China has been initiating of late—enhancing military capabilities, surging defence budget, strengthening maritime and aerial domains in South China Sea and East China Sea. In fact, Japan’s concerns over China’s ‘clandestine’ military moves in the region are expressed in the white paper it released, importantly, during Modi’s visit this week. Of course, these concerns are equally shared by India.

Leaving asides the focus on strengthening defence cooperation in the region to counterbalance China, India’s Look East Policy hinges mostly on strengthening economic cooperation and trade relations with SE Asian countries. Understandably, when it comes to enhancing economic  relations, India sees Japan, which is already the fourth-largest investor in the country, as the key ally. Japan’s $4 billion investment commitment for the ambitious $100 billion Delhi-Mumbai Industrial Corridor Project aimed at developing industrial zones spanning across six states, is a recent instance when it came forward to throw its weight behind business activity in India.

During his visit to Japan, Modi tried to hard-sell India as a manufacturing destination, asking Japanese investors to ‘come and make in India’. In fact, India can learn a lesson or two from Japan whose development over the last several decades has been driven by an impressive growth of small and medium enterprises (SMEs) which are crucial for progress in the manufacturing sector for any country.

Besides infrastructure, the Modi government expects Japanese investments in high-speed rail transit systems, energy, including nuclear and solar power generation, and clean coal technologies.

While Japan is key focus on India’s Look East Policy, it cannot afford to ignore other countries in the SE Asia region, especially Vietnam, the only Asian country that has defeated China in a war (though China too claimed victory in the 1979 Sino-Vietnamese War over control of Cambodia, Chinese forces were forced to retreat back across the Vietnamese border and Hanoi-backed regimes have been in Cambodia till today) and Myanmar whose GDP grew an impressive 6.8 per cent in FY2013-14.  

Having said this, the Indian government doesn’t want to unnecessarily provoke China and would want to retain a smooth working relation with its bigger neighbour.  The visit of China’s foreign minister Wang Yi to India in June and Modi’s meeting with Chinese President Xi Jinping at the BRICS summit in July are clear indications that the Modi government wants to retain the apparent thaw in diplomatic relations with China.

One should want and watch how Modi will walk the tightrope of broadening the scope of India’s Look East Policy, befriending SE Asian peers like Japan, while not antagonising China.

Why closer India-UK trade ties a win-win for both countries

Continuing his strategy of visiting foreign countries as a means of promoting India as a friendly investment destination and evangelising the ‘Make in India’ campaign, Prime Minister Narendra Modi—the first Indian premier to visit the UK in a decade—managed to clinch deals worth $14 billion during his just-concluded visit to Britain.

The deals span technology, defence, insurance services, finance, healthcare and energy, and include a $4.4-billion investment by Britain's OPG Power Ventures to add 4,200 MW capacity of new electricity generation in Tamil Nadu; $1.4 billion by Vodafone to  support the Indian government’s Digital India and Make in India initiatives; $3 billion by the largest Solar power generator in Europe, Lightsource, to design, install and manage around 3 GW of solar power infrastructure in India over five years; $1.8 billion by British technology company Intelligent Energy 's to provide clean energy; and $365 million by  Standard Life, Bupa and Aviva in their Indian joint ventures.

The two nations also signed a civil nuclear deal, pledging to collaborate in defence and cyber security. India is also looking at attracting more British investments into India in the areas of defence manufacturing. These may include a pact for Britain’s BAE Systems to sell 20 more Hawk trainer jets to India. The UK will also provide technical assistance to develop Indore, Pune and Amaravati to help meet India's ambitious urban development goals.

Riding on the surge in confidence among FIIs, following a slew of measures by the Modi government to revamp the adversarial and oppressive direct tax regime in India, overhaul indirect tax system via GST and attract investment in infrastructure, the country has received $30 billion in foreign direct investment in the first six months of this calendar year. While the Modi government is trying to enhance the ease of doing business in the country, it continues to position India as a preferred investment destination and an alternative to China which is slowing down. Against this backdrop, it perceives Britain as a key market for the country as an increasing number of Indian corporates are spreading their wings to the UK via alliances and acquisitions, the language for business remains same, laws are similar and Britain is strategically located for reaching European markets. During his visit to the UK—the first Western country to end a visa ban on Modi, imposed after the 2002 riots in Gujarat, when he was chief minister of the state—Modi rightfully said the UK is India’s gateway to Europe.

The UK ranks 18th in the list of India’s top 25 trading partners (it used to occupy the number one position for long even after India’s independence) and two-way trade in 2014-15 stood at $14.34 billion. The UK is the third-largest inward investor in India, after Mauritius and Singapore, with a cumulative investment of $22.26 billion between 2000 and 2015.

On the other hand, India is the third-largest foreign investor in the UK. The two countries have signed many bilateral trade agreements. These include the Joint Economic and Trade Committee which was inaugurated in New Delhi in 2005 to boost two-way bilateral investments.

In what is perceived as ‘reverse colonialism’ where non-Western countries impact the West, Indian companies have increasingly expanding their presence in the UK. The growth of India's multinational companies contributed greatly to UK's business and economy. As of 2014, Indian companies in the UK generated over £19 billion. They have also employed more than 100,000 people in the UK.
Of late, the UK government has lost no chance to label India as one of the fastest growing economies in the world and one among its most influential trade partners.

Besides, as negotiations for a free trade agreement (FTA) with the EU are heading nowhere, a growing chorus of experts has been calling for a separate FTA between India and Britain.
Given a complex nature of the EU structure and its vast internal issues, the likelihood of reaching an FTA deal with the 27-nation bloc in the near future seems remote. Enhanced trade relation including an FTA with the UK will help India bypass this impasse and make inroads not only on the UK market but the broader European market.

A growing number of experts opine it would be much easier for India to negotiate a deal with Britain which also needs a vast Indian market for reviving its economy. Given the vibrancy of the British economy and a growth potential of Indian economy, there is a lot of scope for the two countries to enhance collaboration in technology, Information Technology, financial services, education, health, textiles, transportation, urban infrastructure and defence. Pursuing dual FTAs (with EU and the UK) should not be a problem as India has been doing the same elsewhere—it maintains an FTA with the ASEAN while continuing to have separate deals with member countries like Singapore.

The merchandise trade between Indian and the UK, in fact, took a dip from $15.82 billion in 2013-14 to $14.33 billion in 2014-15. One hopes that leaders of both the countries would resort to measures that will help revive the momentum and take bilateral trade to newer heights. 

The changing direction of India’s maritime strategy

India’s latest maritime strategy document, released by the Navy recently, was noted for its title, ‘Ensuring Secure Seas,’ which pointed to a clever shift from the country’s hitherto followed maritime strategy as captured by the theme—Freedom to Use the Seas—of the previous document released in 2007. The tweaked title unambiguously indicated the changing colour and tone of the Indian navy’s interests and intentions, considering the changing geopolitical environment and its strategic implications on India’s maritime interests. It also implied the country’s focus on security dynamics along waters beyond the Indian Ocean and its renewed interest in security architecture across the Asia coast taking into account the rising maritime presence of China is the region.

Three points highlight the change in India’s naval strategy: For the first time, the Indian government formally acknowledged the evolving concept of the ‘Indo-Pacific’ witrh regards to its maritime security. This is a clear deviation from the term ‘Indo-Pacific’ which is preferred by several strategically and politically important countries including the US and Japan while referring to the region in official documents, the lone exception being Australia.

The shift implies that the country is ready to broaden its focus beyond Indian Ocean, take note of security changes along its entire maritime boundaries and re-align its policies based on these developments. This also reinforces India’s resolve to strengthen its role in the evolving maritime security architecture in the region.

Second, India is willing to expand the areas of its maritime interest to include The Red Sea, The Gulf of Oman, The Gulf of Aden and The Southwest Indian Ocean, including east coast of Africa. Also, this puts to rest concerns among friendly nations over the seeming lack of India’s naval and political presence in the South China Sea, against the backdrop of a rising China. 

Thirdly, the document refines India’s role as a ‘net security provider’. While the country has not indicated the geographic extent of the region where it aspires to be a net security provider, it has acknowledged the steps required to be a net security provider. The document has also outlined the environment conducive for it to be a net security provider. 

The shift in India’s maritime strategy and policies has been made amply evident via the navy’s engagement under the Modi government. However, hitherto, it has not been any document that detailed this shift. The latest strategy document goes beyond formalising the Indian navy’s thinking and tries to narrate the same without ambiguity. 

It also emphases on collaborating with other countries in the region and to build a network of regional cooperation to ensure peace and stability. 

In fact, under Modi’s leadership, India has been sending a clear message that the country is willing to play a larger role in the unfolding security architecture in the region. This has been made evident through the joint strategic vision with the US, Japan’s inclusion into the MALABAR exercises, re-engaging with the island nations of the IOR and South Pacific and new bilateral exercises with Indonesia and Australia. 

The strategy document has also made a strong pitch for ‘Make-in-India’, advocating enhanced degree of technological self-reliance and increased indigenisation of maritime platforms and equipment. While the strategy paper spells out India’s maritime interest, according to a section of defence analysts, it falls short of being the visionary document. In a world of growing geopolitical entanglements, the changes outlined in the document are seen by them cosmetic in certain areas. According to them, the document paints a picture of a force that boasts of growing capability and aspirations but conscious of its limitations too. 

Notwithstanding the Navy’s role in enhancing diplomatic relationships with neighbours and other peer groups, utilisation of maritime prowess just as a foreign relationship enabler is seen as a limited perceptive. It is true that passage exercises, staff talks, port visits and exchange of personnel are crucial; but they are not a substitute for high-level strategic engagement.

They also highlight the fact that the strategy document fails to paint the picture of China’s growing presence in the Indian Ocean Region. In recent times, China deployed submarines in the IOR and enhanced anti-piracy patrols with the help of additional warships and platforms have acquired a strategic character. 
The document also hesitates to dwell enough on the fact that China may be aiming to develop a littoral framework of operations in the Indian Ocean and familiarising itself with the operational environment for the same. 

While India may have to work a lot more to overcome obstacles to expanding its global influence as a sea-power, especially as China continues to have an edge as a regional behemoth, its advantage of being an Indian Ocean littoral state will help emerge as a decisive maritime player beyond the immediate neighbourhood.