Economy and diplomacy

In a little-noticed speech at the India Today Conclave, the Prime Minister made an important point about how the economy is now driving the changes in India's foreign relations.

The fact that China has become India's second-largest trading partner must surely play a role in improved Indo-China relations. And India's quest for energy security is giving a new dimension to relations with Russia (in the doldrums after the collapse of the Soviet Union and of rupee trade).

The buoyant economies of East Asia have in turn pushed India into its "Look East" policy, while the economic dimension has certainly been a factor in improving relations with the United States: American companies have invested in India in a big way, there is a greater flow of technology, and the realisation that the Indian economy will be among the world's largest in a couple of decades' time is changing perceptions in Washington.

Meanwhile, India's huge surplus on its current account with the US has meant that India has to be sensitive to that country's concerns. The quest for energy security is now driving India further afield: witness the agreements signed late last week with distant Venezuela.

All this when India still counts for less than 1 per cent of world trade. If that were to double in five years, as the government hopes, then the linkages will get stronger.

India's growing pile of foreign exchange reserves is another factor that is making it count""witness the invitation to the finance minister to join the G-8 finance ministers at their London conclave.

Another facet is India's growing presence on the aviation map; from a largely regional presence because of emigrant travel, Indian airlines are now spreading out to all corners. There is also the image change that has been wrought by Indian companies buying counterparts overseas, in markets as diverse as Germany and South Korea, Australia and Spain.

But foreign policy is never fully effective if it remains confined to the economic sphere. Witness how Germany and Japan (till recently the second and third largest economies in the world) both have limited international say because their membership of the western alliance limits their room for independent manoeuvre.

It is only now, when Germany has consciously taken positions that diverge from the American one, that it is seen to have an independent voice. Similarly, the European Union is a powerful economic entity but one that has yet to acquire a full-fledged foreign policy.

The point is that if India wishes to retain its independent voice in international relations, it must resist the occasional temptation to become a subsidiary power within the ring of American influence.

This is not difficult, given the country's civilisational sense of itself, but it also brings us back to the Prime Minister's basic point: it is economic power that will give India the elbow room to carve out a space for itself.