Read the full transcript of a panel discussion on #Dilsewithkapilsibal titled “Global Economy & Foreign Policy: How India’s Strategy Evolved Since 2014”. Speakers are in this session are: Arun Kumar Singh, Jaimini Bhagwati, and Suhasini Haidar. Host Kapil Sibal is the moderator. [Mar 10, 2025].
Listen to the audio version here:
TRANSCRIPT:
[KAPIL SIBAL:] Namaskar. In this episode of Dil Se, we’re going to talk about what’s going to happen to the future of the world in terms of the global economy, what impact that has on foreign policy. Over the years, ever since 2014, what has been the trajectory of our foreign policy?
If you go back into history, you realize that when Pandit Nehru became the Prime Minister of India, we had gone through a very, very troubled period and we became independent and we didn’t want to ally with anybody. So we started with the non-alignment movement. Marshall Tito, Nasser, they were all great leaders. They didn’t want to lose their economy in any sense.
So that continued for a while and then came Indira Gandhi and we saw a strategic alliance with Russia at that point in time. The nature of an economy, because we had not opened up, was such that we wanted support and the Russians supported us. 1971 happened, the Seventh Fleet was sent and Mrs. Gandhi stood up to the Americans.
And then during the Narasimha Rao era, when the global economy opened up, the whole world changed. World changed, why? Because the beginning of the global economy brought about immense trade amongst nations and therefore every nation strategically wanted to ally itself with those countries from which the economy was benefited. But Narasimha Rao therefore started, in a sense, the global era and its impact on the foreign policy.
Then came and that was carried on by Vajpayee in a sense.
India’s Foreign Policy Under Modi
But when Modi ji started his foreign policy, perspective was somewhat different. He personalized foreign policy, that’s my opinion and we’re going to discuss that. His foreign policy was very personalized and if you personalize your foreign policy, then the institutional memory that’s absolutely necessary gets affected.
But apart from personalizing foreign policy, he tilted towards the West, clearly tilted towards the United States of America. Our relationships with Israel, our positions with the Palestinians changed and that’s reflected in our voting in the resolutions in the United Nations as well. We, in the process, also lost our global leadership in the South.
The other thing that happened was that the soft power, which is also part of our foreign policy, started becoming saffronized and that didn’t sort of attract a lot of people around the world. And apart from that, we started increasing our tariffs and that in turn was like during the 60s and 70s, we had what was called protecting ourselves throughout but not allowing goods to come in.
The same thing was happening here and then came Trump. And when Trump came, everything changed. So we don’t know what’s going to happen to our foreign policy trajectory after Trump comes in because every day something new happens. He has threatened India with tariffs on a reciprocal basis.
He has told the Europeans, “I’m going to impose tariffs at 25 percent, Chinese at 10 percent.” And as you know, most of our exports are gems, textiles, pharmaceuticals, and the average tariff of goods imported into America from India is about 3 percent, 3.5 percent. The average tariff of goods coming into India from the United States is about 9 percent.
Now, the economy of a country has a direct impact on the foreign policy of a country. That’s what I believe in. And we have three extraordinary people with us today who are going to discuss all this.
I’m sorry I took too long in the introduction because it’s important to have a perspective of what we’re going to discuss today. Jaimini, thank you very much. Foreign service officer, 1976 batch, economist, St. Stephen’s College, MIT for your master’s, Tufts for your PhD, and 1991 to 2005 worked in the World Bank.
So you have enormous experience on the economic front, ambassador to the European Union. So you’re going to tell us something about the European Commission’s visit here recently. And you’ve written a book called “The Promise of India,” right, in 2019.
[JAIMINI BHAGWATI:] Thank you very much. It did not remain a promise.
[KAPIL SIBAL:] Thanks a lot. Arun, thank you very much for being here. 1979, Foreign Service Officer. I think you’ve served almost every country in the world, as I see from your Moscow 1981-82, Israel 2005-2008, France 2013-15 as ambassador, ambassador to the US 2015-16, non-resident fellow of the Carnegie India, and of course a senior counselor at the Cohen Group.
So thank you very much for being here. Suhasini, what can I say about you? You’ve done the most interesting things. I wish I were a journalist, because I would have loved to do what you’ve done.
Namely, you’ve done a course in journalism at Boston University, the College of Communication, USA. You began your career at the CNN in the UN Bureau in New York in 94, then CNN New Delhi 1995, worked at the CNN International from 1995 to 2005, and reporting from India, Pakistan, Nepal, Sri Lanka, Bangladesh. And you’re part of the CNN team that won the Columbia DuPont Broadcast Journalism Award in 2005.
And from 2005-14, you were Foreign Affairs Editor of the Primetime Anchor for English news channel CNN-IBN. And your famous show was Worldview. Suhasini, thank you very much for being here.
And of course, you’ve actually covered conflicts in diverse regions, including Pakistan, Sri Lanka, Libya, Lebanon, and Syria. Never a dull day.
The Relationship Between Economy and Foreign Policy
[KAPIL SIBAL:] Let me start with you, Jaimini. To what extent is the foreign policy of a country directly related to the economy and the economic relations between a nation and the rest of the world?
[JAIMINI BHAGWATI:] I’ll first say it should be, pardon me, intimately linked. Sometimes it is not, depending upon the leadership, and depending upon their own perspectives, short, medium, and long term. Whether you are fully aware of exactly where your economy is, and where your strengths and weaknesses are. If you wish, I’ll elaborate.
[KAPIL SIBAL:] Yeah, please do. Please do.
[JAIMINI BHAGWATI:] Let’s look at the scenario right now. We got President Trump on the rampage. He wants reciprocal tariffs, etc. Let’s just look at a few numbers to give your viewers a sense of where we are.
You see, the U.S. has a trade deficit in goods of about a trillion dollars. I’m going to round off these numbers. It has a surplus in services of about 300 billion. So they are short in terms of goods and services by 700 billion.
[KAPIL SIBAL:] I see.
[JAIMINI BHAGWATI:] Now, this is what bothers Trump because he feels, because the deficit is much more on the manufacturing side, and that’s where there is employment. While on the services side, while they have a surplus, of course with India is roughly the same, and with us they have a deficit of 40 billion. You think about it.
One trillion dollars of trade deficit with the world as a whole, with us it is 40 billion. So it’s a very small amount. So in terms of our own take on where to go forward on this, we’ll obviously have a lot to do with what President Trump does to us, or with us, or how he goes about things.
We are right now told by the media that there will be some negotiation on an India-U.S. trade deal, which should be done by fall or by the end of 2025. I’m not sure how you will achieve it on used cars. But already he has told us “you to buy oil from us, you to buy gas from us.”
[KAPIL SIBAL:] Absolutely. That impacts us economically.
[JAIMINI BHAGWATI:] Absolutely, and to that extent your foreign policy, because to that extent that you buy more from U.S., you’ll have to buy less from others.
[KAPIL SIBAL:] Correct. Because we have a projection in terms of our demand, it’s obviously going to keep going up. But relatively in proportion wise, if we buy more from U.S., it’ll have to be from third countries, because the cost of transportation will be too high.
[JAIMINI BHAGWATI:] You can work out some third country deal that you buy from so-and-so, but it’s credited to the U.S. It’s like how the Soviet Union used to provide…
[KAPIL SIBAL:] What about our exports? As you’re talking about gems and jewelry, I was talking about…
[JAIMINI BHAGWATI:] No, our exports, you know, are not… The highest number is not gems and jewelry. The highest number is pharmaceuticals, I thought.
[JAIMINI BHAGWATI:] No, it is not. The highest number still is clothes, bedding, etc. It’s broadly related to the textile part of… It’s about 13 billion last year, 2020.
[KAPIL SIBAL:] So if he raises tariffs there, then Bangladesh and others will get the benefit, no?
[JAIMINI BHAGWATI:] They already get the benefit of the GSP, which we don’t get.
[KAPIL SIBAL:] But he withdrew that in the first term.
[JAIMINI BHAGWATI:] That’s right. And the next thing is pharma, as you rightly said. But the third thing, it’s counterintuitive, is a whole bunch of electrical items at relatively lower levels of, should we say, technology. The U.S. sells us, and I’ll stop there because others should also come in. You’ll be interested to know, sells us about four billion worth of nuclear engineering-related materials and equipment.
Now, Westinghouse, you talked about foreign policy. What I would think this country should do is, this is one area we can work profitably with the U.S. You remember the 2008 1-2-3 agreement was nullified more or less by the 2010 legislation based on the Bhopal gas tragedy and so on. We have put all kinds of reparations on those who provide us with equipment.
So I would think that one area where we could profitably work, because we have the 1-2-3 agreement, so there is no bar. So Westinghouse sells a lot of stuff in Europe, which we could profitably take. One little line and then I’ll stop.
[KAPIL SIBAL:] You’re an expert in economics, so you’re saying all this because of the economic point of view.
[JAIMINI BHAGWATI:] That’s right. But you know, if you read Anil Kakodkar’s article on the nuclear aspect, he says, we don’t need these kind of big nuclear plants at all. We need smaller reactors. And we need plutonium, which we have enough of. And we should use that instead of buying this stuff from the Americans. That’s what Kakodkar said.
[JAIMINI BHAGWATI:] Well, I’m not suggesting that what I’m saying is in any way different from what Kakodkar is saying. Kakodkar is talking in a specific context as to where we are. But, you know, one needs to take things that are said by Department of Atomic Energy people, past and present. Because in 1986, I was in the Department of Atomic Energy. I succeeded Shiv Shankar Menon. And Dr. Raja Ramanna was the chairman. And he would, one of the things one needed to do was to look at his speeches at various places. And one mantra was 10,000 megawatt by year 2000. We are in 2025. We produce 8000 megawatt.
India’s Foreign Policy Evolution
[KAPIL SIBAL:] Okay, let’s move on, Arun. Enough of economics. Where is our foreign policy from 2014 to today? And how is it different from the past? And where are we heading?
[ARUN KUMAR SINGH:] So, I think at one level, there’s certainly an element of continuity. You referred to Prime Minister Nehru working towards this policy of non-alignment. And there the idea was that the smaller powers should have the capacity to take their own decisions. And now clearly the articulation has been that we want to maintain the strategic autonomy of our decision-making. And that on each issue, we should be able to take decision based on our own interests.
And there are indicators. For example, when the Russia-Ukraine conflict started, certainly there was an expectation in the US that maybe our positions would be closer to the US position. But the way the government articulated this policy, as I assess, was keeping in mind the importance of India’s relationship with Russia.
And did not go along with the US in terms of either criticizing Russia or condemning Russia. And eventually, it was the US leadership, the Secretary of State, Tony Blinken, saying that we understand India’s compulsions related to Russia and…
[KAPIL SIBAL:] That’s why we abstained in the 2024 recent…
[ARUN KUMAR SINGH:] We have 25 votes at the UN, we have abstained in all of them.
[KAPIL SIBAL:] We have abstained in all of those.
[ARUN KUMAR SINGH:] And so the Americans eventually accepted that we had certain commitments related to Russia. Also in our oil exports, they accepted we were buying oil in Indian rupees from the Russians, they accepted that also.
[KAPIL SIBAL:] But that doesn’t give us strategic autonomy according to me.
[ARUN KUMAR SINGH:] So I think there was a clear signal that we will be taking decisions based on our interests. Now based on the point you made about the convergence of economic interest and how it impacts foreign policy, now today if we are to see, for good or bad, in terms of comprehensive national interest, clearly the most important partner is the United States. Now there are challenges.
It’s our largest trading partner. With the US, as Jaimini mentioned, we have a trade surplus, whereas overall we have a trade deficit. US is the largest source of foreign direct investment in India. US is also the largest destination for outbound Indian foreign investment, 40 billion dollars, because they are looking for market access, they are looking for technology. At 5.2 million, US is the largest single country presence of Indian origin diaspora. At 300,000, largest single country presence of Indian students.
In terms of some of the civilian technologies, semiconductors and others, clearly it is the partnership with the US that is important. So from that perspective, US is an important partner. Now the challenge is that there are many other areas where we don’t have a convergence of interest with the United States. Because every country takes decisions based on its own interest or the political compulsions of its leaders. And it will not always harmonize.
[KAPIL SIBAL:] Don’t you think that we have tilted towards the United States in these years from 2014 onwards? That has moved away, that the continuity in foreign policy was not actually embraced by us.
[ARUN KUMAR SINGH:] I would not say 2000. If you take for example, Prime Minister Manmohan Singh. Opposition on Israel, opposition on the Palestinians is completely different.
So I think there has perhaps been some change on the Israel-Palestine issue, but not on the global issues. Because if you take for example, Prime Minister Manmohan Singh, he staked the survival of his government on seeing the civil-nuclear cooperation agreement through the United States, through the Lok Sabha. And because there was no confidence motion.
Global Economy & Foreign Policy: How India’s Strategy Evolved Since 2014
KAPIL SIBAL: And it was as a result of that that the relationship with the United States has consolidated. That’s right, because Dr. Manmohan Singh had a global perspective and he kept his relations with every country on an even keel. But we see a tilt towards the United States clearly from 2014.
JAIMINI BHAGWATI: So I don’t think I necessarily agree because if you look at France for example, because as I mentioned, US is an important partner. But can be an unpredictable partner and will not always have convergence of interests. So you need other hedging partners.
And as I see it, every Indian government including the present one has tried to sustain its relationship with Russia and with France. Because they give you hedging options. Trump says you buy the F-35s.
KAPIL SIBAL: I don’t think we’re going to buy F-35s. I’m just saying. Trump says buy the F-35s.
Trump says you’ll have to buy our oil, you’ll have to buy our gas. We have no way of actually getting around that because that’s the way it is.
SUHASINI HAIDAR: Well, we do. We have what are called US term limits. So you just drag it out and wait it out as we did with Trump 1. Because he insisted on us signing a deal for LNG, which was not in our favor. We announced an MOU.
We announced another MOU. It was made a big deal off at the Howdy Modi event in Houston. India was going to put billions of dollars into a driftwood plant as it was known in Louisiana.
But when Mr. Trump lost power, the MOU just went away. So India does have that going for it, that if you wait it out enough. I think the point, perhaps, if I could just pick up from what Ambassador Arun Singh is saying, is that maybe there was an attempt to move closer to the US.
Maybe there was definitely when Mr. Modi said in the US Congress that we have shrugged off the hesitations of history. In a sense, trying to say that India is no longer worried about being seen as close to the US. There was that in mind.
But over the next few years, I think there has been a realization even within this government, that actually there is a safety in the strategic autonomy argument, that there is a safety in non-alignment, that they can actually use to India’s benefit and to their own in a certain sense. After all, in 2017, Mr. Trump insisted that India should cut off its most vital source of oil. Iran used to be 12% of Indian oil.
It was sweet oil. It was cheap oil. It came from very close by and our refineries were made for it.
But Mr. Trump sent Nikki Haley here, who announced publicly that India must change its policy on Iran. And lo and behold, the government gave in and agreed to zero out Iranian oil. This was to our detriment.
When Trump said give up Venezuelan oil, we gave it up as well. It was seen as in India’s larger interest. But in fact, you notice that by the time the Russia-Ukraine war happened, and America said zero out American oil, also it was a Biden administration, so perhaps not the same kind of worry and deterrent coming from them.
The government stuck its feet in and didn’t just not zero out. They actually increased from 0.5% of the oil to 40% at one point of time. So I think what’s happening is a kind of maybe grudging realization that perhaps some of these, you know, what I think External Affairs Minister Jaishankar has once referred to as shibboleths of the past.
I’m not sure that they are still feeling that these are necessarily bad things.
Challenges in Trade Agreements and Diplomatic Relations
KAPIL SIBAL: No, that’s true. I don’t dispute that. But considering that Trump is not giving any negotiating space to countries around, I’m not talking just about India, to the Europeans. And it’s going to be difficult to have a trade agreement in these circumstances. Because we don’t know because the next thing they want is agriculture.
Agricultural goods to be exported here. We have not opened our markets. It’s going to be a very difficult thing.
And think about it. Meat products. This is what he wants. Meat products to be sent here. How are we going to deal with all this? And we have accepted today that we will have an EU-India free trade agreement by the end of the year. We’re discussing the phase one of a US-India.
We’ve already missed three or four deadlines with the UK. We have three or four deadlines with Australia. There are a lot of free trade agreements.
So maybe India’s whole policy is going to be reworked. But you make a good point, which is that this is where the summit level diplomacy or personalizing diplomacy is never a great idea. Because when your interlocutor is someone as unreasonable as Mr. Donald Trump, then it does not help to make negotiations just a man to man kind of thing.
And that’s where you are right. That now we are dealing with a situation where Mr. Trump doesn’t spare anyone their blushes. He says what he feels like.
We know that our prime minister does not like to face press conferences. And yet Mr. Trump threw him into two different press conferences and opened him up to all kinds of questions he wouldn’t otherwise have answered. There’s a certain discourteous manner in which he speaks about India consistently.
The fact that he announced the reciprocal taxes against India not an hour before he was going to meet Prime Minister Modi. Or that he’s talking about taking off the Chabahar waiver for India, which is important. Or the way Indians were sent back on military planes.
We didn’t have the courage. We didn’t have the courage to say that’s not acceptable to us. You know, courage comes from strength.
And I’m not going to get into where the Indian economy is, because you’ll say again, you know, you’re talking too much economics. So you don’t have to look only at today’s stock market crash. There are various things happening in the Indian economy, which do not allow us to let alone flex our muscles at the international front.
But I want to go back to your earlier point that somehow there was some kind of greater autonomy. You remember the 60s, PL 480, etc. and so on. Lyndon B. Johnson and what happened and so on. The Green Revolution took care of some of that. But the world has moved.
But the relative size of India’s economy hasn’t changed all that much. The absolute. Yes.
But China, in the meantime, has grown so much. So when you’re looking at the world today, the three poles are the US, Russia, China, Russia, because not because of the size of its economy or how it has handled its economy. It’s far too dependent on fossil fuels.
But because of technology, the S-400 missile defense system has been bought, not just by us, but also the Chinese. So you can imagine that our nuclear powered submarines are provided by the Russians. So we have not changed those basic.
SUHASINI HAIDAR: No, we can’t. Because they supply us all the defense equipment. Most of it is supplied by them.
KAPIL SIBAL: So we can’t change.
SUHASINI HAIDAR: Exactly. We want the S-400s.
KAPIL SIBAL: Exactly. And we have got some early. Yeah, but the proximity of Russia and China, I’ll come to you on that.
The proximity of Russia and China has made it more difficult for us.
India-Russia-China Relations
ARUN KUMAR SINGH: So one of the reasons why I say, I think we state the course on the Russia relationship is also because Russia, because of its isolation from the West, was getting more and more dependent on China and more interlinked. So I think there was a need for India to ensure that at least on India-China issues, Russia did not go over to China.
And the sense I get is that there has been confidence in India that that was achieved. That in 2020, for example, when Galwan happened, I think Russian responses were reassuring to the Indian side. That is true.
So that was one element. And I think that’s certainly something that India has to keep in mind. Now, while the Russia relationship is vital with defense cooperation, we also have to factor in that we had a certain comfort level with Russia because they didn’t supply defense items to Pakistan.
But in China, context is different. The Chinese defense capacity and defense industrial base has been built up initially with Russian support. Russians were now talking to Pakistan on supply.
KAPIL SIBAL: But no major supplies.
ARUN KUMAR SINGH: Helicopters. But no major supplies.
So that’s changed. But our concern is, and today our concern is more China. And now the Chinese have been supplying Russia’s defense industrial base.
KAPIL SIBAL: See where we are. And I’ll just carry forward that dialogue with you. See where we are.
We have no real clout with our neighbors anymore. Let’s see where we are today. We have no real clout with the neighbors.
Our relationship with the US is changing radically. The Europeans are going to be very hurt. The Europeans are going to look for markets in India.
We don’t know how that is going to happen. We’ve lost the leadership of the Global South. We’ve lost the leadership.
We are no longer leaders of the Global South. That’s my belief. Trump says, if you’re going to do anything to the dollar, if BRICS does anything for a currency that we said yes, we agree to that, suddenly Jaishankar in Doha said, no, no, no, we want to trade in dollars.
Right? So that’s the kind of thing that’s happening around the world. Where do we stand as a country in terms of the clout of our foreign policy?
India’s Position in the Global Order
ARUN KUMAR SINGH: So some areas where perhaps I don’t necessarily agree. But that’s why the discussion.
The BRICS was never really working for a non-dollar common currency. They were floating. China has become the leader there.
But I don’t think India would have been comfortable with that.
KAPIL SIBAL: But they were talking. But they said, we agreed.
We made a public statement. Yes, we are agreeable to that.
ARUN KUMAR SINGH: And so the mechanics of that are not that easy.
KAPIL SIBAL: Yeah, no, absolutely.
ARUN KUMAR SINGH: So that’s one. I think in terms of leadership of the Global South, clearly India is still making some effort.
And you saw what India did in the context of G20. And no other country has convened meetings of the Global South that India has not. To what extent it sustains, we’ll have to watch.
But I think one thing that’s happening. And in terms of the impact on the neighbors, I think it’s a reflection of what Germany said. In 1980, China’s GDP was the same as India’s GDP.
Today’s GDP is five times India’s GDP. Now with that, they have expanded outwards. And so as we are hedging in our foreign policy to maintain our autonomy, our neighbors are hedging against us and using China.
So that’s an inevitable impact. But I think one thing that’s happening, which we should watch, is that there is a certain emphasis now being placed in partnerships in critical and emerging technologies. Because they are going to define nature of work, nature of living.
KAPIL SIBAL: You’re far behind there.
ARUN KUMAR SINGH: But we are getting into those partnerships. And one thing that’s helping us, that the US, despite all the unpredictability, and despite whatever they may do with China, with Elon Musk and others around Trump, they believe that they are in deep technological competition with China.
And China is the only country with the intent and capability to replace the US in the international system. And they still want to maintain US privacy, whatever else they may do. And they have come to accept, and most leading US companies, that for them to win the technology competition with China, they need the partnership with India and 1.4 billion people.
So you have 1700 global capability centers here, doing cutting-edge R&D and technology development work. So that gives us a peg to leverage our relevance. I hope we are successful.
KAPIL SIBAL: But what’s your response to the issues that are raising?
India’s Foreign Policy Foundations
SUHASINI HAIDAR: Well, these are the issues of the moment. I think there is a broader context in which India’s foreign policy works. And there is a reason why it has worked this way for, I would say, not just the decades since our independence, but in a sense, who India has been through the ages.
And that is both history and geography. The history is the goodwill that India has always had. The sense that we have as Indians, that we don’t aggress on others, that we don’t try to push territorial boundaries on others.
That has led to a real reservoir of goodwill for India. And I think that’s why so many countries still want to deal with us, even when they have other differences with us. The second, I think, is our geography.
Where you stand, you were asking, where do you stand? I would say, where do you stand is about where you sit. And we sit in a place where all our continental neighbors, if you just go upwards, all our continental neighbors are not in the America camp. All the way up to Russia on one side, and China on the other.
And our two biggest threats are security threats, and the challenges, and for the foreseeable future, the place where our military resources will be concentrated, are on 3,500 kilometers with China, 3,000 kilometers with Pakistan. So that is where our resources will go. Not in the Indo-Pacific, not in dealing with other people’s issues, but in dealing with our own continental issues.
And I think the third part to all of this is the idea that India has to be some kind of a leader in its own region, or has to be a country whose neighbors are stakeholders in our success, if it is to rise. Because otherwise there will always be a ring of fire surrounding India and creating problems when you least expect it. One day it’s Bangladesh, the other day it’s the Maldives, Pakistan’s a constant.
If we want to work around this, then we have to be stakeholders in our neighbors’ success, and we have to have the neighbors feeling the same way about us. So I think in terms of these three aspects, it is very difficult for our foreign policy eventually to outreach and become some alien concept from Mars, you know. But I think, Swasthi, the mistake we made, and this is my own perspective, you may not agree, the mistake we made was that we depended far too much on politics and concentrating on the economy of our country.
Global Economy & Foreign Policy: How India’s Strategy Evolved Since 2014
[SUHASINI HAIDAR:] That is the biggest mistake we made, which means that China went far ahead of us, we just don’t have the economic clout, even for our neighbors and the rest of the world. And because we were constantly talking about winning elections, and winning elections on the basis of political upmanship, based on policies that we are all aware of. And even today, the fact that we did not cut off trade ties with China, despite that situation, but are looking to isolate Pakistan, are looking to cut off our connections to the west of India, because of political issues, is going to hamper us.
[KAPIL SIBAL:] Absolutely. And what leverage do we have with China? I mean, the kind of things that we are dependent on China on almost everything. Our pharmaceutical ingredients all depend on this.
[SUHASINI HAIDAR:] They supply us. We’re going to be in great difficulty. You talked about our leadership in the foreign policy arena of the past.
I think the single most important factor was our championing of independence, whether it is for the African country, whether it is for Indonesia and so on. That is no longer valid or relevant. So to that extent, I don’t think there is any diminution in India’s stature.
Economic Dependencies and Protectionism
[JAIMINI BHAGWATI:] The problem is what you just mentioned that, you know, why is it that we can’t produce those pharmaceutical ingredients in India? What is it that China has? It is a basic chemical. So which goes into pharmaceutical products. We’ve been hearing this for ages about we don’t want to join the RCEP because we are scared of China.
I mean, you know, because of some milk cooperatives in Gujarat and so on and so forth. So we are always also too dependent on our corporate sector who should face more competition. We have not given them enough competition.
There is reasonable amount of competition domestically, but we need to give them more international competition and that should be part of our foreign policy. Not something separate because you give them competition and let them know. This is like import substitution.
In the past, there used to be import. Now it’s barriers, you know, tariff barriers. What about PLI? You know, this production linked incentives.
[KAPIL SIBAL:] It’s another form of protectionism. To the extent that Apple is taking advantage of it and we have about 14 billion US dollars of exports of Apple phones.
[JAIMINI BHAGWATI:] No, it’s only in one sector that it’s working. Other sectors are not. I totally agree. I’m not in favor of PLI, but then we don’t want to get too invested.
Internal Strength and Foreign Policy
But on the political foreign policy side, you see, your ability to project and to attract and to be friends with people is totally dependent. That totally may be an exaggeration because with Pakistan and now with Bangladesh, it is not totally dependent on our economic size. But our projections, even in dealing with someone like President Trump, are based on our own domestic economic strengths.
And how cohesive are we as a society without getting into the politics of India? You’ve seen, you know, the rumblings in the South and so on and so forth. We don’t want to go there because that is being watched very carefully by people outside. And you can believe me when I say this, that intelligence agencies are quite active within India.
And that’s par for the course all over the world. So we need to watch out for some of that. Who would be interested? You remember KGB and who gave how much money to whom during the Indira Gandhi years? How much? And Mr. Pillu Modi coming to parliament with a sign around his neck.
You’re too young to remember. I am a CIA agent and so on. So the thing is, you know, how are we going to deal with these influences is based on our own internal strengths.
And that internal strength comes from making your economy strong. And to make your economy strong, you have to give freedom to people. Freedom to people means don’t get the ED after them. Don’t get the CBI after them.
[KAPIL SIBAL:] You said it. I agree with everything you just said.
[JAIMINI BHAGWATI:] Unless you do that, you’re going to be in this rut all the time. And you talked very interesting. I’ll come back to you.
Intellectual Property and Economic Growth
[KAPIL SIBAL:] You said that we have a reservoir of these great people who do a lot of research. And then in the new emerging technological revolution that’s taking place, we’ll play a part. You see, if you look at what we do in Bangalore and others, we produce for others.
They buy the intellectual property that we produce and they get all the profit. So we are just doing these little, you know, on a mobile phone. What is it that we manufacture? We just assemble this and the software that we produce, which you talked about, is something that’s owned by them because they buy the software.
So we are not going to get economic strength on the basis of that. We have to start doing the hardware stuff. To be a very strong economy.
So that is not going to take us anywhere. So I think you made a valid point that certainly a lot of technology and technology development work is happening in India and Bangalore. But the intellectual property is not vested with Indian entities.
[ARUN KUMAR SINGH:] That’s correct. It’s vested with the international entities that are getting the work done here. So there is income generation happening here.
There is some capacity building taking place. But till you do intellectual property generation, wealth creation will not happen at the same level. So that effort has to be made.
But till that is realized, at least something is happening. So what has been done from 2014 to today? No such a thing. I think one can’t do a divider.
[KAPIL SIBAL:] When I say what has been done, I mean substantially. Look, we are where we are. Your economy is growing at a slow pace of 6.3% or 6.7%. That’s, you know, as I said in Parliament the other day, the finance minister, even if she does nothing, will still grow at 6%.
And economists agree to that. The question is, we need to grow at 8%. We need to grow at 10%.
Now you can only do that if you free up the system. And you are not willing to do that because politics is your main concern. How to win our election is the main concern.
Your main concern is how to make your economy strong so that how can you make your foreign policy strong? And how can you have clout in the world? I think for the moment we make a big splash on the international scene. I don’t think you can take away from that. And I think we are able, in a certain sense, to give a sense of India.
[SUHASINI HAIDAR:] But you’re absolutely right that in order for us to actually be part of that global discussion. In the old days it used to be India is not part of the problem and it’s not part of the solution. But eventually to be a part of that global discussion, you have to have the economic heft to go with it.
Employment and Economic Challenges
[JAIMINI BHAGWATI:] So if I may submit, when you talk about foreign policy projection, it is based on domestic strength. So one area where a number of people, there are hundreds of millions of people who have got affected is MSMEs. They have been devastated as I mentioned earlier.
I am not going to get into the pros and cons of demonetization and GST. GST was, I have mentioned it already. So you have really made it very difficult to create employment.
Because the larger companies, I don’t know whether you know, a tyre company, I am on the board of one, they increase the size of the company in terms of the production. But the manpower goes down. Sometime back a person at the shop floor used to get 10,000 rupees.
Now they get 50,000. Cost to company. And they just don’t, they want to automate.
And they are automating. But then you also need to move up the value chain. To be able to earn enough and you also need to give employment.
You can go to any mofosil town, any place in India, in fact go anywhere in Delhi. The two things which seem to be growing in our urban areas are security guards and drivers. So that’s not the way and security guards are paid a pittance.
So employment generation, while we think about foreign policies, because at the end of the day, I keep repeating, that is a superstructure. That is from 10th floor onwards. From 0 to 10 is domestic.
So you can’t build that superstructure. You could do it during Nehru’s time. Newly independent country.
Mahatma Gandhi. The whole world is looking at us agog. What has this country achieved? Cost to it.
To a large extent it’s also because Britain bled itself white. And as you know, everything went public and everything was nationalized in the UK in the 1940s. People talk about Fabian socialism here and blame Nehru.
But why don’t they look at UK and what happened in the 1940s? I think another place is, well, again, India is seen as a growing power, emerging power when it comes to our infrastructure. It’s a lot of our infrastructure and I don’t mean to make it a socialist argument at all. But a lot of the infrastructure we are touting today is meant for a very small section of our society.
[SUHASINI HAIDAR:] It’s high speed expressways. It’s tollways. It’s the high speed rail or even bullet train rail.
These are all meant for people. And we know from the latest economic survey that they don’t even represent 5 percent of India. So therefore, the infrastructure push for the rest of India is in a sense suffering.
And until that large mass is moved up the value chain, up the income chain, as Ambassador Bhagwati was saying, I don’t think you can make the next leap, in a sense, to the high table. So if you don’t create jobs, you won’t have and you don’t have employment. You won’t get people to have a larger amount of money in their pockets.
[KAPIL SIBAL:] That will not fuel the economy. And you will only be having people at the top earning money. That is the creamy layer of society earning a lot of money.
And with automation, they will earn more money. But the employment there will also be impacted. Some will be generated.
With the gold visa from the US, they might actually just leave. So many people have left for Dubai. So many have left for Dubai.
So the question is, it’s fine. That’s all fine. But if politics overrides your interests in making India economically a superpower, then we’ll never be and we won’t have any clout in foreign policy.
That’s my belief. It’s fine that we can carry on like this. India has a lot of goodwill.
[ARUN KUMAR SINGH:] That’s right. Well, you know, we are very reasonable people by and large. That’s fine.
And we negotiate well with people like you. That’s okay. But where does it take us? Ultimately, economic strength is critical because I think it is through economic strength that other countries will look at you with interest.
Be it United States, be it the Europeans because Europeans are going through their own challenges. And as Suhasini mentioned, if you have economic strength and create opportunities for your neighbors, then they feel invested in our success. So I think that has to be for a sustainable increase in foreign policy influence.
[KAPIL SIBAL:] And if you look at the newspapers every morning, we don’t talk about, they don’t talk about the economy at all. It’s only about politics. We try.
Opportunities and Challenges
But tell me another thing now. I also think this is a great opportunity for us because now with the world changing, Europe having to look beyond America, looking at Asia because the two biggest countries in the world, in terms of economic possibilities, are China and India. So we have a great opportunity for actually now negotiating very good deals with Europe and bilateral deals with the rest of the world.
And I think that if we can do that, I think we’d be able, we’d be going on the road. May I submit something? Sorry, just before you. May I submit something? The two largest countries in terms of population are China and India.
[JAIMINI BHAGWATI:] Between the two of us, we’re roughly three billion people. The biggest failure of Indian foreign policy is not anything else but the fact that China felt the need to flex its muscles in Ladakh. We should have anticipated that.
We should have been able to figure things out. We needed American help and their satellite coverage to even figure out where exactly they were. So these are the kinds of things which make for strength in foreign policy.
You can’t have a situation where you have your largest neighbor with whom you have a very large trade interaction. Whether it is in our favor or not is not relevant. Why were we caught napping? And that is a failure of the foreign policy establishment, of the army, of our intelligence agencies and so on.
Because that’s very concrete. And it happened very recently. So 2020, April.
So we need to think of that. Why we cope with Mr. Trump? Because he’s unpredictable. And as Suhasini mentioned, if you don’t mind my using your first name, four years.
And he can’t be re-elected unless he changes the constitution, which is, I think, going to be impossible. Hopefully will be impossible. But China is there.
It’ll be there after four years. Mr. Xi Jinping may be there depending upon his health for another 20 years. So we need to focus on that.
And Mr. Putin, I don’t know how long he’ll be there depending upon his health. But he’s a very bright man. I’ve sat across the table from him, spoke fluently in English for over two hours, did not look at a single note.
I’ll not mention who was on my right, who was representing India. And he had to keep looking at his notes. So while we deal with Trump, Europe I would be less concerned about because they are themselves weak.
They’ll reach out to India. We don’t have. That’s what I’m saying.
[KAPIL SIBAL:] So it’s an opportunity for them. That’s right. Because they’ll reach out to India.
It’s an opportunity. But they are in grave economic trouble because of the age profile. German economy has grown at 0.3 percent.
[JAIMINI BHAGWATI:] No, it is the demographic profile. They need to bring in workers. We were working for a blue card with Europe.
Global Economy & Foreign Policy: How India’s Strategy Evolved Since 2014
KAPIL SIBAL: Now with the AFT, which has got 20 percent of the vote. They’re not going to allow that to happen. 21 percent.
JAIMINI BHAGWATI: It’s 20.8. You might have a Nazi party in Germany for you. I don’t think that’s possible. The CDU.
KAPIL SIBAL: I know they will. The Social Democrats.
SUHASINI HAIDAR: But you know, if I could just add to that point. So we’ve discussed how the economy is one of the cruxes of India’s foreign policy. Also the idea of India’s own strategic impulses. But I also want to add one more thing, which we sometimes disregard or see as too idealistic, which is that if India is to be seen as a counterpoint to China, we’re not going to be seen as the counterpoint in terms of the market access or in terms of the liberalization, in terms of the manufacturing base that China has already built.
We will be seen as a counterpoint to China because of our USP, which is made up of the fact that India is a democracy, that India is a pluralistic secular democracy and that it is a rule abiding country. If India stops being one of those three, we lose our USP in a certain sense. So those who want to recast India in a majoritarian mold or those who say we need strong leadership and non-federal leadership, we need a central figure who will lead us into the future.
And those who feel that India should now flex its own muscles, especially with its neighbors, take back territory that has been taken away from us. All of those ideas are actually detrimental to this idea of India that in fact makes people see us as a country.
KAPIL SIBAL: I tend to agree with what you’re saying. What about you?
ARUN KUMAR SINGH: So I think going back to the question you asked about the opportunity or the challenge. So clearly this is a moment of opportunity but also a huge challenge. And challenge because after the dissolution of the Soviet Union, when US saw itself as the only global power, pushed the world for globalization of production.
Now that phase of globalization of production which China benefited from is not available. And we lost out in that phase because manufacturing went to China, we got some services. And today China GDP is 18% of global GDP but they have 32% of global manufacturing.
But because of that concentration, today the mood led by the US is to reorder the supply chain. So and there will be challenges because they’re talking of US shoring on shoring. He said if Tesla invests in India, it will be unfair to the United States and that’s what Trump said.
But still US can’t do everything. So there will be an element of looking for secure supply chains, trusted supply chains, French shoring. That gives us an opportunity to plug into the reordering of supply chain.
And to some extent it’s happening. Just look at semiconductors. There have been fresh US investments in semiconductors. And they’re also looking at what you can do more in terms of integrating the supply chain in terms of semiconductors both in the US and India. So that creates an opportunity. So we can look at similar arrangements also with Europe, also with the UK.
KAPIL SIBAL: And that will create opportunity for us depending on how we are able to. You see how I look at it is like this that in any case US’s number one antagonistic entity country is China. They will have to look towards us and to that extent I think they’ll be willing to make concessions to us because of that relationship.
The Europeans will be also looking at China and us. Because if America is going to do them in then they’ll have to look for markets themselves. So they will be looking at China and they’ll be looking at us.
So I think there’s an opportunity there. We need to actually be a little more proactive to our neighbors. And as you rightly said we must send a message to the rest of the world that we are a functioning thriving democracy.
We believe in the rule of law. And that we are not going to for political considerations. We’re not going to take decisions in the manner that we have been doing in the recent past. We need to go back and start talking to Pakistan. It makes no sense according to me.
If Vajpayee could talk to Pakistan even after Kargil what’s the point in not talking. We’re talking to the Taliban.
SUHASINI HAIDAR: Yeah we’re talking to the Taliban.
KAPIL SIBAL: Why don’t we talk to Pakistan. But that’s politics. See this is what puts us in difficulty.
But I will refer to something on which you are an expert. Which is how foreign investors look at us. You remember the Vodafone case. And how it was overturned by legislation by then finance minister Mr. Pranab Mukherjee. Going forward if you want investment and we want investment we are a capital deficient country. We need to also look at our legal system where anything and everything gets postponed for years.
What happens is that in the legal system in this country today is in real I would say shambles. That needs to reinvent itself. And this starts from the bottom from the district level right to the top.
And people have to judges have to stand up and say we will not accept this. This is not something that the constitution allows you to do. As long as the legal system or the judicial system succumbs to the politics of the country. I think there is no hope for foreign investment in this country.
JAIMINI BHAGWATI: Absolutely I completely agree with you. I think there is also it’s not just the legal system.
I think there are three things investors are looking for. The first is the ease of entry land acquisition. Those are all in the regulatory space actually. Not so much in going into the courts. The second is the rule of law and order. That is not just the courts but also your police that if they file a complaint they will be able to get justice.
And they will not be extorted or those kind of things. And the third which we always forget about is the ease of exit. That even if an investor doesn’t want to exit India they should know that we will be fair on that subject.
We have had in the last five years cases of investors needing to shut down their factories. And being told you have to continue to pay people but we will not allow you to sell your factory to others like the Chinese or others. And making India’s reputation as a sense very difficult for that kind of investment.
ARUN KUMAR SINGH: No I think ease of entry is a very important thing and clearly a lot has been done over the years including after 2014. But much more needs to be done. We still hear from the foreign investors that they do face challenges in terms of getting regulatory.
And in fact the Prime Minister if you saw recently has set up the deregulation commission. So obviously there is a recognition of the need to do and more needs to be done.
KAPIL SIBAL: That’s right. I mean I think he said what will come of it I don’t know. But I mean we were just 10 years down the road. I mean we were at stale space and in terms of our economic growth.
JAIMINI BHAGWATI: It’s 11 years now. So too many vested interests and you know that way too well.
KAPIL SIBAL: Also see the stories that come out of India. You see three in a globalized world nothing that happens in India is not known in the rest of the world. You have resolutions being moved in the European Parliament which is very unsavory. I mean I feel sorry that such a thing should happen to a country as great as ours.
Those resolutions are moved. The kind of stories that come out of India about attacks against minorities don’t have the kind of will not get the support system that you need. Because there is India stands for certain values which have been diminished.
I am sorry to say over the years. As you said our USP is to be the un-China in these respects. Democracy, pluralism and rule abiding. And if you attack that you are not going to get the kind of vibes that you should get with people wanting to collaborate with you. Therefore the rule of law is very important. It’s fundamental.
And therefore you should not have government agencies pursuing certain people based on certain political beliefs. And I am happy that at this point in time some judgments are coming from the Supreme Court to sort of water down the kind of things that were happening. But it’s just not enough.
SUHASINI HAIDAR: Absolutely. Way not enough. Way not enough. And the government should realize that look it’s impacting not just the economy. It’s impacting the world view of India. Right? And that’s very unfortunate.
I think also in terms of image the fact is we have to be prepared that as a growing country, as a country that’s being seen much more on the international stage that we are also going to get criticized and how we deal with that criticism is also very important. I think especially in journalism this is something we have learned in the last few years that you have to really have a government that is willing to deal with criticism.
Empowering People at the Bottom of the Pyramid
KAPIL SIBAL: Last thing I’ll discuss and then we’ll sort of close this discussion is that what has this government done in the last 10 years? What has any government done in the last since 1950s on empowering people at the bottom of the pyramid? Very little has been done.
We keep on talking about, you know, giving freebies to people, assets of our country to certain individuals, certain members of the corporate sector. And that has a very bad impact on the economy. If you talk since the 50s, I think the two most important pillars on which any society rests are education and health.
And they are on the concurrent list so the state governments can do more. So instead of only looking at the center, because we are a large country with the number of people. So there is a whole debate now on the three language formula.
What’s the use of it? Where are we going as a nation? It’s a waste of time. Basics, the three R’s, read, write, arithmetic. I’m told by owners of foreign businesses when I was outside that we find it difficult to recruit people who can get trained.
We’re not expecting them to be trained when you arrive there. But if they don’t know enough in English, because they can’t now have start printing things in various regional languages, although today with Google…
SUHASINI HAIDAR: Now you say MBBS books will be in Hindi?
KAPIL SIBAL: No, no, no harm. Because with Google… In other words, we come to the conclusion, the bottom of the pyramid must be strengthened.
More money in the pockets of poor people, of ordinary people. Strengthen your economic base. Make yourself an economic powerhouse. You will be a strong power in the world. And your foreign policy will flourish. If you don’t do that, we’ll be negotiating and we’ll get the short end of the stick.
SUHASINI HAIDAR: I think as that song said, what we should look for is R-E-S-P-E-C-T. If we are respected, that’s enough. We don’t have to be strong.
KAPIL SIBAL: I think we’re all in agreement on that. Thank you very much.
ARUN KUMAR SINGH: Thank you.
JAIMINI BHAGWATI: Thank you so much.
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