Examining Modiplomacy

Donald Trump is the seventh US President on an official trip to India in the last week of February 2020. While the critics of Modi Government tried their best to play down the impact and outcome of the visit, two important statements by President Trump signify the importance of the Indo-US relationship and how much Modi Government has made an impact in terms of both deepening the relationship while protecting India’s turf without giving in to the American demands.

President Trump defined Prime Minister Modi as a ‘true friend’, a ‘successful leader’ and also a ‘very tough negotiator’. He described America’s friendship with India as ‘natural, beautiful and enduring’. He also stated ‘America loves India, America respects India and America will always be a faithful and loyal friend to the Indian people’.

How Modi Doctrine made India Resilient & Bold

The issue that needs deliberation is how much these words of admiration by President Trump would hold their weight in the long term and how much would the US stand by these words if India takes strong stand on certain issues which are not in congruence with American thinking?

To understand this, one has to look back at what happened in July 2017 when the US introduced a new type of sanction against Russia, Iran and North Korea. The Countering American Adversaries Through Sanctions Act or CAATSA was aimed at putting punitive sanctions not just against Iran, North Korea and Russia but also against any country or entity engaging in business dealings with those countries especially in the realm of energy and defence.

However, defying American threats of sanctions, Modi Government, in 2018, went ahead and signed a $5.43 billion deal with Russia for purchase of S-400 air defence system, which is considered one of the finest in the world. A contract followed this for four more Talwar class frigates and a $3 billion deal for leasing of another nuclear submarine from Russia. Negotiations are also going on with Russia for collaboration in making Ka-226 helicopters and AK-203 assault rifles, in India for Indian Armed Forces. Modi Government, it seems, made it clear to US Administration that while India is keen to deepen its defence and energy cooperation with the US, it can never give up its strategic defence cooperation with Russia, an old and time-tested friend.

Prior to S-400 deal, in 2017 itself, India had also given green signal to Russian energy giant Rosneft’s acquisition of debt-laden Essar Oil for $12.9 billion, in what was one the largest FDI in India’s energy sector. That too was done in defiance of CAATSA sanctions. Further, in 2018 itself, Russia’s Gazprom started shipping LNG to India as part of a $ 25 billion deal to supply gas over 20 years. This was followed by a decision between India and Russia for setting up of 20 nuclear reactors in India over the next 20 years.

In the same league, the Modi Government also made it clear that abruptly terminating oil procurement from Iran, as a consequence of CAATSA sanctions, would have significant supply-side disruptions for India. Eventually, the US gave India a six months waiver on procurement of oil from Iran. Gradually India, during that six months phase, reduced its acquisition from Iran and contracted for oil deals elsewhere without letting Indian consumers face any supply-side shock.

Not only just that but Modi Government’s assertive and persuasive diplomacy with US Administration also made sure that India’s investments and engagement in Chabahar Port of Iran are exempted from the CAATSA sanctions primarily because Modi Administration convinced Trump Administration why Chabahar Port is critical to India’s seamless access to Afghanistan and Central Asia bypassing Pakistan.

If one has to judge the finesse of Modi Government’s assertive diplomacy while dealing with Trump Administration and the success therein, one has to witness the kind of threats of sanctions that Turkey is facing for the acquisition of similar S-400 air defence system from Russia. Likewise, countries like Germany were castigated and termed as ‘Captive’ of Russia by President Trump for not spending enough on NATO. US-China relationship went for a toss because of the tensions associated with trade issues. But it did not happen that way with India despite minor hiccups. The US understood India’s position and did not impose any sanctions.

What India Achieved in Trump-Modi Era

Interestingly, in the last two years, Modi Government’s deft and assertive diplomacy extracted considerable benefits from the US. India was given entry into the Australia Group, Wassenaar Arrangement and MTCR club and was accorded Strategic Trade Authorisation Level -1 by Trump Administration. Each of these gave India access to critical technologies in the realm of defence and nuclear energy which is exclusive only to a few and which was denied to India for long. Also India’s crossborder airstrikes on terror training camps deep inside Pakistan’s Balakot got support from all major powers including the US, Russia and France. All of them, among others, made sure that no resolution against India is made in UN on either India’s cross border airstrikes or India’s abrogation of Article 370.

On the issue of a trade deal, some of the opposition parties and critics of Modi Government have been trying to present a false narrative that the US not signing a trade deal with India is a reflection of failure of Trump’s visit and that India did not gain anything out of it. On the contrary, the fact that the trade deal was not signed was simply because Modi Government had put its foot down on specific issues and did not accept the conditions or demands of the US trade negotiators. And Modi Government did it to protect the interests of India’s farmers, small traders and the common man.

In the first place, one of the significant contentions that the US raised with India was that of the price of medical devices. A trade deal on American terms would have meant that prices of critical medical devices such as a cardiac stent or knee implants would have sky-rocketed once again. In 2017 Modi Government had slashed the prices of cardiac stents by 75% and fixed the rates of drug-eluting stents (DES) at Rs 29,600 and bare-metal stents (BMS) at Rs 7260. Contrast this with the price of a drug-eluting stent before price control, which was a staggering Rs 1.2 lakh and for a bare-metal stent at around Rs 45,000.

For a country with nearly six crore cardiac patients, capping the prices of stents was a great relief for the common man seeking affordable treatment. Same is the case with knee implants. Therefore by refusing to withdraw the price control on stents and knee implants, the Modi Government has safeguarded the interests of the common man even while not souring the relation with US Administration.

By reducing corporate tax and by allowing 100% contract manufacturing, Modi Administration is making it clear that if foreign companies want more access to the Indian market, then they would have to invest in India, manufacture the products here for selling it in the Indian market, instead of merely importing from home country to sell it here. For a country like India, FDI is always more preferable than a trade deal.

The second area where Modi Government has firmly stood its ground is related to data localisation. As has often been stated by Prime Minister Modi, data is the new oil of the 21st century. For a country with 1.3 billion people, billion-plus mobile connections, more than 600 million internet users, and an ever-increasing e-commerce market, the enormity of digital economic data that is generated annually and its quantum valuation, is colossal. While the government wants storage of critical data generated in India to be done within physical boundaries of India, global internet giants, social media and payment gateways companies are very much against it. While negotiations are continuing and some kind of middle path would surely be brought out, Modi Government’s stand on data sovereignty is at least making sure that data of Indians do not become the exclusive right of global companies alone and does not lead to what is often called Data Colonisation in a Digital Economy.

The third major area where Modi Government played a balancing act synchronising the imperatives of globalisation and protecting the rights of marginal traders is in the realm of e-commerce. Today, e-commerce is a reality, and its existence cannot be denied. It has its benefits as well, which cannot be refuted. From creating a new generation of entrepreneurs to creating new impetus in the logistics market, e-commerce is here to stay.

However, that does not mean that monopolistic or restrictive trade practices of e-commerce giants would be overlooked if they resort to the same and harm the interest of India’s millions of small traders. Keeping in mind the attention of the small and marginal traders, the Modi Government imposed certain conditions on e-commerce companies from early 2019. This includes restriction of e-commerce marketplace entities from buying more than 25% of its products from a single vendor, restricting e-commerce marketplace entities from giving deep discounts on products sold, restriction on e-commerce marketplace entities imposing any mandate or condition on any company to sell products exclusively through its platform only, and prohibiting e-commerce marketplace entities from selling products of those companies through its platform in which the e-commerce company has equity stakes.

While these steps were a massive sigh of relief for the beleaguered small traders and shopkeepers in India who were feeling short-changed by the restrictive trade practices of e-commerce majors, invariably some of the global e-commerce giants, mostly from the US, did not like it. Yet Modi Government, keeping in mind the interests of the tens of millions of small traders, did not succumb to the pressures of US lobbies.

Also, US trade negotiators wanted unbridled entry into India’s diary and chicken industry. For an industry which provides livelihood to more than 80 million dairy farmers, it is difficult for India to allow US unrestricted access. Therefore, it is for these reasons that Modi Government did not sign the trade deal and President Trump had to admit that PM Modi is a tough negotiator which is essentially an excellent compliment for Government of India. It is a reflection of the emergence of a new India which now knows the art of tough negotiations to protect its turf.

For a country with a $3 trillion economy, it would be difficult for anyone to take India lightly anymore as they realise that India is no more a pushover. However, it does not mean that a trade deal would not happen in future. It only means that the trade deal would happen when it would safeguard the interests of both countries. That is what PM Modi’s diplomacy has ensured by not going for a trade deal in haste. It was for the same reason that Modi Government did not sign for the Regional Comprehensive Economic Partnership (RCEP) because it would have flooded India with cheap Chinese products.

Over the last few years, what Modi Doctrine of diplomacy has ensured is that India is indeed now a multi-aligned country. It is one of the very few countries now which has good relation with both US and Russia and has made it clear that its deepening of engagements with each would not be at the altar of ditching others. It is one of the rarest countries which despite major pertinent and unsettled issued with China, started the informal dialogue between two heads of states to have a deeper understanding between the two countries, without any condition or strings of meeting outcomes, attached to it.

India under Modi Government is also one of the very few countries which have maintained good relationships with almost all Gulf countries even when the Saudis and the Iranians don’t see eye to eye. Not just that, for siding with Pakistan on Article 370, both Turkey and Malaysia found hit economically by India through the cancellation of defence contracts and curbs on import of palm oil respectively. Modi Doctrine is now making it clear to the world that they can’t take an anti-India stand on critical issues and yet fancy lapping up benefits from the Indian government at the same time.

Even in the realm of defence deals, India under Modi Government has not only speeded up defence modernisation program but has also ensured that India selects what is best for it and is not compelled or pushed by other countries to take their products. Thus while India did buy the Chinook, Apache and MH-60 Helicopters from the US, it went to Rafale from France while it opted for S-400 and deals for nuclear submarines and frigates with Russia. And Modi Government successfully balanced it all without offending anyone.

From 2013 of UPA era when Morgan Stanley had designated India as one of the ‘Fragile Five’ economies among the emerging markets when India was mired by policy paralysis and systemic corruption allegations, when the office of Prime Minister was weakened by external influence, India under PM Modi’s leadership has truly emerged in the last six years.

President Trump’s admiration for PM Modi was not mere words but acceptance of the emergence of a new India under PM Modi which has learnt the art of protecting its turf and national interest even while deepening relationships with global powerhouses. It is this modern, assertive and resilient India under PM Modi that every country of the world wants to engage with now, knowing well that its journey towards a $ 5 trillion economy by 2025-26 and $10 trillion by 2030-32 is rested assured despite minor hiccups here and there.