Dr. Syama Prasad Mookerjee Research Foundation

Goddess Lakshmi: the Maker of our Foreign Relations

Bharat Variawalla

Goddess Lakshmi is today the principle maker of the foreign policy of the Modi Government. How best can our foreign relations help generate Lakshmi, or wealth, is at the centre of Narendra Modi’s foreign relations pursuit. Just before his recent visit to France, Germany and Canada, Prime Minister Modi twitted that the visit had one purpose: bring investments from there and create jobs for our young people.

It is important that we know why a man whose formative experience has been that of Chief Minister of Gujarat should take such interest in world affairs. The answer is that his thinking on foreign policy is very largely shaped by the culture of Gujarat. That culture, what I call, the Vanijjya culture. It is the Vaishya who have historically spawned this culture.

The Vaishya in the traditional Varnashrama order creates wealth, or more correctly put sampatti, (capital and wealth). It is the Vaishya who occupies the central role in Gujarat’s economy, and with increasing democratization of politics in the early eighties, also politics. Then the old varna divide began to breakdown. Narendra Modi was the first politician in Gujrat to notice that the old caste divide was breaking down. Devraj Urs of Karnataka too realized this in the early seventies but he could not shape the politics of Karnataka accordingly because Indira Gandhi would not let him. She knew only the politics of caste and religious divide.

Let’s return to Gujarat. With caste barriers breaking down and the resultant economic mobility and social mobility, the people of Gujarat began to value economic growth. The Vanijjya culture of the state reasserted then. Modi was the foremost exponent of this culture, not just in Gujarat but also in the country.

The Vanijjya culture was in full display at the annual meeting called Vibrant Gujarat. In his ten years in office as Chief Minister, Modi’s Vibrant Gujarat meetings became the occasion for important decision makers of the world of business, politics, academia and media to transact business. It also became an important event in international business circles.

It is important to know what the Vibrant Gujarat meetings signified, nationally and internationally. It signified the end of the license permit raj. Here was a Chief Minister of one of economically most advanced state of the country openly interacting with the leaders of the corporate world. Business leaders were not pariahs for him, as they were for Indira Gandhi and her children and grand children.

The dynasty shunned and even disdained business. An open and clean partnership between business and politics or the market and the state, as indeed it exists in the democracies of Europe and America, was disdained by the dynasty. It professed socialism which, in the Indian contest, meant a clandestine dirty relationship between the money bags of the Congress and some big business houses.

This kind of relationship between the state and business was born  in the years of Jawaharlal Nehru rule but really flowered in the years of Indira Gandhi’s fourteen years old rule and then under her children and her daughter-in-law. What this meant in sociological terms, and that is more pertinent here, is the perpetuation of the caste, ethnic and religious divisions of the country. Under the license permit raj, the country remained economically stagnant, at about three percent of rate of growth in the years between 1960 and 1990 and generated what I termed “babu socialism”.

These were wasted years. We, with our strong business culture, could have been the highest growth rate country in the world. Instead we became a basket case, living on American wheat and American money. South Korea was at a lower level of growth than we were in 1961. Where was South Korea 20 years later and where were we!

Modi loathed the license permit raj and did everything to bury it in Gujarat. Today he is the Prime Minister. He wants to dismantle the license permit raj and put in its place a clean, transparent and accountable relationship between the State and business.

Modi has to wage a battle on several fronts to put in place a healthy relationship between the state and business. His interest in foreign relations comes from his policy design for economic development at home. His foreign policy then, is an extension of his economic policies at home. Narasimha Rao evolved a foreign policy in the 1990s that would complement his policy turn toward a market economy.

Modi has turned to our east, the Asia-Pacific region, the world’s power house. The Asia-Pacific Region (APR), broadly defined, consist of the countries of South East Asia (the ASEAN group of countries and the Pacific sea board (China, Japan and the two Koreas). There is also a larger grouping of countries, of which APR is a part, and they consists of the United States, Australia, and some would include Russia in it. This is indeed a formidable grouping of countries – three largest economies of the world, American, Chinese, Japanese and four largest military powers, the US, Russia and China and India.

India is not a part of the APR, though by the virtue of the fact that it is the world’s third largest economy, it has considerable weight.  It   cannot be ignored. Most would like India to play a major role in APR.

This is the abode of Lakshmi. Understandably, it is the thrust area of the Modi Government’s foreign policy. Since assuming the Prime Ministership, Modi has visited some of the countries of the area and has hosted some leaders of the countries from there. What do these visits tell us about the purpose of his foreign policy?  It is very largely domestic. His foreign policy thus is an extension of his domestic policy.

The Asia-Pacific Region today is the pivot of world politics in the way Europe was during the Cold War years. Here is where China and India, world’s second and third largest economies and military power of about the same ranking converge.

We may be rivals but it is my strong contention that our rivalry need not lead to armed conflict, and that on-going globalization could even moderate our rivalry. A simple fact would illustrate why the globalization of trade could bring us closer. Our trade with China today stands at $ 61 bn and the possibility of doubling it in five years is high.

The paradoxical thing is that all those who fear the rise, certainly impressive, of China are all also its strong trading partners. The United States, Japan, South Korea, India and Indonesia, Malaysia and Singapore are China’s best trading partners. In fact the rise of China is entirely due to its remarkable ability to adopt its state controlled economy to global capitalism. Japan and later South Korea and Taiwan did it the sixties and seventies. China now broadly follows their path.  In 1970 China accounted for a miserable 0.78 percent of global GDP. In 2010 the figure was 7.43 percent. Strangely enough, India accounted for a slightly higher share of world GDP, 0.87 percent in 1970 but in the forty years up to 2010, we increased just over two fold, 2.26 percent.

Historically speaking China’s rise to preeminence is without precedent, not just for its rapidity but also by the route it has taken to reach it. In forty years, from 1970 to 2010, it increased its GDP share of the world GDP by eight times. The nearest historical parallel to China’s rise is the rise of Imperial Germany in the last quarter of the nineteenth century. Germany became a nation in 1870 under the leadership of a man of extraordinary leadership quality, Otto von Bismarck. By 1890, twenty years after its birth as a nation, it economically   surpassed Great Britain to become the foremost industrial power in the world.

But the route Germany chose to world preeminence was basically a military route, though it was accompanied by great acquisition of economic power. In the case of China, it is the latter’s acquiring of economic power, accompanied by some growth in military power We will  grossly misread this fact if we only see China’s rise as solely due to its acquisition of military power.

Instead all major powers of Asia-Pacific Region and the US and India are China’s major trading power. Their economies are greatly interdependent on each other. None can afford to snap these links without seriously hurting itself. This is the logic of interdependence. It attenuates conflict among sovereign states. As Prime Minister Modi said in his speech at Tsinghua University this is the age of “interdependence” and India and China have to work in that spirit. Such logic is at work in our relations with China. We are the second and the largest economies today and with a difference of 1: 5 in our GDP. India is about $ 2 trillion and China’s is about $ 10 trillion. But by all estimates, that this GDP gap will narrow to 1:3.

It is then time to rethink of our relationship with China. It is not the China of 1962. Today’s China is a confident China, fully enmeshed in the world capitalist economy. So must we be confident that we are firmly set on a growth path that enjoys the support of the people. Our modernization rests on consensus: China’s modernization rests on coercion. We have seen what coerced modernization did to the Soviet Union. It disintegrated in 1992.

We have enough power to protect our interests. We both can reap together Lakshmi by greatly expanding our economic cooperation. Let us not make the unresolved border dispute a hostage to the larger economic relationship. The border problem too will fall in place once we have strong economic relationship with them. Chinese also knows that there is now a leadership in India that can make a settlement that appears to be just.  This was not the case before.

South Asia is a region of many complexities and challenges. Regional trade in the region is also one of the lowest in the world. But a ray of light has been shown by the Modi Government. A land boundary agreement between India and Bangladesh has now been passed by Parliament. The much awaited Teesta River agreement with Bangladesh may follow, and with it, hopefully, extensive cooperation between India, Nepal, Bangladesh and Bhutan. A part of South Asia will be knit together by trade, energy and communication links. Prime Minister Modi’s promised shared zone of prosperity is indeed taking gradual shape.

(The author is a veteran scholar & Honorary Fellow with the Centre for the Study of Developing Societies, Delhi)