By Kanwal Sibal
While the impact of the Bharatiya Janata Party’s electoral debacle in Bihar and the public rift between the party’s “veterans” and the current leadership on the course of domestic politics is uncertain, India’s foreign relations will not normally be affected by these developments. Diplomats in Delhi and other observers abroad, including business houses, will of course analyse and assess the results of the Bihar elections for their meaning for Narendra Modi’s leadership, parliamentary work, government’s economic policies, investment prospects and so on. It is being speculated that Modi may have to change his style of functioning, concentrate less power in his office, rely less on the bureaucracy, give his ministers more room and realize that governing a state is different from governance at the Centre. Whether the electoral defeat in Bihar following that in Delhi, and the call for more consensual leadership made by the old guard, will bring about changes in working style is open to question. In the context of foreign policy, such speculation is not very germane. India’s external partners are essentially interested in economic governance and the opportunities that a rising India offers. For them, as in the case of our own people, a single party majority government under Modi after years of weak coalition governments at the Centre held out hope that India would be able to deal with its problems more decisively and move forward more purposefully. Modi’s message, delivered with confidence, has been business- and investment-friendly from the start. During his foreign visits he has invited investors to look at opportunities in India, sought their participation in his various campaigns, whether Smart Cities, Digital India, Make in India, Clean Ganga and the like, promised them ease of doing business in India, announced fasttrack arrangements for major investor partners such as the United States of America, Japan, Germany, the United Kingdom and others, extended assurances of predictable tax policies and so on. He has met top CEOs in the financial, industrial, infrastructural, digital and media sectors to convey this message. Modi’s message has been received positively, but would-be investors want to see more results on the ground, quicker implementation of declared policies, more concrete steps by way of ease of doing business, more clarity about tax policies, further liberalization in the financial and labour sectors, and more efficient regulatory mechanisms. Better protection of intellectual property rights, and less stringent local content requirements are other demands. They have adopted a wait and watch attitude, even if, as the government rightly claims, FDI figures have gone up by 40 per cent. The government has announced, just before Modi’s UK visit, further liberalization in 15 sectors. Foreign investors will, nevertheless, always seek more and faster liberalization and will build pressures in that direction through business lobbies, rating agencies, international financial institutions and the media.
Tax issues will always be raised as escaping tax liabilities as much as possible in any jurisdiction is part of their business strategies. There will always be a gap between what business seeks and what governments can do, especially in democracies where political consensus behind reforms has to be forged, which is not always easy. The Modi government has not been able to get the land acquisition bill passed and the fate of the goods and services tax remains uncertain, more so after the Bihar elections, which may make the Congress and others more determined to oppose Modi tooth and nail, even if the larger national interest suffers. Whether the GST, in which the US and others are keenly interested, sees the day in April 2016 as earlier envisaged, is moot. If, as it appears, the Modi government may not now be able to get a majority in the Rajya Sabha, and the country will have to live with this duality of a single-party majority in the Lok Sabha and an Opposition-dominated Rajya Sabha, the confidence of prospective investors in the capacity of the government to deliver on all its promises may get affected to some extent.
Investors know, however, that in virtually every country governments are not always able to implement their policies and programmes because of internal opposition, the economic situation is almost always perceived as unsatisfactory and governments are accused of failing to find the right solutions. The mismanagement of the US financial sector that continues to plague the world economy, the economic crisis in Europe, the slowdown of the Chinese economy, the faltering of almost all emerging economies show that no government gets everything right. Notwithstanding some negative features relating to the health of the banking sector, the slowdown in manufacturing and exports and so on, the scenario in India is actually quite hopeful in international eyes in view of expected growth rates, the size of the Indian market, the country’s human capital, the liberalization process under way and the Modi government’s ambitious developmental plans. These are durable factors that will continue to attract India’s foreign partners, not the ups and downs of state-level elections in India. We have to see things in perspective. President Barack Obama has seen his majority in the Senate and the House of Representatives reduced to a minority. His flagship programmes have been emasculated by the Republicans, who are determined to oppose his legislative agenda and attack his foreign policy. Yet, this has not affected our calculations about the benefits we derive from IndiaUS relations, which have taken on a new momentum under Modi.
President François Hollande of France has seen his domestic popularity fall dramatically and local elections have gone against his Socialist Party, but without affecting in any way the content of Indo-French ties. In fact, even when governments change in countries, there is continuity in relationships because of a host of underlying geopolitical, security, economic and other factors. The Bihar election result may give glee to the Opposition for cutting down Modi to size domestically in some measure, but foreign governments work with Modi in his capacity as India’s prime minister responsible for the country’s foreign and security policies, and, of course, economic policy.
Modi’s visit to the UK just after the Bihar elections and the focus there on perspectives of multifaceted cooperation between the two countries, whether in the areas of finance, trade, reciprocal investments, science and technology, nuclear and renewable energy, defence, security, education, health and so on, shows that the external view of India is larger than what happens in a state-level election. The election defeat in Bihar reinforces the Opposition’s narrative on rising intolerance in the country. This is finding echoes abroad as an extension of a concerted campaign by those sections of India’s political class, civil society and the media that are still not reconciled to Modi’s rise to power and would like to politically and morally delegitimize him nationally and internationally to prevent him from consolidating his position and continue in power beyond his first mandate. Expatriate Indians as well as local elements in countries like Britain who are traditionally antipathetic towards India participate in this campaign. The audacious and ill-mannered questions on intolerance by British journalists to Modi in London flowed from this. Obviously, for these elements, this is the most material issue in India-UK relations. By this they exhibit their own almost pathological intolerance towards Modi and his party. (The author is former foreign secretary of India and can be reached at [email protected])