The dynamics of India’s economic and strategic engagements with the outside world have changed significantly in the last few years, particularly in 2020. This has resulted from the health and economic implications of COVID-19 pandemic as well as the military standoff between India and China. The combination of economic stress and strategic choices as a result of the India-China tensions will be felt on Indian economic and foreign policies in 2021.  This in turn, will shape India’s integration with the evolving Asian economic architecture and sharpen its strategic engagements within the broader Indo-Pacific region. Although the Indian economy has been performing well in recent years, some slowdown was clearly evident even before COVID-19 badly hit the country. If the sudden economic decline in 2020 is not followed by quick recovery in 2021, it will have serious strategic consequences. India was always a big country and the largest democracy. The world started looking at India as an opportunity only when it showed close to 7 per cent average growth year after year. This has been the period when India signed about 35 strategic partnerships and more than a dozen trade agreements. The growth and outward orientation helped New Delhi forge closer ties with all major players such as the US, the European Union, Russia, Japan as well as key countries within the ASEAN, GCC, Africa and Latin America.

The growing tensions and trade war between the US and China in 2020 coincided with New Delhi’s own difficulties in managing its ties with Beijing. The Indo-US relationship has been one of the main beneficiaries of this situation. Despite Brexit uncertainties and little movement on bilateral FTAs, ties with the EU strengthened with the adoption of a new roadmap to 2025. Russia also remained a valuable partner.

Due to difficult India-Pakistan relations, ties with Afghanistan and Iran have always been crucial. Chabahar port and related investments could have helped India in improving its role in the wider region. The US obsession with Iran and sanctions, however, made things complicated. Pragmatically, New Delhi forged closer ties with other key countries in the region such as Saudi Arabia, UAE and Israel.

To connect with a resurgent Africa, evolving Indian strategy followed commitments made at the India-Africa Forum Summits and the ten guiding principles of Modi’s Africa policy. The Indian footprint in Africa has increased through trade, investment and development activities; in addition to new diplomatic missions.

In external economic engagements, the Modi government has been cautious about trade deals. It has not signed any major FTA in the last few years. Asian partners were disappointed when India walked out of the RCEP. The centrality of India in the Indo-Pacific narrative without being part of the RCEP raises concerns about India’s economic vulnerabilities. With increasing Chinese assertiveness, major economic players including the US, Japan and the EU are looking for diversifying global value chains. But mixed messages of Aatmanirbhar Bharat have further raised some concerns about India’s commitment towards liberalisation.

In the midst of the economic decline and cautious approach towards liberalisation, India has started positioning itself as a crucial geopolitical player in the context of a rising China. This was welcomed by the Trump administration and increasingly ‘geopolitical’ European Union. The circumstances may become more complicated in 2021 under a Biden administration.

There are already signs that anti-China sentiment is losing some momentum in the Indo-Pacific narrative. More and more players will talk about a more inclusive Indo-Pacific rather than a subtle coalition against rising China.

Once the US re-joins the Paris climate accord on the first day of the Biden presidency, Washington would focus on claiming leadership in climate action. Since climate is a big concern in Europe, this will further strengthen the transatlantic alliance. As climate change issue will be gathering pace in 2021, India can raise its ambition and may set a course for a carbon neutrality timeline. Most major economies have pledged carbon neutrality by 2050. Even China has pledged it by 2060. India has done well in climate change performance index. But a large part of increased renewables are additional capacities rather than replacements.  A slowdown in economic growth could be additional factor for better performance.

Traditionally, South Asia was considered to be an Indian area of influence. China has tried to balance it through close strategic ties with Pakistan. Reconciliation talks with Taliban and the US exit from Afghanistan will further strengthen this nexus. With expanding Chinese profile including the BRI projects in South Asia, more attention is needed on the neighbours in 2021.

Geopolitically, India’s relevance in the Indo-Pacific area has been established in 2020. New Delhi needs to focus on bold external economic engagements and a climate neutrality timeline in 2021. With defensive Indian approach on these matters, China may regain some of its lost prestige.        (Source: Moneycontrol)