In the contemporary, economically globalised world, the success of a country's foreign policy and its regional and global influence are based primarily on the resilience of its economy and its military potential. Economic liberalisation, together with its high growth rates, the acquisition of a nuclear deterrent and a growing military muscle, led to countries far and near to seek enhanced cooperation with India. This resulted in India's participation in economic forums like G20, BRICS and ASEAN and the end of global nuclear sanctions against it. India was a country sought after in major capitals across the world, for over a decade.
This glowing global image of India has received serious setbacks over the past four years. Economic growth has plummeted and we have faced possible downgrades by reputed global ratings agencies. Across the world, we have acquired the reputation of being a country mired in corruption, where the climate for investment and business is becoming increasingly difficult. We are seen as a country afflicted by policy paralysis, with foreign investors facing the prospect of whimsical, retroactive legislation that threatens the sanctity of international practices and court verdicts.
The last four years have also seen a serious erosion of our defence potential, despite the emergence of an assertive and militarily powerful China. All the three services are facing equipment shortages, in areas ranging from fighter aircraft and submarines to mountain artillery and helicopters. With the budget deficit spiralling out of control, thanks to populist "entitlement" schemes, the Defence Budget was pruned, by continued deferment in approval of crucial proposals, like raising a Strike Corps on our eastern borders with China and acquisition of multi-role combat aircraft, to replace old and obsolescent fighters . The Budget outlay for Defence is now around 1.74% of GDP — the lowest level, over the past 50 years. The Finance Commission had recommended a Defence Budget of 3% of GDP.
With serious shortcomings in the power and infrastructure sectors and worldwide belief that the environment in India is not business friendly, the new Government will have to focus primary attention on removing bottlenecks to business, investment and growth. There will have to be a drastic restructuring of economic policies to enhance defence preparedness and reduce dependence on imports, for weapons and equipment. Incentives for foreign investments and ending of public sector monopoly in defence industry are essential, for building a modern, indigenous, high tech industrial base. Even a show of determination by the new government about its serious intent to boost growth and investment, will revive international confidence in India, as a country open to investment and ready to restore a high growth path.
Over the past quarter of a century, India has shown diplomatic dexterity in building good relations with three crucial global power centres — the USA, Russia and the European Union. Following developments in Ukraine and Crimea, there are going to be tensions in relations between Russia on the one hand and the US and EU, on the other. India will have to chart its course dextrously, as it has done in the past, to enable it to retain good working relationships, with all three parties. A resurgent and powerful China, at loggerheads with most of its neighbours with whom it shares borders, will continue to pose serious challenges to India. Continuing dialogue with China will have to be combined with firmness on border issues and proactive diplomacy with China's neighbours like Japan, Vietnam and South Korea, bilaterally and regionally, in East and South East Asia.
Within South Asia, New Delhi will have to show far greater dexterity in carrying along states like Tamil Nadu and West Bengal, while dealing with issues of concern to these states in our relations with Sri Lanka and Bangladesh. On our western borders, the ongoing US withdrawal from Afghanistan is inevitably going to lead to greater challenges from the Taliban and its affiliates in Pakistan, like the Lashkar-e-Taiba and Jaish-e-Mohammed. While New Delhi should be open to dialogue and cooperation with Pakistan, there has to be a clear message to the Nawaz Sharif government that dialogue and terrorism cannot go hand in hand.
Relations with the Islamic world are going to become more complicated, as Arab-Persian and Shia-Sunni differences lead to growing violence and instability. We will have to strike a delicate balance in dealing with contending parties. The stakes are particularly high in the six Arab Gulf states, where nearly 7 million Indians, who remit back over $40 billion annually, live and from where we get around 70% of our oil supplies.
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