Growing importance of geo-economics approach for India

The term geo-economics first came into prominence after the end of the cold war. It denotes interconnectivity of the economic and commercial opportunities, broader political and international relations, and pursuit by a country of its strategic interests, including through military capabilities. This approach is rooted in the growing importance of economic factors in international relations.

The geo-economics approach thus emphasises the importance of integrating India’s economic diplomacy in its multi-faceted relations with different countries and regions in the context of a rapidly changing world order.

This requires strategic thinking with an occasion or an event specific flexible tactics. There should be coordination within ministries; among different levels of the government; and between the government, businesses, universities, and think tanks, and the media to expand India’s economic and strategic space globally.

There are several strong reasons for India’s public, private, and research organisations to acquire proficiency in geo-economics approach.

First, as India continues to rapidly integrate with the world economy, global developments increasingly impinge on India’s core economic and strategic interests.  Indicators of India’s integration with the world economy include the following: India’s international trade in goods and services is expected to be around $1500 billion before the end of this decade; its total inward FDI stock is currently at $150 billion and its outward FDI at $100 billion; its inward portfolio investment stock is at $90 billion, and its inward remittances are at $60. All these are expected to grow significantly overtime.

Second, while India remains a strong supporter of multilateral trade regime through the World Trade Organisation (WTO), it has extensively pursued bilateral regional trade and broader economic cooperation agreements. These agreements bring greater complexity to customs and economic administration. Expertise in geo-economics approach could help in realising the potential benefits of these agreements, while helping to ensure that they are implemented in the intended manner, and do not adversely impact on India’s interests.

Third, India needs to align interest of its 30 million diaspora spread globally with its rise as a major country.
Fourth, size and complexity of India’s economy is growing. The nominal GDP for 2010-11 is estimated at $1600 billion. At nominal growth of 12%, India’s GDP will be $3200 billion by 2016-17; and $6400 billion by 2022-23.  Moreover, technological, knowledge, and resource (including energy) intensity of economic activities is increasing.

India needs to focus on challenges arising from global resource scarcity, and how to obtain future supplies with high degree of reliability at competitive prices. Proficiency in geo-economics approach could permit India to benefit from rapidly forming partnerships with key importing countries like  Japan, to help diversify their global risks in obtaining the requisite supply.

Fifth, the emergence of a multi-polar world captured in G-0 (no global leader) on the one hand and in G-20 involving many powers, has also increased the importance of geo-economics.

Rapid and sustained growth in China, Brazil   and other middle income countries with relatively large populations, combined with projected slower growth in industrial countries that have been impacted severely by the 2008 global economic crisis, is creating many challenges and opportunities for India where proficiency in geo-economics approach can be useful.

Sixth, there are emerging cross-cutting global issues. These include climate change; terrorism; cyber-warfare; pandemics; rush to secure energy and resource supplies; and difficulties in sustaining multi-lateral focus  in trade and on economic issues through the completion of the Doha round, is creating much more complex environment, in which skills in geo-economics will be critical.

There are several measures to enhance India’s proficiency in geo-economics which merit consideration. The objective should be to develop a policy community which can contribute to high quality sophisticated debates on geo-economics issues relevant for India.

First, there needs to be much greater awareness of the importance of geo-economics approach within the government.
Second, key economic, international relations, and defense related research centers and think tanks should develop expertise in geo-economics. In addition to recruiting researchers, these organisations can sponsor young scholars to peruse post graduate degrees in geo-economics in major universities and think tanks abroad. 

Third, consideration could be given to introducing geo-economics courses in political science, international relations, and business and management programmes.

The above analysis suggests that the geo-economic approach to analysing India’s diplomacy in a rapidly changing world order merits strong consideration.

The writer is a professor of public policy at the National University of Singapore and can be reached at mukul.asher@gmail.com.
Views are personal.