Projecting an image of ‘strength’ has become an intrinsic part of the Narendra Modi government’s decision-making process. Yet, it seems to confuse standing strong with standing alone—whether in relation to the WTO, IMF, or bilateral dealings with partner countries. A country can achieve all that it wants with nuance and sophistication without rubbing partners the wrong way. Or it can bull ahead with a ‘we’ll do what we want’ attitude, which could be equally successful but risks irritating partners, and might even invite retaliation.
India needs to figure out what kind of global player it wants to be while remaining uncompromising on its interests—hard-nosed and difficult, or cooperative and collaborative.
The thing is that, in pursuing its interests, India has annoyed a number of partners across various levels. More often than not, the concern has not been what India has done but how it has done it.
Communication is a major issue
The US, UK, EU, and Japan—all major trade and investment partners—have barely concealed their frustration with India’s trade policies at the World Trade Organisation. At WTO Committee on Agriculture meetings, they have repeatedly questioned why India has not informed the WTO of its decisions to ban exports of rice, wheat, and onions.
It is, of course, difficult to discern what foreign nations are thinking, but a useful approach is to superimpose a human voice to their written statements. Imagine someone saying the following, and the irritation becomes clear:
“Could India provide the reason behind why the required notification to the Committee on Agriculture has not been made before it instituted the export prohibition…?” Japan, Switzerland, the US, UK, and Australia asked in a joint question. “Please indicate when this export prohibition will be notified.”
See, they are not questioning India’s right to implement export bans. Nor are they asking for reconsideration. They simply seek the courtesy of compliance with WTO rules and timely notification of India’s actions.
Then we come to the issue of Most Favoured Nation status between India and Switzerland. Switzerland unilaterally revoked its MFN status for India following a Supreme Court judgment from 2023. The judgement broadly stated tax benefits under the MFN clause were not automatic and required explicit notification by the Indian government, which had not happened.
Now, to be endlessly charitable to the government, let’s assume the absence of notification for over a year since the judgment is not due to incompetence. Perhaps the government just didn’t think it was significant enough. But this attitude has now annoyed a small but growing partner.
Switzerland is part of the European Free Trade Association, with which India signed a Free Trade Agreement earlier in 2024. A part of this agreement is linked to investment commitments in India. It’s not likely that this MFN status tiff is going to affect those investments, but it’s still a needless irritant.
Also read: The new ‘Hindu rate of growth’ is here. It’s called 7% and it’s just not enough
All-round intervention is avoidable
India’s overt disdain for international bodies also comes through in its foreign exchange policy. Last year, the International Monetary Fund (IMF) reclassified India’s foreign exchange regime, indicating that India was exerting greater control over the rupee rather than allowing it to move freely.
The Reserve Bank of India (RBI) stridently refuted these allegations, questioning the IMF”s study period and methods. However, ample evidence shows significant RBI intervention in the foreign exchange market, resulting in the rupee moving within a narrower band compared to peer currencies. The IMF hasn’t flagged the issue again, but it’s only a matter of time.
Whether the RBI should be intervening or not is a different question. The issue is how it communicates its actions. In this case, is shrill denial better than calm acceptance?
Closer to home, the Adani Group’s heavy-handed tactics in its electricity supply agreement with Bangladesh had a similar effect. Bangladesh owes Adani Power between $650-850 million in dues. In response, the Adani Group abruptly halved the power supply to Bangladesh.
Yes, this is a business deal, and the Indian government should not get directly involved. But it’s also a foreign policy issue. The government could have quietly advised the Adani Group to adopt a more lenient approach, especially given India’s delicate relations with Bangladesh’s new government. Such instructions routinely take place. Business is often an instrument of foreign policy.
If Adani’s decision to reduce power supply was tacitly backed by the government, then India should have expected the annoyed response.
Earlier this month, Bangladesh rescinded a decision allowing private telecom providers to use it as a transit point for internet services to areas with connectivity issues. This essentially delays India’s efforts to provide full connectivity to the Northeast region—an avoidable outcome.
Now, Bangladesh is requesting rice from India. This is an opportunity for India to score an easy win. Rather than seeming churlish and denying something as basic as food, India can try repairing relations by being magnanimous. It’s not as if we are short of rice.
Then there’s the government’s obdurate refusal to amend its ‘dynamic and market-linked’ fuel pricing policy to reflect that it hasn’t changed petrol and diesel prices in any significant way for years. This is again symptomatic of the attitude that the government can do what it wants, without communicating anything. In essence, it stands alone.
Another example of the Modi government being blind to the optics of friendship has to do with disaster relief. Kerala’s finance minister KN Balagopal criticised the Centre for demanding payment for Indian Air Force (IAF) rescue operations during the Wayanad landslides. Could the Centre not have waived these or covered them through disaster funds?
Doing away with the Planning Commission, the only true platform for Centre-state communication, was an early indication of the Modi government’s disdain for feedback. This attitude has only become stronger and more expansive over the years. While India continues to be an ally to many countries, it no longer seems interested in being a friend.
TCA Sharad Raghavan is Deputy Editor – Economy at ThePrint. He tweets @SharadRaghavan. Views are personal.
(Edited by Prashant)
The boss needs to act. This is what happens when ministers are assured of their job, no matter what they do or don’t do.
Some change is needed in Commerce and Finance ministries. Seems, they have assumed TINA. (There is no alternative)
Take the classic case of explanation given by Finance Minister for popcorn issue. That was a PR disaster. Such kind of explanation from an IAS/IRS officer can be justified, but not from a politician!!
well articulated opinion based on general reading of facts. While the author was fair enough to admit what the government is doing may be correct in policy but fall short in communication, sudden ban of food export and curtailing power supply in difficult times, are not the action expected from a growing and populous nation aspiring to become world leader in coming times. It needs some concession from our part also to be seen and accepted by others as true leader.