India Acts East

Washington’s Asia rebalance, first articulated by President Barack Obama in a 2011 speech to Australia’s parliament, has received ample attention. India’s envisioned pivot to Asia has garnered far less. Nonetheless, India’s planned pivot is freighted with significance for the country’s economic prospects, and for its relationship with the United States.

India’s rebalance is the subject of the Wilson Center’s new India in Asia initiative, set to launch on May 18. Its inaugural event will feature a discussion with distinguished Indian diplomat Nirupama Rao on how she envisions India’s role on the continent.

In November 2014, speaking at the annual summit of the Association of Southeast Asian Nations (ASEAN), Indian Prime Minister Narendra Modi announced the establishment of an “Act East” policy, replacing the previous government’s “Look East” policy and telegraphing the administration’s intention to more actively engage its Asian neighbors. “Rapidly developing India and ASEAN can be great partners for each other,” he said. “We are both keen to enhance our cooperation in advancing balance, peace, and stability in the region.”

In Singapore a year later, Modi reiterated his pledge to deepen India’s focus on the countries to its east. He spoke of helping ensure freedom of navigation in Asia’s regional waters, and of working with regional partners to ensure “that our commons — ocean, space, and cyber — remain avenues of shared prosperity” rather than “new theaters of contests.”

India’s eastward push makes good strategic sense. A nation with great-power aspirations must develop clout not only in far-flung lands, but also in areas closer to home — particularly when its broader backyard boasts two-thirds of the world’s population, a rising military power, and a major portion of the world’s wealth. Clearly, Modi is aware of Asia’s strategic significance. Of the roughly 40 foreign trips he has made as premier, including seven of his first nine, about half have been to South, Southeast, and East Asia.

Immediately after taking office, Modi signaled a desire to deepen engagement with his western neighbors: He invited the leaders of the South Asian Association for Regional Cooperation countries to his inauguration. However, a robust eastward push may be easier than a westward one. In South Asia, India confronts not only Pakistan, but also a region rife with smaller, poorer nations that often regard it with suspicion. By contrast, in the Asia-Pacific, India finds friends — such as Australia and Japan — and numerous countries, some with sizable Indian diaspora communities, that share New Delhi’s concerns about Beijing’s rise.

To be sure, carrying out the Act East policy will not be easy. Until now, New Delhi’s involvements to its east have leaned more toward ordinary diplomacy than major deals — although there have been notable exceptions, including oil and defense accords with Vietnam, inked in 2014 — fueling the opinions of critics, who argue that the policy lacks substance. One Indian commentator recently labeled it a “catchy but vacuous” initiative. A Lowy Institute analysis published in December 2014 asserted that New Delhi “must demonstrate that Act East is more than just a rebranding of an existing policy.” This remains true today.

And yet, the potential benefits of deeper engagement with the Asia-Pacific region are immense for India — particularly those benefits associated with economics and energy. The economic clout of China, Japan, and South Korea, is well known, but the fast-growing ASEAN economies also have much to offer. According to a McKinsey assessment, ASEAN collectively constitutes the seventh­-largest economy in the world and is home to nearly 230 of the world’s largest companies. Last year, Vietnam set a national record for levels of incoming foreign direct investment. Singapore is one of the top sources of FDI to India.

Meanwhile, Australia and Indonesia can strengthen India’s energy security — a crucial boost for a country that will require three to four times as much energy in the coming decades to return to double-digit economic growth. Australia is a top global producer of liquid natural gas — a highly sought-after commodity for India, especially since 2014, when prices in Asia fell by 75 percent. India lacks direct access to gas-rich Central Asia, so Australia presents a particularly attractive opportunity.

Meanwhile, despite India’s pledge to embrace clean energy, coal will remain a core component of its energy mix for the foreseeable future. India’s need for coal accentuates the significance of Indonesia, which provides India with more than 60 percent of its coal imports.

India would also benefit by associating itself more closely with the new and emerging economic institutions proliferating across the Asia-Pacific. The country is already the second biggest shareholder in the Asian Infrastructure Investment Bank, and hopes to receive a $500 million loan to finance solar energy projects. India is also one of the 16 countries, including China, negotiating for the Regional Comprehensive Economic Partnership (RCEP). Washington hears little about the RCEP, yet if ratified, it would constitute a mammoth trade bloc comprising half the world’s population and almost 30 percent of global gross domestic product. For India, a major advantage of RCEP membership is that it would facilitate access to key supply chains in Southeast Asia — access that could otherwise be denied by the Trans-Pacific Partnership, to which New Delhi is not a party, when it enters into force.

In April, however, rumors (which New Delhi denied) surfaced in the Indian press: RCEP negotiators were allegedly threatening to remove India from the talks because its negotiating position was too protectionist. India’s historic reluctance to embrace large-scale liberalization in global trade negotiations highlights the obstacles to gaining membership, in RCEP as well as existing institutions such as the Asia-Pacific Economic Cooperation group.

Other factors limiting the reach of the Act East policy include distractions from Pakistan, stepped-up diplomacy in the Middle East, and a desire to avoid provoking China. India has much to gain from a deeper engagement with the Asia-Pacific, yet these gains are far from assured.

Of particular importance as India considers pivoting east is the extent to which its activities in Asia align with U.S. interests in the region. A sharper Indian focus on the Asia-Pacific could boost U.S.-India cooperation, given Washington’s longstanding desire for New Delhi to play a more robust role in the region. In fact, it was Hillary Clinton, not Modi, who first proposed an Act East policy for India. In a speech in India in 2011 — several months before Obama stood before the Australian Parliament and laid out his Asia rebalance plan — the then-secretary of state said, “we encourage India not just to look east, but to engage East and act East as well.”

However, India’s pivot to the Asia-Pacific could also stoke U.S.-India tensions: The United States may want India to play a more muscular role in Asia than New Delhi would want. In March, Indian officials quickly rejected the proposal by a top U.S. military official, Admiral Harry Harris of the Pacific Command, for the United States and India to launch joint patrols in Asia. Despite Modi’s desire to work more closely with the United States in the region, a sentiment captured in joint statements following Modi’s summits with Obama, New Delhi is not interested in alliance-like commitments. Additionally, India does not want to provoke China. Despite a long-standing border dispute, the two rivals enjoy a trade relationship valued at $70 billion.

When it comes to Asia, both Washington and New Delhi have long looked east, and now seek to act east. How much they cooperate east remains to be seen.

Photo credit: PRAKASH SINGH/AFP/Getty Images