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Why States Need to be Involved in India’s Foreign Policy

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Image credit: The Aspirant Forum

By Ratish Srivastava (@socilia13)

The involvement of states in India’s foreign policy making could be vital in launching India onto the next phase of development. The centre holds executive power in all matters related to foreign policy as stipulated in Article 246a, 7th schedule. Indian states already have many responsibilities like improving infrastructure for public health services, agriculture, transportation, etc. However, there is a heightened need to improve their economic performance and generate enough revenue so as to not depend on the centre for funding and help improve foreign relations with other nation-states.

States can and have proven themselves to be important players in improving India’s ties with other countries and at the same time improve their economic performance. States like Gujarat and Maharashtra have shown great promise with exports, contributing as much as 46% of India’s exports. Combining the exports of Tamil Nadu, Andhra Pradesh and Karnataka with the exports of Gujrat and Maharashtra increases the figure to about 70% of the total exports of India.

These states have accessed global economic opportunities, and have witnessed tremendous growth. These states have struck deals with major players in the international market, like Maharashtra’s deal with Enron in 1996, although the deal ended with the Enron scandal, which rendered the Texas-based company bankrupt. It is still worth noting the role a state can play in striking deals with international companies. Another example would be Andhra Pradesh’s ability to negotiate a state-level World Bank development loan in 2002 under the leadership of Chandrababu Naidu, proving that states can meet their development goals without help from the central government.

States in India who lag behind in these areas need to come up with a stronger structure for engaging in exports. A major concern for states with no ports, or states who depend on other states for container facilities and ports is that their export figures are being undervalued. This is because the point of origin code is filled by clearing agents rather than the exporters themselves, as the agents see no significant importance of the point of origin.

States need to understand the importance of having a state export policy, like Gujarat, which has a five-year export policy. This policy will not only address the supply side of the problems but will also address the need for adequate infrastructure and appropriate labour laws to make the state a more attractive destination for trade.

Chief Ministers of state should travel abroad to negotiate with industrial houses (Maharashtra-Enron), international organisations (Andhra Pradesh-World Bank) and commercial wings of foreign governments with the aim of achieving investment deals for their own states and to be part of intergovernmental negotiations within the World Trade Organisation (WTO). To improve the infrastructure the state needs more FDI inflows and they need to increase taxes to generate the revenue necessary for making such changes.

Apart from the economic benefits a state could reap, there is motivation for states to be involved in neighbourhood policies. Matters such as illegal trade and immigration (border security) and improving relations with the Indian diaspora in the neighbouring countries with which they have socio-cultural ties also contribute to a state’s involvement in foreign policy. Improving trans-border regional links and trans-border neighbourly contacts through the involvement of states can have positive effects on India’s foreign policy.

State interference can also have adverse impact on foreign policy, for instance, the fiasco regarding the Teesta water treaty with Bangladesh in 2011 and pressure from DMK on the central government to vote against Sri Lanka in the United Nations Human Rights Council. in 2013.

On the other hand, the role that a state can play in improving relations with India’s neighbours is huge. Border states, with historical, cultural, linguistic, religious, and ethnic links can help provide a platform for the central government to build stronger ties and improve border security. They can help improve socio-cultural ties as well, case in point, the Chief Minister of Bihar Nitish Kumar and the Deputy Chief Minister of Punjab Sukhbir Singh travelling to Pakistan in 2012 to leverage socio-cultural ties.

India can also improve border security if it allows the states who have borders with other countries to be involved in the process. It can help the centre make policies accordingly as states understand the ground realities better at the border which will help strangle illegal drug trade and immigration.

The benefits for state involvement in foreign policy has been underplayed, with much of the focus being put on the negative impact it can have. However, the positive impact could outweigh the negative as it allows states to have the power to improve its situation.

Ratish Srivastava (@socilia13) is a research intern at Takshashila Institution.

This post is the part of a series of blogposts on ‘States in Foreign Policy’.

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Why is India hesitant in its policy towards Iran?

 The slow progress on Iran policy can have long term strategic implications for India

With sweeping changes occurring in West Asia after the lifting of sanctions against Iran by the US on 16th January, Iran is all set to play a major role in the geopolitics of this region. But India’s Iran policy seems to stuck in stasis. In May 2015, the long standing Chabahar port deal was finalised with Iran. The port is slated to be operational by the end of 2016. This will link India with Afghanistan and Central Asia. Calling off the sanctions is a welcome opportunity to be seized.  All indications towards the end of 2015 pointed towards this development and India should have been ready. It seems the government did not think that sanctions would be lifted so soon.

In a speech delivered at the India International Centre, Delhi on 18th January, Mr Gholamreza Ansari, Iran’s ambassador to India said, “In the changed circumstances in West Asian region, India cannot follow a policy of patient waiting any more. I have often been advised to be patient on big India-Iran projects. Does India want to wait for centuries before capturing the right opportunities?” Iran had asked India to conclude the bilateral agreement quickly at the Joint Commission Meeting(JCM) on 28th December 2015.  The main hitch was amendment to ‘withholding tax’ with which India exempted crude payments to Iran, if it was done in Rupees. There was a sense of urgency for this to be done before lifting of the sanctions. With sanctions gone, the need no longer exists as payments will have to be done in dollars. During the sanctions regime, Iran could not trade in dollars. It is free to do so now. There are no barriers to trade. The Indian products like Basmati rice, soyameal, sugar, and pharmaceuticals will have to compete with other countries.

Lack of coordination between ministries is also affecting the important Chabahar project. Iran wanted a loan for developing the rail network from port. In spite of the ministry of external affairs stressing the urgency, the department of financial services and ministry of railways did not move with the desired speed for reasons unknown. As per the deal in May 2015, the contract was supposed to be signed by November last year. If the government does not have the money, could it not invite the private sector? If sufficient guarantees of security is given, then private players will be willing to get involved. After all, there are other projects in Iraq and Syria worth thousands of crores that would interest them. The government only needs to give a push to get this going. After all, Modi is known for his clinical efficiency to get things done.

 

Guru Aiyar is a Research Scholar at Takshashila Institution and tweets @guruaiyar

Featured image: Holy shrine of Abdulazim in Tehran by David Stanley, licensed by creativecommons.org

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