The Association of Indian Diplomats
Ten-point Plan for making it more effective
The need for placing greater emphasis on economic
diplomacy is now universally recognized. Politics no longer drives economics.
Economics must drive politics. Economic considerations must remain in the
forefront of efforts to achieve foreign policy goals. Countries have been
slower in recognizing this than others have been disadvantaged. India sadly
seems to belong to the former category in comparison with some of the other
major actors on the global scene today.
Economic diplomacy is the art of serving economic
security and strategic interests of the country by the use of economic
instrument in conduct of State to State relations. There is nothing new or
unethical about it. The Indian classic on diplomacy, namely, Kautilya’s “Artha Shastra” has recognized the relevance of “Saam, Daam, Dand and Bhed” in conduct
of diplomacy. Economic diplomacy is designed to influence policy and
regulatory decisions of foreign governments as well as those of international
organizations. It goes beyond trade and investment to the resolution of
multiple causes of international conflicts. Economic diplomacy is necessarily
performed by the official representatives of the State but with the changing
scenario today the private sector has an important role to play and function
to perform in its successful implementation.
Some of the basic objectives of economic
diplomacy in brief are – promotion of trade and investment, achieve
objectives in multilateral trade negotiations, energy security and
realization of political objectives through economic action. Some selected
tasks for the practitioners of economic diplomacy could be:
economic and commercial policies of the host-country to make them most
conducive for the country’s national interests which include those of
business and other stakeholders.
rule-making international bodies for shaping their decisions in the interest
of the diplomat’s own country.
potential conflicts with foreign governments, economic actors and NGOs so
that risks of doing business etc. are minimized.
fora and media to enhance and safeguard the image, capability, reputation and
credibility of their own country and enterprises.
The phenomenon of economic diplomacy is not
new. It can be traced back to the commercial diplomacy of the European states
in the 19th century or the ‘dollar diplomacy’ or ‘cheque book
diplomacy’ of the US in the early years of the last century. US-China
relations offer a more recent and powerful illustration of how business
considerations influence political relations in spite of deep ideological
differences. Japan has extensively used the economic instrument to win
friends and remove the blemish of its wartime occupation and atrocities. The
post-Mao China, cleverly used the economic instrument by offering attractive
terms of trade and investments to its known adversaries like the US, Japan,
South Korea by raising their stake in the stability and continuity of the
communist regime in China, the Tienanmen Square
In the early years after independence Indian Heads
of Mission concentrated mostly on political work, leaving whatever little
economic work was there to specially appointed “commercial representatives”,
many of whom were drawn from the Commerce Ministry and some from Finance
Ministry. As the importance of economic diplomacy grew it was thought necessary
to appoint a “Super Ambassador” to oversee economic work in the whole of
Western Europe in the late fifties. In recent years, however, more and more
Heads of Mission have been getting directly involved in economic work and are
devoting the major part of their time to such work. It is necessary not only
to encourage this trend but also to make our best talent available for it.
The most important task to be an Head of Mission
today lies in identifying the ‘big interest’ for India and generating
specific and concrete proposals of a ‘big item’ nature. For instance, it
should be possible to identify a scheme involving a country, which has iron
ore and requires a steel plant, to be put in touch with both a Government
entity and a private Indian entity, working in unison, to extract a major
deal in the energy sector either there or through a third
country/party. Similarly, it should be possible to identify a private
sector Indian entity to make a major overseas investment in the IT sector in
return for preciously required minerals and metals. Some of this is
already being done, but on a small scale. The need for such
inter-linked action and the realization that this is the prime requirement,
needs to be promoted through a change in the foreign service mindset.
The processes of globalisation have almost
completely obliterated the distinction between political and economic work.
Other than hardcore bilateral political negotiations, and even these are not
free from attendant economic consequences, there is very little in what we
presently do where there is no strong economic undertone. Just to cite two
examples issues in the health sector, the first public health treaty, the
Framework Convention on Tobacco Control (FCTC). Although primarily motivated
by public health concerns, the FCTC has a significant impact on the growth
and production of tobacco and tobacco products. Its provisions relating to
commercial advertising, both domestic and cross-border severely impact
consumption and have a direct bearing on hard core economic interests; or
issues relating to the pandemic HIV/AIDS which involve generic drug
production etc; all of these are hardcore economic issues. The point being
emphasized is that all work today in a Mission abroad, almost without
exception has an economic content, whether it be Consular (which leads to
tourism, health tourism etc.), military cooperation etc. etc.
India’s achievements in economic diplomacy
particularly since the first oil shock of 1973 have been considerable.
However, it still has a long way to go in the process of fully integrating
its economic goals with its political and strategic objectives. To achieve
this we need a sea change in our mindset. Changes are required not only in
the functioning of our missions abroad but also at headquarters. In this
regard we still seem to be in a sort of a vicious circle. There is a tendency
to regard international economic relations as a highly specialized job that
is best left to specialists. While lip service is paid to MEA’s co-coordinating
role, in effect even this role is increasingly being assigned to other
agencies. We must get out of this vicious circle and MEA must become the
leading actor for economic diplomacy to become an effective tool of Foreign
Policy. This is particularly important with the growing trend towards
globalization and India’s rapid integration into the world economy.
For the success of economic diplomacy India has to
ensure steady growth of trade, technology and investment flows. The
mains source is going to be the United States. Our emphasis of increasing
economic relations with the US must continue. European Union, though a close
ally of US, is not a surrogate of the US and should be treated as such. This
region is an important source of supply of advanced technology and
investments to supplement Japan and the US.
Next, India should improve its communications link,
both physical and cultural, with the ASEAN region, by consciously involving
itself in building roads, highways, airlines, promoting travel and tourism
and offer itself as a big hinterland as an alternative to China without
showing signs of antagonism towards growing Chinese influence in the region.
In fact, in certain areas of South West China, which are relatively remote
from the thriving commercial centers of
East-North-East China, such as Shanghai, Tienjing,
Beijing, India has advantage to penetrate economically and forge useful trade
and economic links and integrate them with ASEAN and BIMSTEC region. These
are the five South-West China provinces, viz., on the spectrum of the
Government of India for special attention and treatment.
Our traditional economic relations with the Russian
Federation need to be revived.
Nearer home, i.e., in the SAARC, Government of India
needs to adopt a bold strategy of integrating it with India by offering
unilateral concessions for free flow of trade, tourism, capital and people so
that the political boundaries become irrelevant. The idea is to make it fully
integrated and unified economic community. There will be objections and
obstacles from the smaller neighbours. But the vision should be clear to make
the sub-continent a sphere of co-prosperity. It will help us if the
purchasing power in the immediate neighbourhood increased. China should not
be allowed to out triumph India economically and also diplomatically in South
In East Asia, Japan and South Korea have already
become important stake holders in India. This trend should be further
encouraged. Mutually beneficial trade and economic exchanges with China
should be allowed to grow.
West Asia and gulf should remain areas of Indian
interest confined mainly to maintain uninterrupted supply of oil and
safeguard well being of Indians in the gulf.
Central Asia, though geographically closer, will
remain somewhat distant due to the turmoil and lack of communications with
India. It should therefore, receive due attention.
Africa and Latin America have remained continents of
fringe economic interest to India. The challenge is to reverse this trend.
Economic diplomacy requires all the finesse and
knowledge of traditional diplomacy. In addition, it requires an in-depth
knowledge of economic analysis, commercial relations, both national and
global trading rules, functioning of inter-governmental organizations,
politics of trade & investment, and policy issues ranging from
health/environment to the prudential supervision of insurance. It also
requires an in-depth knowledge of corporate structures and functioning of
major corporations of the host-country.
Ten Point Plan of Action
A beginning has to be made right at the training
stage. The purpose is not adequately served by routine “attachment” of
trainees with economic ministries and trade and industry organizations –
which often view them as undesirable intrusions in their work. It is
necessary to revamp the training schedule so as to ensure that right from the
start IFS officers are adequately equipped to handle economic work.
Focused emphasis on practical economics during early
training as all officers have not studied the subject.
w Admittedly the Foundation Course at the FSTI can
only deal with generalities. Specialized courses, therefore, need to be
devised for mid-career training – particularly for officers going abroad for
economic assignments as First Secretary/Counsellor.
w It is important to strengthen the diplomats
connectivity with states of India. A road map must be devised so that our
diplomats are better equipped with state-level information including
investment opportunities and tourism related details.
w Emphasis right from the beginning should be on the
importance of networking with the public and private sector, academic
institutions etc. Training with the corporate sector be given more importance
w The Heads of Missions also need to undergo special
training to enable them not only to supervise the economic work in their
missions but also to take a direct interest themselves in such work.
w The FSTI is organizing an Internet based mid-career
training programme. It is important that in all such training, the focus is
kept not just on knowledge accretion but also on skills enhancement.
w A point that needs to be driven home at every stage
is that contrary to a common misconception economic work is very much a part
of the mainstream of diplomacy. IFS officers need to be reassured that
specialization in economic diplomacy would in no way hamper their prospects
for career enhancement but will exhilarate career advancements.
w To meet the challenge of globalization, the Training
Programmes of FSTI must ensure adequate coverage of latest developments on
the multilateral economic scene, with particular emphasis on institutions
such as WTO, UNCTAD etc. This aspect has to be borne in mind not only in
devising the initial programmes for new entrants but also in preparing
specialized courses for officers proceeding on economic assignments.
w WTO runs an annual training programme, which is
regularly attended by officers from the Commerce Ministry. The possibility of
regularly deputing IFS officers for such training should be explored.
2. Changes in MEA
It is almost impossible to manage the Foreign Policy
challenges of globalization on a sanctioned cadre strength 699 (and only 550
in place). The current cadre strength is not only insufficient to man India’s
163 Missions and Posts abroad but leaves us with a completely distorted
Headquarters-Missions ratio. Our situation is pathetic because we just
do not have the manpower available at Headquarters to deal with the evolving
scenario. If we do well, it is because of the outstanding quality of
individual officers. We cannot, however, always bank on this. But then,
this is true not only of economic diplomacy but also of every area of our
bilateral political functioning. A depleted strength at Headquarters makes it
virtually impossible for the Headquarters to absorb the political and
economic reporting from Missions abroad and impossible for them to provide
any serious guidance. But here again, we are setting our sights a bit low.
The issue is not whether there can be collated research inputs available at
Headquarters. What we require is the ability to take a comprehensive and
holistic view of a wide variety of variables which impact on our economic
diplomacy. This relates to the fundamental issue of MEA’s interaction with
other economic Ministries. MEA has not been able to provide any significant
inputs either to the ongoing WTO negotiations or for that matter in any of
the other areas which are crucial to our existence, i.e. issues covered by
the Ministry of Finance, Department of Economic Affairs, Ministry of Health,
Department of Telecommunications etc. With an absent manpower capacity, MEA’s
role becomes limited.
w We need to take a serious look at the organizational
setup in MEA to see whether it is adequately equipped to bring economic
diplomacy to the center stage for the conduct of
foreign policy. The establishment of Divisions and the allocation of
work among them must be primarily aimed at making economic diplomacy more
effective and not, as seems to have been the case in the past, on ad-hoc
considerations such as the knowledge and expertise of individuals available
at a particular time. We need to build up and strengthen institutions
to ensure continuity and create opportunities for more officers to acquire
the necessary expertise.
w Our quest for strengthening bilateral economic
relations must have a global sweep, encompassing not only the highly
industrialized countries but also the developing nations. The main
responsibility for handling bilateral economic relations must rest with the
territorial divisions, each of which must have on its staff officers who have
specialized in economic work.
w The root cause of many problems facing MEA is the
shortage of personnel at Headquarters in relation to our missions abroad.
Efficient foreign ministries function with a personnel ratio of 1 to 1 or
less (e.g. Australia, China, Brazil, Singapore, UK) or at minimum of 1 to 1.5
or 1.8 (France, Germany, Italy, US). Unfortunately we are at a much lower
figure of 1 to 4. Some suggestions had been made to resolve this problem in
the report on the reorganizing of MEA in 2001. This of course is a wider
issue but strengthening the headquarters would also enable better management
of economic work.
w Economic diplomacy should be supported with research
that is stellar to empirical studies and focuses on a practical base. MEA
needs a small research institute that could be linked to the FSTI as in
Malaysia and Thailand. As a part of its functions relating to international
economic relations, MEA finances an autonomous research institution – The
Research and Information System for Non-aligned and Other Developing
Countries (RIS). It should be ensured that its activities are directly
related to MEA’s own efforts to strengthen economic diplomacy. It may be
worthwhile to have a pool of institutions of excellence in research whose
services are always readily available.
w There is need for greater coordination among the
various Divisions and Sections of the MEA whose work has a bearing on
economic diplomacy. This is true, for example of the offers of scholarships,
fellowships, technical assistance etc. Such work needs to be integrated so as
to maximize its impact in serving our foreign policy goals.
w Greater attention has to be paid to MEA’s liaison
with economic ministries. Here again there has been a great deal of “ad-hocism” in the past. The effectiveness of such work has
tended to depend on the aptitude and interest of individual officers and
there does not appear to have been a conscious effort to institutionalize it.
The policy and practice of posting IFS officers in such ministries also needs
to be put on a regular footing. We have to break the vicious circle of lack
of expertise combined with the denial of opportunities for its acquisition.
An adequate talent pool has to be developed and nurtured for which we should
not hesitate to take professional help from outside MEA whether from the
government or non-government sectors.
w Wherever on account of inter-Ministerial problems
MEA cannot coordinate, it should be easier to have inter-Ministerial coordination
done through PMO.
w Handing Over Note: It is essential that every
officer leaves a Handing over Note to enable the successor to carry forward
the work. This is particularly essential for a Head of Mission. Every HoM should not believe that the wheel has to be
rediscovered from the day of his/her assuming charge. There should be a
scrutiny of the HoM’s Handing Over Note at the
w Plan of Action: The MEA must give clear guidelines
to the mission and prepare a programme of work or action plan in consultation
with them and the industry which must be reviewed periodically. Wherever
possible clear goals and targets must be established. The areas of emphasis
will naturally vary from country to country. The strengthening of economic
relations has to be a coordinated effort, taking into account the broad
foreign policy goals and has to extend to numerous sectors, including trade
promotion, technical and industrial cooperation, two-way capital flows to and
from India, collaboration in the fields of science and technology etc. The
possibilities in various sectors need to be identified and integrated into
comprehensive action plans. At the end of the year there is a new need to
impartially evaluate the action plan. Mid year
monitoring is also essential.
3. Missions Abroad
Traditionally, commercial officers had to answer
trade enquiries, keep updated lists of buyers and sellers and then provide
facilitation to ensure that commerce takes place. Those were the days when a Mission
could feel proud that, within a given reference period, the quantum of trade
had gone up by 10% or 15%. This is no longer the case. All
information relating to buyers and sellers is readily available at the click
of a button. Delivery schedules, problems relating to freight and
insurance, legal contracts are all quite easily resolved without the
intervention of the traditional Commercial Representatives (CRs). The
intervention of the CR is really required only in the case of nasty disputes
when the case goes in for litigation. Our trade with china is increasing at
the rate of US $ 2 billion per year. Dealing with barriers to goods, tariff
or non-tariff, as they cross borders is, is no longer an adequate or
sufficient basis to explain what is happening in the market place or the work
of the CR. A good CR has to go beyond to identify and surmount the ‘entry
barriers’ which are often invisible. This also requires more sustained and
intense interaction with the private sector both in India and the country of
accreditation. Today, all officers in the Mission end up doing primarily
There has been steady improvement in the handling of
economic work by our missions abroad in recent years. Nevertheless there is
considerable scope for further improvement.
w MEA must itself play a central role in streamlining
the economic work in our missions. Their tasks must be clearly defined and
guidelines given for their accomplishment. Wherever possible clear
goals and targets must be established.
w The strengthening of economic relations has to be a
coordinated effort, taking into account the broad foreign policy goals and
has to extend to numerous sectors, including trade promotion, technical and
industrial cooperation, two-way capital flows to and from India,
collaboration in the fields of science and technology etc. The areas of
emphasis will naturally vary from country to country. The possibilities in
various sectors need to be identified and integrated into comprehensive
action plans that should be evaluated at the end of the year.
w Extensive use should be made of latest technology,
for example by establishing hyperlinks with websites of States, trade and
industry bodies etc. both for creating awareness as well as for promotional
w Some missions publish economic newsletters.
There is need to review these from the aspect of quality of content/printing,
frequency, reach, etc. There should be a periodic “audit” of their
utility and impact with a view to further improvements and ensuring the best
way of putting across our message in the target country.
w MEA should periodically review the financial outlay
for economic work particularly in respect of the missions in the major target
countries with a view to optimizing the returns.
w There should be greater reliance on local talent,
particularly at junior levels, in the commercial wings of the missions.
It would be far more effective to have a well-paid local commercial officer
rather than an India based assistant who costs approximately $4000 per month
in developed countries and around $3000 in developing countries. For this
amount it is possible to get fairly good local officers. An added
advantage would be their knowledge of the language and of the local
w It would be useful for our missions to analyze the
economic and technical cooperation programmes at present moving on lines
independently managed by different ministries and departments. The objective
should be to ensure a coordinated effort so that our strengths are leveraged
to the maximum extent to our advantage and our weaknesses are not exploited.
In this respect particular attention needs to be paid to countries from which
large purchases are made including Defence purchases.
w Like most other aspects of our professional
performance, it is little things, many of them routine, that we are called
upon to do that become the building blocks of a strong and stable edifice of
economic diplomacy. There is considerable scope for improving the image in
the public mind, particularly in the business community, about the way our
missions function. Many of them say that they contact the missions only when
they are in trouble!
w Traditional problems like trade complaints,
machinery for punishment of offenders, establishment of a trade investment
dispute mediation system, linking of economic data bases should be given high
priority and increasing reliance placed on computerization so that requests
for information and assistance can be handled with the utmost urgency.
w It will be useful for selected missions to bring out
booklets on success stories as was done by the embassy in Germany where 13
successful German entrepreneurs wrote about their experiences of investment
in India. Such accounts help in attracting more investments.
w Concept of Trade Fairs need to be re-examined as
well as the role of ITPO.
w Missions, especially in developed countries, must
make a keen study of clever non-tariff barriers.
w FIIs are responsible for $70 billion portfolio
investment in India. It was an FII –Goldman Sachs – who produced the
BRIC report. Our Missions in financial capitals should cultivate them.
w Importance of Project exports, especially to
developing countries receiving ODA, bilateral and multilateral, worth
billions of dollars on an untied basis. Our construction and equipment
companies like for instance L&T and BHEL can be very competitive. Our
Embassies have to be on alert to report home such project tenders.
w Everyone of our Missions should have a guidance
sheet for important Indian visitors, listing DOs and DON’Ts, based on local
knowledge and important telephone numbers both of the Mission, Indian
organizations and those of the host country.
4. Categorization/Prioritization of countries
w The business community finds it hard to comprehend
the logic underlying the present system of categorizing missions abroad into
A, B & C (which is, of course, largely based on considerations such as
living conditions etc.). While this may serve a limited (internal) purpose it
also seems necessary to have a separate classification of countries taking
into account their importance from the point of view of our economic
interests. This exercise should be carried out in consultation with the Trade
and Industry organizations as well as the economic ministries with a view to
identifying the major targets of economic diplomacy.
w After categorization of priority country has been
done the list can be further divided for phased targeting. The indicative
parameters could be political importance i.e. neighbouring countries, strong
bilateral relations etc., economic development of the country, quantum of aid
received from India if any, India’s political/trade/economic objectives which
include purchases of oil and defence, identification of sectoral analysis of
the country, and inputs of the various industry associations.
w Identify areas/sectors where India has
technology/cost/skill advantage and how these could be
marketed/leveraged. This would be achieved through a high level
evaluation of various sectors/industries and short-listing of focus sectors.
w After this exercise, consideration should be given
to the strengthening of the commercial/economic wings of the missions in the
major target countries, including, for example the G-8 and G-20.
w In some of the major target countries, “branding of
India” is important with promotions like ‘Incredible India’ with which the
Ministries concerned should be closely associated.
w It is equally important to identify selected key
countries that should be the focus of attention for promoting FDI flows.
5. Linkages with the Apex Trade and Industry
w Greater linkages with industrial organizations like
CII, FICCI, ASSOCHAM can only be beneficial. Cross fertilization of ideas so
generated will strengthen economic diplomacy. It is important that
representatives of these organizations are made a part of select Indian
Missions abroad. After discussions with organizations like CII, FICCI,
ASSOCHAM, FIEO, NASSCOM etc. local officers with commercial experience at the
level of marketing or research officers should be posted at their cost to
work under the supervision of the head of the commercial wing in some of our
selected Missions abroad. He would be under the effective administrative
control of the Head of Mission. Their reports should be sent directly to the
organization in consultation with the head of the commercial wing. The person
appointed will promote general interests and not only of his own chamber. To
begin with this could be made applicable in our High Commissions in London
and Singapore, Embassies in Tokyo, Brussels, Moscow and Paris and Consulate
Generals in New York, Frankfurt and Dubai. In addition neighbouring
countries can be included in the list.
w At present MEA’s interaction with such organizations
is sporadic with the initiative in general coming from the latter. It is
important to institutionalize such interaction so that there is a better
appreciation of the views of the private sector, which must be fully
reflected in the conduct of economic diplomacy.
w We also need to encourage these organizations to
revamp their institutional framework for interaction between the business
communities of India and other countries. In particular the functioning of
JBCs (Joint Business Councils) requires considerable improvement. MEA needs
to closely monitor such activities and ensure that they augment its own
w In addition to the apex trade and industry
organizations, MEA could also benefit from linkages with IIMs and IITs whose
knowledge and expertise could provide useful inputs for the evolution of our
w Assistance of these organizations should be sought
in analysis, advocacy and dispute settlement.
w Internships to business executives of other
countries should also be offered by industry/trade organizations.
w There should be involvement of these organizations
in preparation of joint studies/feasibility reports/study groups.
6. Involvement of the Private Sector/Banks
w Direct involvement of business and industry in
w A greater role should be sought in the outside world
for the large number of consultancy organizations functioning in India with a
view to promoting service exports. Apart from direct revenue, their
feasibility reports could favour Indian suppliers.
w It is necessary to spread greater awareness abroad
about what India has to offer in the areas of science and technology.
w Special emphasis needs to be placed on Information
Technology in which India’s leadership is now widely recognized and other
knowledge based technologies including nuclear energy, space technology and
other value-added activities e.g. films, entertainment, education, training,
tourism, medical treatment.
w Direct connections between Indian CEOs and their
counterparts abroad as has been done recently in respect of the USA
w Banks these days play an important role. Indian
banks both in public, private sector and those engaged in other activities in
India should be made an integral part of our activities.
7. Energy Security / Oil Diplomacy
In the early 70’s after
the first oil shock a senior officer of the MEA was posted in the Petroleum
Ministry and again today when the Minister for Petroleum is a former foreign
service officer and the posting of a senior IFS officer in the ministry, and
the constitution of an advisory committee on oil diplomacy for energy
security an attempt is being made to harness diplomatic skills. However, in
the long term the Ministry of External Affairs must play an important role in
monitoring this important subject on a regular basis. This would be a crucial
part of economic diplomacy.
Energy security is crucial and oil diplomacy
deserves special consideration. It should become a part of India’s foreign
and trade policy. The dependence on oil imports by India has been on the
increase. The Hydro Carbon Vision 2025 estimates that the demand for oil and
gas shall increase from the present level of 113 MMTPA (million metric tonnes
per annum) of oil to 365 in 2025. Similarly, the demand for gas will increase
from the existing level of 150 mm cu m per day to 400 mm cu m in the same
period. Consequently, it is important to
w Acquire oil acreages abroad to enhance energy
w Promote direct investment in the upstream
exploration and production segment of India’s domestic oil and natural gas
w Make an assessment of focus countries which
currently could be Iraq, Iran, Russia, Libya, Venezuela, Sudan, Kazakhstan
and Vietnam. This assessment could be changed from time to time
w Identification of opportunities including a
comprehensive mix of commercial/political/diplomatic ploy that could be used
to leverage opportunities in the focus countries in oil and gas sector
through collaboration with the participating firms from India
w Attracting FDI in Indian oil and gas sector
w Need to look at alternatives to oil like city and
industrial waste, biomass energy, solar energy, wind energy etc.
Diplomatic experience and expertise can help in the
achievement of the above objectives as was proved in 2001 when India made its
largest investment abroad of $1.7 billion at that time in the Sakalin-I project where diplomatic skills helped India in
clinching the deal
8. Development cooperation
w There is need for better coordination of India’s
development cooperation policies and programmes so that they not only become
more efficient but also are fully integrated with our overall goals of
w Banks such as the EXIM Bank should have an important
role in the drawing up and implementation of programmes of development
w Advantage should be taken of our substantial foreign
exchange reserves to promote development cooperation, for example by
extending soft loans to countries in need, which could be tied to
procurements from India. Banks can play a useful role in this process also.
w Consideration may be given to the establishment of a
Bank on the lines of the Japan Bank for development cooperation.
w We need to revise the institutional framework for
extending lines of credits and grants on concessional terms and the financial
mechanism for promotions of projects in other developing countries.
9. The Role of NRIs
w Some efforts have been made in the recent past to
provide a greater role for NRIs in realizing the goals of our economic
diplomacy, for example, through periodic get-togethers between them and our
policy makers, both in India as well as countries where they have a sizeable
presence. There is obvious need for further intensifying such efforts.
w The valuable contribution of NRIs to the advancement
of the countries of their residence, particularly in areas such as medical
sciences and information technology, is widely recognized. Many of them are
keen to place at our disposal the valuable experience they have gained, for
example by assisting in the establishment of institutions such as Hospitals
and Technical Institutes in India. These efforts have often been frustrated
by bureaucratic delays and other procedural hurdles. Both MEA and our
missions abroad can play an important role in facilitating such involvement
of NRIs to our advantage. Following are specific areas where economic
diplomacy should aim at getting the maximum involvement of NRIs particularly
in countries like USA and UK.
w Diaspora and direct trade – Diaspora creates demand
by specialized consumption and help creating the brand equity example :
basmati rice, tea, spices, fruits & vegetables, ayurvedic
w Entertainment Industry – Diaspora plays crucial role
in promoting bollywood, films and music.
Organised effort can see this grow by leaps and bounce. Effective use
should be made by the film industry for India’s economic diplomacy.
w Fashion, garment & textile industry – Diaspora
can play a useful role in promoting these products.
w Gems & Jewellery – Diaspora emerged as a major
player in the field and with greater effort they can also popularize Indian
w India Art – Diaspora can be a major vehicle in
promoting the Indian art.
w Diaspora, and indirect trade – Diaspora is an
excellent asset for facilitating entry into new market. They can help
in making penetration strategies, creating opportunity for consultation and
w Diaspora can play very useful role in technology
w They can play invaluable role in providing access to
the decision makers.
w Tourism – Diaspora can play a useful role in
promoting tourism, particularly, medical tourism. They can also promote
higher education in India.
w Diaspora investments would be beneficial and should
be encouraged in social infrastructure, business expansion into India, new
venture funds to spark innovation, and deposits in diversified financial
10. Globalisation / Multilateral economic diplomacy
w The process of globalisation and technological
revolution has transformed inter alia the fundamentals of
international relations. On the one hand, the nation-states are engaged in
fierce competition for economic gains and at the same time seek cooperation
with other like-minded states to mould regulatory institutions in their
favour. Countries also compete with each other to attract foreign direct
investment, push other countries to gain market access for their national
companies and attempt to protect their domestic markets by covert or overt
trade barriers. Countries are also deepening their cooperation at
standard and rule-setting inter-governmental institutions such as the World
Trade Organisation (WTO).
w The total value of global trade today, i.e. the
total value of goods and services exchanges, is close to US $ 9 trillion. 50%
of these exchanges take place through the multilaterally negotiated set of
rules, i.e. the WTO. The rest of this trade takes place through regional,
sub-regional and bilateral agreements between nation states.
w Trade policy is a major component of foreign policy
and we cannot afford to compartmentalize the two. We need a dedicated set of
people in the Minsitry not only to deal with WTO
issues but also to deal with issues arising out of Free Trade Agreements and
regional and sub-regional agreements. The personnel to man these posts need
to be carefully selected. The general view that anti-dumping matters are a
purely technical issues, relating to goods being sold below their cost price
in foreign markets, has to be forsaken and the political undertones of such
actions need to be understood.
w Multilateral economic issues like those related to
WTO, anti-dumping, regional trade arrangements need to be given more
w On the other hand, as part of the driving force
behind the processes of globalisation, firms have been engaged in rapid
expansion through mergers and acquisitions (M&A) and several forms of
joint venture, while at the same time intensifying efforts to influence
domestic and international policies in their favour. Increasingly,
trans-national companies (TNCs) form cross-territorial alliances to
coordinate their policy positions and strengthen their lobbying effort
vis-à-vis international regulatory and governance bodies.
w The result has been growing complexity and number of
actors impacting international economic relations.
So, traditional state-to-state diplomacy alone is now inadequate to manage
the new international order. It requires sophisticated economic diplomacy to
meet the challenges and exploit the opportunities of such an increasingly
interconnected and interdependent states and markets.
w Take the maximum advantage of globalisation. The
objective should be to see India at the high economic table e.g. in a
expanded G-8 and other important economic foras.
w The increasing trend towards globalisation and, as a
consequence, India’s rapid integration into the world economy to which
attention has been drawn earlier, have opened up fresh avenues for
multilateral economic diplomacy for which both MEA and the Missions abroad
(notably those in New York, Geneva, Bangkok and Brussels) need to be fully
equipped to respond to the new challenges.
w MEA must be better prepared to take an active part
in multilateral economic negotiations. Consideration may be given, for
example, to the creation of a special cell in the Division concerned that
becomes a storehouse of information on issues coming up in such negotiations
and which ensures MEA’s active participation both in the preparation of
briefs as well as in the actual conduct of the negotiations.
w The proposed Research Institute to be attached to
FSTI could play an important role in servicing MEA’s requirements in the area
of multilateral economic diplomacy. In the meantime increased interaction
between the Ministry and institutions such as RIS and ICRIER (Indian Council
for Research in International Economic Relations) must be ensured through
active association with their activities.
w IFS officers actively involved in negotiations on
economic relations – bilateral and multilateral should be encouraged to
prepare critical case of histories of these negotiations. The case histories
should be discussed in specific meetings.
w IFS officers must be provided with opportunities to
acquire the necessary expertise through assignments in the economic
ministries concerned as well as in Missions with a high concentration of
economic work. In particular, there is need to ensure that IFS officers are
at all times posted in the Indian Missions to WTO and the European Union. At
the same time MEA should not hesitate to use the services of professionally
qualified persons from outside the Ministry.
Foreign relations can no longer be divided between
political and economic competencies. Unless we have an integrated foreign
service which is responsible for the entire gamut of our economic relations,
including in relation to trade, energy and health issues, we are unlikely to make
any specific breakthrough. This may be a tall order and is unlikely to be
realized in the immediately foreseeable future. Therefore, the next best we
can do is significantly increase the cadre strength of the foreign service,
drastically overhaul the training programme, introduce mid-career training
courses and make promotion to senior levels on merit basis. Unless we do
this, we are unlikely to achieve anything more than mere tinkering with the
problem with limited improvement. Some bold decisions have been taken
by the Government which will have far-reaching implications. One must find
ways and means of reorienting the bureaucratic mindset. Insofar as MEA is
concerned, there should be no difficulty. What we require is a more intensive
interaction between our senior Heads of Mission and those in the Government
who are producing the blueprint for the new India. There is a wide disconnect
between what we are seeking and instruments available with us. The action
plan is aimed for the quantum jump.