Guest post by Gateway House

As 2012 draws to a close, it’s imperative to assess India’s foreign policy performance, and look ahead to what we can expect in 2013.

So far, the report is mixed: Four foreign policy hotspots, five sweet spots, and two blind spots. About the same as 2011, when we gave six jeers and five cheers for India’s foreign policy performance.

Geopolitically, 2011 was the year of celebrating the shift of global growth and power to Asia; a year later, 2012 has seen the beginning of pushback on Asia from the U.S., which has seen the confidence of newly elected governments in Japan and South Korea and increased aggression from China as a result of its own domestic power shift.

Internationally, India has been an active participant in the creation of alternate financial instruments and institutions from emerging countries. And so far New Delhi has deftly handled the U.S. pivot to Asia, and maintained bi-partisan support in Washington, while simultaneously balancing its energy imports from Iran.

In contrast, New Delhi has been ham-handed at home. This is the year in which the government has been put on the mat by a strong anti-corruption movement started in 2011, to the current anti-rape movement engulfing the country. An enfeebled centre could hang on, or bring on mid-term elections in 2012 – a distinct possibility after the Bharatiya Janata Party’s win in Gujarat this month. It could change if the ruling Congress government genuinely confronts corruption and addresses law and order issues, continues on its path to economic reform and provides jobs to the 14 million youth who join the workforce every year. They are the boiling cauldron of the under-educated and unemployed young who yearn for political and economic change.

Clearly, our international stature is better than our image at home. We present our top foreign policy Hotspots, Sweet spots and Blind spots for 2012.

Foreign Policy Hot spots

The Maldives: In the wake of the regime change in the Maldives in February, New Delhi may have reacted hastily by recognising the new government led by Mohammed Waheed and bypassing the friendly and more secular former president, Mohamed Nasheed. The increasing fundamentalism and political breakdown that have followed in the Maldives have made India an easy target – most recently highlighted by the GMR-Maldives dispute. But two external factors may also be at play: China’s increasing economic influence in the island-nation and possible Western interest in the old World War II military base in Gan, the southernmost island in the Maldives.

Sri Lanka: Bowing to pressure from both domestic coalition politics and international organisations and allies, India voted against Sri Lanka at the UN Human Rights Council in March; the vote eroded our position of non-interference in the internal affairs of sovereign nations. In September, the bilateral hit a new low, with threats and attacks on Sri Lankan pilgrims and school children travelling in Tamil Nadu. It was exacerbated by the politically opportunistic demands of the Chief Minister of Tamil Nadu, that India must stop training Sri Lankan military personnel. Meanwhile, China raised military aid to more than $100 million and billions in strategic infrastructure for Sri Lanka.

South China Sea: Our Chief of Naval Staff’s statement that India is “prepared” to protect Indian interests in the South China Sea was subsequently watered down. Nevertheless, Beijing reacted sharply, stating that it “opposes any unilateral oil and gas exploration activities in disputed areas in the South China Sea,” despite its own infrastructure-building activities in disputed areas of Pakistan-occupied Jammu and Kashmir. The U.S.’s rebalancing in Asia juxtaposed with recent election outcomes in Japan and South Korea have given New Delhi more strategic space to be firm with China. We must continue our policy of balancing our economic interests in trade and attracting Chinese investment and negotiating our concerns on the border with positioning on Chinese disputes with ASEAN members in the South China Sea and its adversarial posturing towards the U.S.

Syria: India’s Track II diplomacy in Syria was not successful for the people of Syria, who remain caught in the battle between the West and Gulf-funded “rebels” and fundamentalists, and the Bashar al-Assad government. Despite India’s close relations with Damascus and efforts to mediate an acceptable solution at the UN Security Council in July, India voted, along with the West, for stronger sanctions against the Syrian regime, while fellow BRICS nations Russia and China exercised a veto. It is only a matter of time before the exit of Assad, but the sectarian fighting could continue for decades, at great cost to the Syrian people and secularism in the region. The conflict may cause further regional destabilisation, more friction between Israel and Iran, and eventually a rise in the price of oil.

Foreign Policy Sweet spots

India-Myanmar: After 25 years of cautious engagement, India’s policy of not shunning military governments – while simultaneously maintaining support for Myanmar’s democratisation – put us on the right side of history. Successive high-level visits this year resulted in a credit line worth $500 million to Myanmar and various agreements on border issues, energy and infrastructure. India is poised to play a vital role in Myanmar: as a model for democratic institution-building and also with business and development solutions that are affordable and adaptable. In particular, Myanmar can benefit from India’s experience in addressing complex identity issues.

Alternate financial instruments: In March, New Delhi proposed a BRICS Bank and in December the government moved further to promote more SAARC currency swaps. India already has currency swap deals with Japan worth $15 billion and is part of a SAARC deal worth $2 billion. These are positive signs of emerging economies taking the initiative to design alternative financial instruments to mitigate the volatility caused by the financial crises of the U.S. and Europe. Could a viable multilateral option emerge from BRICS? Can bilateral currency swap deals be the building blocks of an alternative financial system?

Afghanistan: India hosted the first ‘Investment Summit on Afghanistan’ in June, probably with the cooperation of Washington, and then participated in the first India-U.S.-Afghanistan trilateral dialogue in September. Indian business is supporting New Delhi’s efforts in Afghanistan, and more than $10 billion is likely to be invested in the Hajigak iron ore mines and various coal, fertiliser and small development projects. New Delhi must now amplify its role on the ground in Afghanistan – through both security and infrastructure cooperation. This, however, entails a dilemma: how can India expand its presence without becoming a target for the Taliban and unfriendly Pakistani entities?

Energy security: So far, India has successfully balanced two fundamental interests: our strategic relationship with the U.S. and our escalating energy requirements. The MT Omvati Prem became the first ship with Indian insurance to load oil from Iran in August, after European Union sanctions came into force in July. With increasing instability in West Asia, we will need more such creativity to maintain the steady flow of oil from the Gulf and we must also look for alternative suppliers in other geographies.

ASEAN: The recently-concluded negotiations of the India-ASEAN Free Trade Agreement in services and investments is a significant step in improving regional connectivity. Over the past two decades, our engagement with ASEAN has intensified and become multifaceted, with a massive increase in trade from $2.9 billion in 1993 to $80 billion in 2012. The region is not only at the centre of our Look East policy, but it is also vital to our efforts to economically and strategically balance China in an Asia that is increasingly important globally.

Foreign Policy Blind Spots

Central Asia: We have not been able to leverage our cordial relations with the Central Asian states to advantageous positions on energy, on membership of the Shanghai Cooperation Organisation (SCO), trade, and tactical cooperation in Afghanistan. We should more actively engage with Central Asia to press our case for membership of the SCO and to expand economic exchanges.

Lost Opportunities for Growth: India’s fiscal problems were highlighted many times in 2012 – in April, for instance, when S&P revised our outlook from stable to “negative” with the threat of an investment rating downgrade to “junk” status within 24 months. India’s growth rate continues to slide and is now 5.3 percent. India is struggling with a falling rupee and a rising oil import burden, along with the budgetary imperative to reduce fuel subsidies. We are condemned to a continuing economic slowdown unless the government confronts corruption more seriously and implements economic reforms.

Looking forward to 2013

What can we expect for 2013? Despite the best efforts of our Prime Minister to keep India-Pakistan relations on an even keel, the critical issues with Pakistan – Jammu & Kashmir, water, terrorism – remain intractable. Don’t hold your breath: nothing will change till Pakistan’s elections in May 2013 and perhaps even our own in 2014. Pakistani Interior Minister Rehman Malik’s disastrous recent visit to India has set back the improvements that had come with New Delhi’s patient diplomacy. Just as we have been able to successfully do with Myanmar and Iran, we should resist American efforts to influence us to make concessions on Pakistan, and handle the relationship according to our own imperatives.

For India-U.S. relations, a visit by Barack Obama, which would be an unprecedented second visit by a serving U.S. president, could propel the strategic bilateral relationship to new heights.

We hope for better times in 2013: an end to the conflict in Syria, more stability in Pakistan, less aggressive posturing by China in Asia and a recovered global – and Indian – economy.

(This article originally appeared at Gateway House and has been republished with their approval. All views mentioned in the article are those of the author and do not reflect the opinions or positions of USINPAC in any manner.)