India Business

Trade Liberalisation: Can Restriction and Protectionism ever be a sound policy (Part 2)

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Guest post by Sumantra Maitra

Will Protectionism help?
There is an argument that the poor can be protected with trade restrictions and protectionism. Protectionism in economic terms can be explained as a tendency to stifle free trade or competition with tariffs, duties, levies, subsidies, license or quotas, and the proponents argue that protectionism is beneficial for a lot of reasons. The main reasons are that comparative advantage has lost its legitimacy and meaning, as capital is free to move across the globalised integrated world, nascent and infant industries should be protected, to a position where they can grow and compete, and finally, Laissez Faire capitalism and unrestricted competition creates social evil.

For a start, protectionism has been criticized by almost the majority of economists across the spectrum. The biggest criticism is that protectionism promotes incompetence. The infant industry idea is completely baseless as the industry will remain infantile and shelled in a cocoon, if it never faces the competition from outside. Also, one important thing which is compromised in protectionism is quality of goods and the consumers are the biggest losers. It is not clear how many jobs protectionism and trade restrictions can actually save, maybe some jobs in the short run in some industries, but it “prevents the expansion of jobs in similar industries”.   A simple but prudent example would bring us back to India, where in 1984; there was only one private car manufacturer, the “Ambassadors”, which churned horrible, technologically inferior behemoths, unavailable to the mass other than the elites. After liberalization, now not only there are innumerable choices, but great competition which assures production quality at the highest and world standard, prices low, and different domestic car manufacturing and auxiliary industries guarantying jobs for millions.

The trend of protectionism is growing however, alarmingly across the World. Director General Pascal Lamy of WTO, warned against trade restrictions, in a speech in June 2011, during the height of global recession, that the “protectionist pressures remain and are being generated by stubbornly high levels of unemployment in many countries, persistent global imbalances, and macroeconomic concerns”  Recently EU parliament called for tighter restrictions on bank’s trading activities, and opposed greater competition between clearing houses.   Also there is a growing tendency of Economic Patriotism in United States which can be detrimental for consumers.

Conclusion
To summarize, trade liberalization effects on consumer pattern and income patterns of the poor, and even though there are opposing views and ambiguity on the changes in wages and welfare of the poor, overall it should be encouraged for the following reasons. Trade pessimism never helped any country, simply because we live in a globalized world, and centralized or autarkic economy will find it hard to survive. A lot of arguments against trade liberalization come from countries like sub-Saharan Africa, which are maybe due to flawed institutional and structural systems, or due to the overall scenario of investment, materials, productivity and a lot of other factors, trade liberalization is not as beneficial for the poor as it was supposed to be. Chronic political instability is also a major factor in these countries. The assessments don’t include liberalization of services, trade facilitations, elimination of licensing and non tariff barriers, domestic reforms or markets, and most importantly welfare of workers, which can have massive repercussions for the mass and could potentially blunt any move to open up free trade.   The fact that trade liberalization worked for certain countries poor and not for others are a testimonial that it is not the concept of liberalization, but the factors and modes to liberalize is what matters for the poor. That being said, more research is needed to actually integrate the poor so that a vast majority of the downtrodden living below poverty line across the world can have equal opportunities. Identification of the problems in Latin America or Sub-Saharan Africa, and employing the solutions is the hardest challenge facing humanity. Even though the overall percentage of poverty has declined, but the number of people living under dollar two a day has increased enormously, mostly in sub-Saharan Africa. More research needs to be done to identify the causes and act for the remedy. If not provide the guarantee to feed every mouth on planet, atleast to provide the opportunity to tap in the benefits of globalization.

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(Sumantra Maitra is a freelance journalist, currently a post grad scholar of International Studies, and a tutor of New Zealand Foreign Policy and Theories of International Relations, at the University of Otago, New Zealand. He would like to thank Prof. Robert Patman, Politics Dept. University of Otago, and Prof. David Fielding, Economics Dept. University of Otago, for their support and guidance.)

India Business

Trade Liberalisation: Can Restriction and Protectionism ever be a sound policy (Part 1)

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Guest post by Sumantra Maitra

Trade liberalization or free trade is a highly contested subject, especially in the current global financial scenario and ongoing economic recession and slowdown, which draws feverish support and equally violent condemnation. Whether trade liberalization hurts the poor or not is itself a matter of great debate and difference of opinion, one that can be seen in the recent latest move to allow Foreign Direct Investment (hereinafter FDI) by the Indian Government, and the varied reactions from both sides of the spectrum.  There are arguments that Trade liberalization helps in growth and growth ultimately helps in lowering poverty, but on the other hand the uniformity of the benefits of globalisaion and trade liberalization is questioned. Arguments against trade liberalization claim that it can cost jobs and even lives, due to cheaper goods not facing the stringent checks at the market, or due to the loss of livelihood due to competition.  Proponents and supporters, claim trade liberalization ultimately lowers consumer costs, fosters economic growth while maximizing efficiency.  In this essay an effort is made to point down the basic aspects of trade liberalization and free and open market, how they benefit, and how they hurt poor, if at all, and when.

Trade Liberalization: The Arguments

Trade liberalization or openness can be defined as “ The openness of an economy is the degree to which nationals and foreigners can transact without artificial (that is governmental imposed) costs (including delays and uncertainty) that are not imposed on transactions among domestic citizens. “  So, in other words, it is free exchange of goods between nations, and removal or reduction of restrictions and barriers in the borders and policies, and includes dismantling of tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). Trade liberalization can provide a massive shock to the economy, and one of the immediate micro effects would be a decrease in prices of imported goods, and a possible increase in the prices of the exports. Thus it would generally help in the overall standard of living for the poor people, as they would have saved income even after spending on consumerism. Also, low prices and greater competition keeps the domestic goods price low, and benefits the consumer. The increase in capital goods flow and competition influence the employment and wages. The benefits can be seen with a Stolper-Samuelson theorem, which states that a relative increase in the price of commodity will increase the real return to the factor used intensively in that industry. In a developing country, trade liberalization helps increase in relative prices of labour intensive products, and relative wages, demand for unskilled labour and employment. Stolper-Samuelson theorem is however based on perfect labour mobility, and zero policy distortion, which is not true in every developing country. Country studies as diverse as ranging from India to Poland, shows that labour mobility is also not similar or uniform, at times hardly mobile.

Competition is also a very important factor when it comes to trade liberalization and its effect on the poor. There is an argument that opening of the economy, benefits workers by making it possible to export more goods, at a higher price, which will in turn lead to higher profits and incomes, and better standard of living for the poor. But on the other hand there is also an argument, that if such sectors, which were protected by trade liberalizations, if they were opened up, it might hurt the poor badly, as a lot of domestic firms will die away in front of competition from firms from outside. Generally it is seen that in developing countries, the sectors which are traditionally protected, like manufacturing, textiles or fast food and drinks, suffer massively as they cannot compete with multinational brands. With loss of Government protection, like stoppage of subsidies, firms become uncompetitive, and shut down, thus in “short run” there might be massive unemployment and increase in poverty.

However, efficiency and competition in the long run increases productivity. And higher productivity increases the growth rate of an economy. Global Poverty Report of 2001 states that trade liberalization can be beneficial in the long term, as it helps in making investment more efficient, allows FDI, which in turn increases the participation of newer technologies, and more productivity. Overall productivity also increases overall growth, and FDI and foreign investment increases employment and business opportunities in different sectors, which balances the employment loss resulting from the removal of protectionism. The liberalization of Indian centralized and command economy during the early nineties led to quite a few public sector job losses, but subsequently with the opening and free competition and influx of Multi National Companies, the service industries notably IT and Telecom and Pharmaceuticals, led to massive employment and growth compensating for the earlier shock.

Open Trade and Poverty

If we exclude sub-Saharan Africa and parts of Eastern Europe, extreme poverty rates are lower today than they were 20 years ago, percentage of world population living under extreme poverty has fallen from 30 percent to 17 percent in the last two decades.   Two important and interesting examples of the benefits of trade liberalization are that of China and India.  China from 1980 to 1992, immediately after their liberalization per capita income grew by 3.6 percent per annum, Even though GINI coefficient increased from .32 to .38, which is a massive increase in inequality by international standards, the actual number of poor fell by around 250 million. In India, in two stages of liberalization, around 1991 and 1996, poverty fell “dramatically” from 35 percent in 1987/88 to 29 percent in 1993/94 and to 23 percent in 1999/2000.

Often it is seen that Trade liberalization is not enough for the economy to grow. A lot of African countries liberalized their economy, during or around the same time when China, Indonesia and India opened their market, starting from the early eighties to early nineties. But the African countries didn’t experience the same benefits. Similarly all the Eastern European formerly communist countries liberalized their highly centralized economy during the same period, but their growth pattern was not the same, it was highly uneven. One of the reasons for that maybe that trade liberalization only helps create opportunities but to sustain them massive structural and institutional reforms are needed along with. For example, infrastructure, education, technological know how, appropriate exchange rates are needed alongside trade reforms, to make the benefits from the reforms more sustainable. For example, Poland, or any East European country benefited hugely from trade liberalization, as although they were communist before, they had the base for good industrial investment, like roads and hospitals. Countries from Sub Saharan Africa like Zambia for example, lacked in these regards.

An effect which is more or less regarded to be backed by solid empirical evidence is that countries see a decline in poverty, regardless of their position in world trade. The inequality gap may rise, but there is overall a decline of poverty. Examples as diverse as Zambia, Poland and Colombia, with completely different socio-economic background, prove that Globalization and trade liberalization basically helped in the lowering of poverty. “The study on Zambia suggests that poor consumers gain from falling prices for the goods they buy, while poor producers in exporting sectors benefit from trade reform through higher prices for their goods. In Colombia, increasing export activity has been associated with an increase in compliance with labor legislation and a fall in poverty. In Poland, unskilled workers – who are the most likely to be poor – have gained from Poland’s accession to the European Union. “  Harrison/McMillan claims in their analysis. It doesn’t mean that the prosperity came from the same working solutions though. For example in the case of Poland, it was due to easy labor mobility across Europe, whereas in the case of Zambia and Colombia, it was due to competition and exports. Also, notably it is a common factor that poor countries would grow faster than comparatively rich countries, if they are well integrated and they have proper functioning institutions. There can be over time, absolute convergence, the literature on growth theorizes. Foreign investment has different effects on different countries though, depending their macroeconomic stabilization policies, and exchange rate flexibility. Factors like infrastructure can be the determining factor behind the success or failure of trade liberalization in a country. Also massive internal market can neutralize the shock of trade liberalization, like India, Indonesia and China could absorb the shocks comparatively better than Colombia or Argentina, being domestic consumption driven economy, being dependent on domestic markets more than less export sector performance.

There is ample evidence that Globalization and trade liberalization produces both winners and losers, but it is highly difficult to corroborate them into a solid hypothesis, as the data colection is extremely difficult and varied. Even in a single region, two different outcomes can be found for two different factors, depending on their two completely varied approaches to trade liberalization. “The heterogeneity in outcomes associated with poverty– globalization linkages is one theme that emerges from a number of the different country case studies. “  as per Harrison/McMillan. Also, different measures and degrees and approaches to trade liberalization can have different results. The difference of data, the difference of statistics, and the generalization of different approaches can give highly unsatisfactory answers to the impact of trade liberalizations, but according to Berg/Krueger some common factors can be derived, as increase in competition leading to lower prices and better quality of goods, leading to general betterment of poor consumers. Also, trade liberalization helps poor farmers, as generally in the developing countries, a major percentage among the poor are engaged in small scale agriculture.

(This is part 1 of a two part post. Part 2 will be posted shortly.)

(Sumantra Maitra is a freelance journalist, currently a post grad scholar of International Studies, and a tutor of New Zealand Foreign Policy and Theories of International Relations, at the University of Otago, New Zealand. He would like to thank Prof. Robert Patman, Politics Dept. University of Otago, and Prof. David Fielding, Economics Dept. University of Otago, for their support and guidance.)

Immigration Blog, Indian-Americans and U.S. Politics Blog

Politics & Pills – The Startup Visa

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For years dozens of Silicon Valley’s brightest and most highly respected entrepreneurs like Paul Graham, Brad Feld, Reid Hoffman, and Eric Reis have been trying to convince Congress and the White House for the urgent need of a “start-up visa” that would create a special visa category for foreign entrepreneurs who have raised capital from qualified American investors  (There’s even a documentary film on the subject, http://startingupinamerica.com/ ).   For three years the issue was buried as a casualty of election politics over ‘outsourcing’ and related issues.

Amazingly enough, a bipartisan Senate bill expected to be introduced this month, aims to get 75,000 new “entrepreneur visas” every year to founders who raise $100,000 for new ventures that hire at least two employees within a year.  The bill also would create 50,000 visas per year for foreign students who graduate from U.S. universities with advanced degrees in science, technology, engineering or mathematics (STEM).  Upon hearing the news, the valley cheered…for five minutes.  Because then the boom was quickly lowered.

President Obama and top Senate Democrats have said they are highly supportive of visas for STEM graduates and high-tech entrepreneurs, but are insisting those issues must be tied to package that includes establishing a pathway to citizenship for the estimated 11 million immigrants in America illegally.

Last November, the House passed a stand-alone bill that would have given visas to immigrants in high-tech fields.  President Obama opposed the bill, and the White House said at the time it “does not support narrowly tailored proposals that do not meet the president’s long-term objectives with respect to comprehensive immigration reform.”

Passing the Start-up Act in many ways is a step towards the America that needs to be re-captured:  As the global leader in innovation and technology, that creates hundreds of thousands of well paying jobs in growth oriented fields. The America which is able to compete with emerging markets in Asia and attracts the best talent.  The poison pill of linking skilled and unskilled immigration is another step down into the morass, where political expediency and vote-bank politics always trumps the need to solve difficult problems.  It’s a poor choice for America that desperately needs jobs and growth.

India-US Relations Blog

India’s foreign policy: A year in review

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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.)

Defence And Strategic Affairs Blog

Placing India on the Global Front

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Guest blog by Madhu Nair

Over the past two decades India’s stand on foreign affairs has undergone a sea change. Its view of the world and itself, as well as the world’s perception of India has undergone profound changes. From a country that was rather conservative in foreign matters to the present one that is actively engaging itself with world powers – it is a welcome change. The changing dynamics in geopolitics and the fluctuating economic condition has made sure that India makes the necessary correction in its foreign code to prepare itself better for the future. For years, India has tried to maintain a balance when it came to managing relations with external powers. Be it the unstable neighbors, the unreliable west or the fluctuating middle-east, India has been managing them with good care.

Dealing with international relations is a tricky affair. Any let up could scumble India’s image as an international player thereby causing harm to its political and economic interests. According to Dr. C. Raja Mohan, a leading foreign policy analyst, there are five challenges that the nation faces in the near future. These include:

•    The creation of an area of peace and prosperity in the South-Asian Subcontinent
•    The construction of a stable architecture for peace and cooperation in Asia
•    The peaceful management of Asia’s maritime commons
•    A new internationalism that will be shaped by a deepening integration with the global economy and an effective contribution to the management of global problems
•    A clear line between celebrating its own democratic values and imposing them on others.

To meet these challenges India’s foreign policy needs a pragmatic approach with dedicated efforts from all quarters of the establishment; the polity, the bureaucracy and subject matter experts. The credit to the positive change in the last few decades may well go to dynamic foreign affairs officials whose sole objective was to place India on the global map.

The first name that crops up in the list of illustrious diplomats the country has seen is that of Late Ambassador Bimal Sanyal. Mr. Sanyal is remembered as one of the most sincere and hardworking diplomat who pioneered many firsts in the service. He was the very first Secretary in the Ministry of External Affairs exclusively entrusted with ‘Economic Relations’ as a tool of diplomacy which has since become a mantra for India’s modern day diplomacy. The Association of Indian Diplomats awards The Ambassador Bimal Sanyal Memorial Medals to outstanding officers each year. It awards a Gold medal for the Best IFS Officer trainee each year and a Silver medal for the Best dissertation.

The architect of India’s modern foreign policy, Brajesh Mishra is undoubtedly the next in line. Principal Secretary to former PM Atal Bihari Vajpayee, Mishra was also the first National Security Advisor. Known for his tough stand on various issues and his ability to make things work, Mishra built a good rapport with officials, ministers and diplomats alike. A troubleshooter in many ways, his sole motive was to make India’s position known on a myriad of issues. Mishra’s death leaves behind a legacy that has become a cornerstone for many aspiring and serving officers of the time.

Shiv Shankar Menon, India’s present National Security Advisor is yet another torchbearer of India’s interest on the international platform. Menon was instrumental in shaping the Indo-US nuclear deal which remains a milestone in US-India relations. Coming from a family of diplomats, Menon has helped India come out of the age-old nonalignment concept which has brought India closer to the West.

The year 2012 has rather been regretful for India. The arrest of the Italian marines and the following controversy has cast a shadow on India-Italy relations. Norway’s displeasure on the cancellation of 2G licenses to Uninor, a telecom joint venture by Telenor and Unitech India, has put the relations under strain. Perhaps the only silver lining for this year, the FDI in retail, too has come under tremendous pressure from opposition parties and is giving the government sleepless nights. With the 2014 elections coming close, the year 2013 will play the decider in which way the tide moves.

India’s foreign policies must be framed around how the world stands and not what it feels it should be; a problem that still plagues the country’s leadership. Though it has come a long way from being unrealistic, India still needs to make concentrated efforts to make itself relevant on the global stage. Much of it again will depend on the men who manage India’s foreign affairs.

Disclaimer: All views expressed in this article are those of the author and do not necessarily represent the views of USINPAC.