In the Name of the South: India’s aggressive economic diplomacy C. P. Chandrasekhar

India’s government has since the year of its G20 Presidency claimed to have restored the country’s role as the ‘Voice of the South’ in global dialogues. That is often backed up by reference to its efforts to focus attention on the problem of debt stress and default in poor developing countries, and to the induction of the African Union into the G20. Third World ‘leadership’ is being won by building solidarity among less developed countries is the argument.

But recent episodes suggest that in practice that may not be what India is managing to achieve. One such episode occurred at the 13^th Ministerial meet of the WTO at Abu Dhabi, where the closing ceremony was marked by India’s Commerce Minister Piyush Goel rushing to the podium to accost WTO Director General (DG) Ngozi Okonjo-Iweala. Goel was reportedly trying to prevent a statement by Fiji’s Deputy Prime Minister and Minister for Trade, Manoa Kamikamica, on fisheries subsidies, an agreement on which was stalled by India. India’s allegation seemed to be that the DG had asked the Fijian minister to make the statement though there had been no consensus on the issue. The DG reportedly denied having instructed the Fijian minister to do so, and the WTO was unwilling to confirm whether the minister had told his Indian counterpart that he had been so instructed.

A number of countries at the WTO have been pushing for an end to subsidies provided for fishing and fishing-related activities, in an effort to curb excessive fishing that leads to a rapid depletion of marine resources. A few rich countries—United States, European Union members, Japan and South Korea (besides China)—account for a large share of these subsidies, which are seen as accruing disproportionately to owners of large deep sea fishing vessels. Many poor countries are coastal nations with a large fisher population and see in the reduction of subsidies a window for them to expand their own exports. However, India has been demanding a significant modification of the draft agreement involving a 25-year moratorium for developing countries, so as to subsidise the activity of poor fishers. Though ostensibly aimed at high income countries, this demand that stalls the agreement has upset some poor countries. The stand-off with the Fijian minister appears to reflect that frustration with India’s stand.

Barely had this display of irritation on India’s part at a global event been forgotten, when news came that it had lodged a diplomatic protest in Bangkok against remarks made by the Thai ambassador to the WTO, Pimchanok Vonkorpon Pitfield, criticising India’s rice procurement and public stockholding programme. India’s subsidies under that programme, though seen intrinsically as WTO violative, are partly endorsed by the Agreement on Agriculture (AoA) which permits the use of such subsidies for food security reasons subject to certain ceilings. Some WTO members claim that the volume of subsidies implicit in the Indian programme exceeded the de minimis ceiling of 10 per cent of the value of production that the AoA provides for. The ambassador had gone further and alleged that, in practice, India’s subsidies were not really aimed at bolstering food security but were more a means to push exports of rice at the expense of its competitors, including Thailand.

There are factors favouring India in this debate about excess subsidies: the regime excludes certain subsidies that the high income countries rely on to support their farmers; and the computation of subsidy levels uses a benchmark average price from 1986-88 which is definitely not appropriate. But the fact remains that domestic concerns have influenced the way the procurement and distribution programme has been run. There have been periods when stocks accumulated and not distributed through the public distribution system (to restrict the volume of subsidies) were sold cheap to traders through the open market scheme, and some of those supplies found their way to export markets. India, which was earlier not a dominant exporter of food grains, emerged as the leading exporter of rice, ahead of Thailand. That has shaped Thailand’s perceptions. But India’s response was so aggressive that its ambassador to the WTO had to be recalled by the Thai government.

These are instances where India’s diplomacy has not been influenced by actual or perceived economic disagreements. That has been the case with India’s positions on IMF support for a balance of payments stressed and political fractious Pakistan, for example. It is indeed true that, influenced by the strategic interests of the US and its European allies, the IMF has been less of the disciplinarian it claims to be when choosing to support Pakistan. It has accommodated Pakistan with 23 loans since independence, even though the targets set in most of those programmes remained unrealised. In July 2023, before the caretaker government that preceded the recently elected administration took office, and when Pakistan was balance of payments stressed not just because of structural and policy weaknesses, but also the effects of devastating floods, the IMF decided to grant it a stand-by arrangement loan of $3 billion. India, as is its practice, had instructed its Executive Director to abstain from voting for or against the loan, and the immediate disbursement of $1.2 billion. It also abstained when in January, following a review, the IMF released a second tranche of $700 million.

The problem now facing Pakistan’s new and unstable government is that the country’s reserves are adequate only to cover around two months of imports and there are repayments on past debt falling due, all at a time when the prospect of boosting foreign exchange receipts are dim. This makes the residue of a little more than a billion dollars available under the current IMF arrangement inadequate, forcing it to approach the institution for one more loan following the release of that sum. This time India has decided to go beyond abstaining on the vote releasing the last tranche of the ongoing IMF programme and demanded that the release must be contingent on measures that provide “checks and balances and ensure stringent monitoring” of the ways in which the money is utilised, to prevent it being diverted either to defence spending or to servicing of loans from other parties.

The latter is widely interpreted as a reference to loans from China. Interestingly, Imran Khan now in prison, but having the legitimacy that comes from the election of several independents supported by his Pakistan Tehreek-e-Insaf (PTI) party, has also written to the IMF asking it not to release additional funds without conducting an audit on the conduct of the elections, which he claims were rigged. Imran Khan has for some time now taken an adversarial position relative to the US. It is ironic that the Indian government that sees the US as a staunch ally in its conflicts in the region, finds itself on the same side as an adversary of the US.

(This article was originally published in Frontline on March 21, 2024)