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Can Modi’s third term bring India and Asean closer together?

South China Morning Post (Hong Kong)
Syed Munir Khasru
June 16, 2024

India’s recent general elections were spread out over the course of six weeks but still managed to provide a thrill. The results suggest the Indian voter decided to humble the mighty and restore balance.

The victory for Prime Minister Narendra Modi, the Bharatiya Janata Party and its alliance partners has secured a mandate for political and economic reform, although they will have to engage in negotiations and are likely to face stronger opposition. Modi’s victory was widely expected, but needing a coalition to form a government was not.

As Modi begins his third term, India’s “Act East” policy is poised for a recalibration. New Delhi’s economic and strategic engagement with Southeast Asia saw an upswing during his first two terms, albeit with some shortcomings that require a course correction. Modi may now inject new vigour into this key foreign policy as India seeks to establish a stronger Indo-Pacific presence.

On the economic front, trade and investment links with Southeast Asian nations have received a major boost, with annual bilateral trade surging from around US$80 billion in 2014 to more than US$110 billion by 2021-22. However, the existing trade accord with the Association of Southeast Asian Nations – the Asean-India Free Trade Area – is seen as heavily favouring the Asean side, frustrating India.

India’s exports to Southeast Asia saw a moderate increase in the 2023 financial year, rising to US$44 billion from US$42.3 billion the previous year. Meanwhile, imports from Asean nations rose at a sharper pace, from US$68 billion to US$87.6 billion, resulting in a substantial trade deficit of US$43.6 billion for India. The need to address the trade imbalance is all the more pressing given that the trade deficit was just US$5 billion in 2011.

On the other hand, the economic outreach to Asean nations under Modi’s government has been hampered by a reluctance to undertake market reforms and liberalise tariffs. This has led to frustration among several Southeast Asian states, leaving the economic dimension of Act East lagging behind the policy objectives.

On the strategic front, India’s efforts as part of the Act East policy have helped bring seven Asean members into the Indo-Pacific Economic Framework, an initiative aimed at strengthening economic cooperation across the two critical regions. India’s Indo-Pacific Oceans Initiative and Asean’s outlook on the Indo-Pacific present opportunities for extensive maritime collaboration.

Participation in these complementary Indo-Pacific strategies allows for greater coordination of respective interests in this strategically vital region. Initiatives dealing with connectivity, such as the US$484 million Kaladan Multi-Modal Transit Transport Project connecting India to Myanmar and the India-Myanmar-Thailand Trilateral Highway, are examples of what Asean-India collaboration can achieve in this area.

However, India’s level of participation remains constrained by resource limitations and risk aversion, preventing it from playing a larger role in countering China’s expanding strategic footprint across the Indo-Pacific. There is a mismatch between India’s rhetorical commitment to upholding a “free and open Indo-Pacific” and its limited role as a security provider in underwriting the regional rules-based order.

Modi’s re-election is likely to give the economic imperative greater importance as India attempts to position itself as an attractive alternative to China for investment and manufacturing under the government’s production-linked incentive schemes.

Fresh momentum could also be injected into expanding economic cooperation agreements with Asean to include commitments by India to greater service-sector liberalisation.

The security dimension is also likely to be scaled up. Maritime engagement, joint operations such as naval exercises between India and Asean states, capacity building and exports to Asean navies are just some areas that could see increased collaboration. As India expands its military footprint in the region to protect its strategic interests, expect a greater focus on defence diplomacy and the sharing of logistics and intelligence with friendly Asean partners.

New Delhi could also consider establishing strategic maritime hubs or logistics facilities across Southeast Asia. Negotiations for acquiring bases in Vietnam’s Cam Ranh Bay and Indonesia’s Sabang Island could bear fruit during Modi’s third term.

At the same time, expect India to continue to develop its soft power across Southeast Asia, through expanded cultural exchanges, education links and development assistance programmes, to bolster its image as an attractive counterweight to China’s hard power.

For smaller Asean states walking a tightrope between the Indian and Chinese spheres of influence, Modi’s third term holds both opportunities and challenges. An economically integrated, strategically engaged India provides a counterweight to Chinese dominance. Productive engagement with India can help Asean states hedge against overreliance on Beijing while enhancing their leverage.

However, they will have to deftly manage potential flashpoints arising from New Delhi’s geopolitical rivalry with Beijing. And Asean centrality could face new strains if US-China tensions cast a larger shadow over the region. Taking advantage of enhanced Indian engagement while fencing off destabilising spillover effects will require skilful statesmanship from Asean nations.

Ultimately, a revamped Act East policy will aim to protect India’s core strategic and economic interests across Southeast Asia while promoting its vision of an open, inclusive and rules-based Indo-Pacific regional architecture.

As India tries to convert its heft into greater strategic alliances, Asean’s neutrality will come under considerable pressure in the years ahead, given the overlapping spheres of influence. For the time being, though, developments in India will continue to bolster ties with Asean, one of the world’s most successful regional economic alliances.

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