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India’s Diplomatic Dance

24 September 2014

India’s new Prime Minister, Narendra Modi, is moving quickly to establish India as a major global actor. This month he has visited Japan, received President Xi Jinping of China and will shortly make his first visit to the US.

Modi is a big fan of Japan and it was no surprise that Tokyo was his major first overseas visit. The fact that he spent five days in Japan is testimony to the importance Modi attaches to the relationship.

The Japanese and Indian media suggested that the visit was an effort of the two major democracies in Asia to balance the rising power of China. It was little surprise, therefore, that closer security ties were the main focus of the visit. Japan agreed not only to ease restrictions on exports of defence equipment and technology but to consider a number of collaborative projects. Both sides agreed to hold regular joint training exercises in maritime defence. The two sides also made progress on nuclear energy co-operation.

Another highlight was Japan’s promise to double investment in India over the next five years – from $2bn to $4bn.  Japan also agreed to provide new loans of up to $480m to the India Infrastructure Finance Company.

The priority areas for investment were listed as construction of high-speed railways and other transport systems, clean-up of the Ganges and other rivers, rural development and development of "smart cities." Tokyo and Delhi also finalised an agreement to allow import of rare earths from India as Japan looks to diversify supply away from China.

When President XI Jinping arrived in Delhi a week later it was inevitable that there would be a bidding war with Japan in terms of investment. Xi signed several agreements in Delhi mainly covering Chinese investment in India's infrastructure. Priority areas were the railways and industrial parks in Gujarat and Maharashtra. China would also allow more market access to India for pharmaceuticals and farm products as reducing the trade deficit is one of Modi’s top priorities.

Modi called for an early settlement on the disputed common border between the two countries and said the ‘true potential of our relations’ would be realised when there was ‘peace in our relations and in the borders’.

Modi now heads to the US for his first meeting with President Obama. He had suffered a visa ban for many years as a result of incidents in his home state over a decade ago but the US moved swiftly to drop the ban after his election. Trade, security and nuclear issues will top the agenda.

So far Europe has not figured high on Modi’s travel plans. The negotiations on the EU-India FTA are not progressing so we are unlikely to see Modi in Brussels for some time.

Meanwhile his energetic diplomacy has put India back on the map and given leaders in Beijing and elsewhere much food for thought.