In many of the challenges confronting the new Indian government, from neighbourhood to trade, China looms large

Prime Minister Narendra Modi will, in all likelihood, make his first overseas visit in his second term to the Maldives. The choice of destination is a significant one, highlighting both the opportunities and challenges that the Modi government will confront as it maps India’s diplomatic priorities for the next five years

Modi began his first term with a similar choice of destination — Bhutan. Five years ago, he also invited the leaders of SAARC countries, including Pakistan’s Nawaz Sharif, to his inauguration. In keeping with the close-to-home theme, on 30 May, Modi will be sworn-in

in the presence of leaders from the Bay of Bengal-focused BIMSTEC grouping (Bangladesh, India, Myanmar, Sri Lanka, Nepal, Bhutan and Thailand).

The idea — both from the choice of overseas visits and the inaugural invites — is to emphasise India’s priorities in its immediate neighbourhood, which has been falling rapidly and deeply into China’s economic embrace.

To be sure, Modi is far from being the only Prime Minister who declared it would be “neighbourhood first”. Yet, his record during his first term in translating these right signals into action is mixed, at best.

In confronting three of India’s prominent challenges — the neighbourhood, Pakistan, and China — Modi 1.0 was marked by twists and turns. An effort at the start of his term to reach out to Islamabad was subsequently derailed by numerous Pakistan-sourced terror attacks, and his tenure ended with the Balakot airstrikes, the worst tensions between the neighbours in decades, and continuing unrest in Jammu and Kashmir.

Similarly, what began as an overly dominating approach to India’s neighbours, most typified by the Nepal blockade in 2015, appeared to yield to a much-needed course-correction in how India engages with her smaller neighbours, which has now seen improved relations with Nepal and Sri Lanka.

Ties with China were in free-fall in 2017 amid the Doklam stand-off, but the last year of Modi’s term saw a re-calibration in relations, with the two “informal summits” with Russia and China. While security ties with the United States and other regional powers who share India’s concerns on China have expanded considerably and will continue to do so, the unpredictability of US President Donald Trump and continuing trade conflicts with his government may have contributed to the renewed emphasis on strategic autonomy.

Looking forward, in many of the challenges confronting the new Indian government, from neighbourhood to trade, China looms large. Bilateral ties this year have, no doubt, been helped by China’s long-overdue move to finally back the designation of the Pakistani terrorist Masood Azhar at the United Nations Security Council 1267 sanctions committee, after a decade of essentially vetoing the listing at Pakistan’s behest.

During the election campaign, Modi was noticeably measured on China, in a striking difference from 2014 when he slammed an “expansionist” neighbour. Modi said during the campaign that the “blacklisting is the result of a global consensus against terror and it would be unfair to reduce it to a China-centric issue”. “China is also part of the countries across the world concerned about terror,” he said. “The India-China relationship is one of mutual respect. When the world is speaking of this century being Asia’s century, they are speaking of the rise of both China and India becoming the powers they used to be historically. So, we are working together, with the knowledge that we are both focusing on growth. Even if there are some differences, both the countries understand there is a lot we agree upon as well.”

Modi did acknowledge the many unresolved issues with China — such as the boundary question — but stressed that the common approach since Wuhan was to not allow “differences to become disputes”. As much as managing stable relations with China will be a priority, Modi’s first term underlined the challenge in doing so, evident during the 72-day border stand-off at Doklam.

In a recent interview, Modi chose to emphasise strategic autonomy in India’s outreach, describing how two side-line meetings at the G20 summit— JAI (Japan, America, India) and RIC (Russia, India and China) — in Modi’s words “got the attention of global think tanks”. “India was common in both meetings,” he said. “This shows the importance of India.”

No doubt, India and China will continue to cooperate on shared interests such as trade — particularly amid the China-US trade war and several common concerns on ensuring global free trade — even as they navigate a growing list of thorny issues.

India has made its opposition on China’s signature Belt and Road Initiative well-known, and was the only major country to boycott both the first and second Belt and Road Forum summits in Beijing. Modi deserves credit for taking a strong stand on the Belt and Road Initiative— in light of China’s projects in Pakistan-occupied Kashmir — despite widespread warnings of India’s impending isolation. Since then, India’s criticisms of the plan, from debt burdens to opacity, have found a wider audience.

But without offering an alternative to a region in need of financing and infrastructure, this will mean little. Offering a credible alternative to the deepening Chinese economic presence in the neighbourhood remains a pressing challenge, as I recently argued in “India 2024”, a Brookings brief that analysed the tasks facing the new government.

While India has taken the first steps in this regard through a new willingness to work together with other countries, including Japan and the United States, constraints in capacity to deliver projects on time is a considerable obstacle. Limitations on funding is another.

Similarly, on trade, India’s trade deficit with China, its biggest trading partner, China, has risen from $38 billion in 2014 to $58 billion in 2018. A lack of competitiveness in manufacturing, continued dependence on Chinese machinery and equipment, and market access problems in China for Indian companies, particularly in pharmaceuticals and information technology sectors, have all contributed to an increasingly unsustainable trade relationship. What has not helped is the absence of a coherent policy in dealing with China, a consequence of a diffused approach to both trade and investment regulation.

By heading to the Maldives, Modi will certainly be sending the right signals to the neighbourhood. But as his second term begins, the time has come for more than signalling.