Published daily by the Lowy Institute

Will Modi and Trump get along?

The story of Narendra Modi's rise to power in India sounds eerily familiar today. And at first glance, Modi and President-elect Donald Trump should be natural allies.

Photo: Getty Images/Bloomberg
Photo: Getty Images/Bloomberg
Published 20 Jan 2017 

In 2014, a man known for his naked populism, an aggressively self-referential election campaign and millions of Twitter followers was elected leader of the world’s largest democracy. Celebrated for his astute business acumen, he served up an intoxicating cocktail of cultural nationalism, Islamophobia and an ambitious infrastructure agenda to the millions who voted for him.

In the period before he took power, he came under uncomfortable levels of scrutiny from the media and global leaders. He sustained heavy criticism for his record of divisive politics. Major global publications such as The Economist refused to endorse him.

The story of Narendra Modi's rise to power in India sounds eerily familiar today. And at first glance, Modi and President-elect Donald Trump should be natural allies. Indeed, there is a suggestion that India-US ties will continue to flourish under Trump, who noted during his campaign that India and Hindus would find a 'true friend in the White House' should he be elected, noting 'I am a big fan of Hindu (sic). I am a big fan of India'.

Since his election in 2014, Modi has largely won over his critics. India’s impressive growth rates, which are tipped to hit 8% in the next few years, are a vast improvement from his predecessor’s days. Even the appallingly implemented demonestisation policy in November 2016 (whereby the government suddenly voided large denomination notes, withdrawing 86% of all cash from circulation overnight) may have trimmed a whole percentage point off its growth in 2016 but financial institutions have still only downgraded their growth forecasts to a pretty robust 7.2% for 2017.

Modi’s sustained pace of overseas travel since entering office allowed him to shop around the Modi brand of politics in the international market. He gained the approval of many of the world’s leaders, including outgoing US President Barack Obama, and major investment deals from the US, Russia, Japan and Europe poured in. US FDI in India jumped by 500% under Modi.

Modi has also focused on India’s traditionally lacklustre foreign policy in an effort to recalibrate its influence to match its growing economic power. But despite Modi’s rhetoric, India’s international dealings are still considered by many academics to be governed by the same cautious, pragmatic ideals as always.

On 17 January, Modi took the stage to kick off his second annual flagship geopolitical conference, the Raisina Dialogue (17-19 January), to again stake out India’s place as an emerging major power. The Dialogue, titled 'The New Normal: Multilateralism with Multipolarity', is framed as India’s alternative to The Shangri-la Security Dialogue in Singapore. While much of the material in Modi’s speech was not new, the backdrop, just days before the inauguration of Trump, cast his rhetoric in a new light, leading to a number of questions about how Trump will deal with India and how this will impact India’s recalibration of its place in the world.

For China, one of India’s biggest strategic concerns going forward, there were a number of subtle messages and warnings as well as an acknowledgement that the two rising powers would need to accommodate each other. Modi cautioned that while it was normal for neighbouring powers to have their differences (alluding to the series of recent diplomatic spats), both countries 'need to show sensitivity and respect for each other's core concerns and interests'.

Washington has long seen India as a potential but somewhat reluctant counterbalance to China in the Asia Pacific. There is evidence that this vision will continue under a Trump Administration: incoming US Secretary of Defence James Mattis, for instance, said in his Senate confirmation hearing that India had a key role in ensuring security and stability across the Asia Pacific. Similarly, India will seek a continuation of strategic and economic engagement with Washington while pursuing cooperation with other major powers. However, the new Administration may push Delhi beyond its comfort zone. Trump is expected to introduce a far more transactional style of diplomacy, and divergent views over managing China’s rise could become a major source of tension in US-India relations.

For Pakistan, Modi’s speech contained a far more deliberate call to isolate Islamabad and an all too familiar refrain that there would be no prospect of peace negotiations as long as Pakistan supported terrorism. Modi and his team will likely already be lobbying the incoming Trump team to harden its stance towards Pakistan. But Trump’s likely approach to Pakistan remains one of the many 'unknown unknowns' of the new presidency.

While the conference in Delhi this week focused on multipolarity in Asia, Trump has shown worryingly little interest in Asia and the Asia Pacific order. He has even suggested that allies — particularly Japan — need to step up and tend to their own security. A more isolationist America in Asia is unlikely, but India will be presented with a difficult challenge for its notion of multipolarity if the US is not one of the key players.

A more immediate threat to India will be Trump’s approach to trade and investment. Modi expressed concern in his speech at the rise of 'parochial and protectionist attitudes' and the increased 'sentiment against trade and migration' in the world today. For India, like China, both the election of Trump and the impending Brexit seem to suggest that the economic tide of globalisation is suddenly receding at a moment when they stand to benefit most from it.

On trade and investment, Trump has dropped his pleasantries towards India and taken populist aim against its manufacturing and outsourcing sectors, alongside China’s. For India the threat of increased tariffs on its exports to the US would be devastating for its current account balance. The US is the largest destination for Indian goods and services exports, and Modi’s economic growth strategy is based on an aggressive campaign to attract US and other manufacturers and investors to India’s shores through the Make in India program.

Trump has also indicated in his speeches that he wants to abolish the H-1B visa, a business visa used heavily by major Indian firms. And has hinted that he will impose large penalties on companies outsourcing work or moving operations overseas (an irony not lost on people who know Trump’s business has used the H1-B visa program). Modi used his speech on Tuesday to appeal to Trump’s America, emphasising that the world needed India’s rise as much as India needed the world.

Modi's foreign policy, while gaining confidence, is still a cautious one, and it assumes that the prevailing multipolar order in Asian order will remain supported by the US. So today, like most of us, Modi is probably hoping that the doom and gloom predictions about Trump’s leadership, much like those during his own rise to power, turn out to be misplaced.

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