Modi 3.0 offers limited opportunities for the West

LONDON, June 3 (Reuters Breakingviews) - Many Western leaders see India as a bulwark against China. Their fear of the People’s Republic outweighs their concerns about Narendra Modi’s authoritarian tendencies. Now that India’s prime minister is on the cusp of winning a third term in office, exit polls suggest, the United States and Europe may double down on the idea that their enemy’s enemy will be a steadfast friend. But the overlap of interests is not large, while the two sides’ values are diverging. The scope for working together will be limited.

During his second term, Modi benefitted from warm welcomes in the West. Last June Joe Biden rolled out the red carpet for him during his state visit to Washington. The U.S. president and the Indian prime minister hailed a new era in their countries’ relationship and signed a clutch of defence and other deals designed to counter China’s global influence.

Shortly after, French President Emmanuel Macron made Modi his guest of honour at the country’s Bastille Day military parade. They agreed in principle deals for India to buy French-made jets and submarines, though these are still under negotiation. Modi in turn welcomed Macron as the chief guest at India’s Republic Day celebrations in January.

Western governments have also promoted India as an alternative supplier of manufactured goods that will help cut their dependence on China. Janet Yellen, the U.S. Treasury Secretary, has described the country as a destination for “friend-shoring”, a plan to build up supply chains with friendly countries.

Meanwhile, the United States, India and various other countries last September announced a multibillion-dollar rail, port, energy and communications “corridor” to link India to Europe via the Middle East. Israel’s war with Gaza has delayed this project.

Relations are not entirely friendly, though. The U.S. government is worried that Modi’s government is cracking down on Muslims, independent media and opposition politicians. The Indian government has responded that such criticism is “misplaced”, “deeply biased” and “unwarranted”.

Washington is also concerned that New Delhi was involved in a failed plot to kill a Sikh separatist in the United States. And the Canadian government has said there are “credible” allegations linking Indian agents to the murder of another Sikh separatist in Canada.

Despite these concerns, it is in the West’s interests to work with India to stop China throwing its weight around. But U.S. and European leaders need to be clear-eyed about what they can get from Modi, and what they can offer in return.

The main worry for U.S. leaders is that the People’s Republic will invade Taiwan or bully other countries in the region, especially the Philippines, Japan and South Korea, with which the United States has defence treaties. India’s fear is that China may grab parts of its territory near the vast land border the two countries share in the Himalayas.

New Delhi is not going to risk Beijing’s wrath by joining any campaign against China in East Asia. Nor are the United States and its allies likely to do much to fend off any attack by China on India – though they could provide the South Asian giant with useful intelligence.

The West can also sell India military equipment. That may cause China to put armed forces in the Himalayas instead of its large eastern sea frontier. Western governments can also help wean India off its dependence on arms from Russia, traditionally its main supplier.

Now that Vladimir Putin has deepened his alliance with Chinese President Xi Jinping, there’s an opportunity to get Modi to downgrade his own alliance with the Russian leader. But New Delhi is not going to cut ties with Moscow, not least because India is making a lot of money by importing Russian crude oil at a discount and then re-exporting refined products.

The West should therefore be wary about supplying its most sophisticated military kit to India and transferring technology that would allow New Delhi to build and develop advanced systems on its own.

Western governments and companies are eager to build up alternative manufacturing hubs as they reduce their dependence on goods made in China. But they should not expect India to fill much of the gap. Though India is expected to grow faster than other major countries and will become the world’s third-largest economy by 2027, according to the International Monetary Fund, that does not make it a new China.

For a start, India’s economic output of $3.6 trillion last year was only 20% of the People’s Republic. What’s more, its prowess is in services rather than manufacturing. Decades of protectionism, which Modi has continued, mean India does not export much of what it produces. Though the country has an increasingly large internal market, it accounted for only 1.7% of global exports in 2021, ranking 18th in the world behind smaller emerging economies such as Mexico and Vietnam.

Despite its growth, India has also struggled to attract foreign direct investment. Last year it secured $28 billion below Brazil and Mexico and roughly on a par with Sweden, according to the OECD.

There are other areas where the West and India could, theoretically, cooperate – notably on climate change. The United States and its allies could help India fast-track its green transition – for example by providing it with cash to close coal-fired power plants before the end of their useful life.

Modi showed little enthusiasm for such a deal when it was discussed in recent years. But if he changes his mind, the West has a strong interest in stopping the upward trajectory of India’s carbon emissions.

Relations between large countries will always be complicated by geography, economics and geopolitics. India’s prime minister appears to view India’s relations with the West as transactional. Western leaders would be wise to take the same approach.