India aspires to become the third economic power on the planet before the end of the decade. Population growth, which is close to China and its more than 1.4 billion people, together with the presence of increasingly global firms such as the empires of Gautam Adani or Mukesh Ambani and the insistence on the use of cheap energy sources, although contaminants invites us to think that the subcontinent has years of prosperity ahead. This is also understood by sovereign wealth funds, which already have India as the second preferred country for their investments.
But the country’s president, Narendra Modi, wants to take advantage of economic growth to increase his power and influence in the region. India has a line of credit for neighboring countries to finance the construction of infrastructure, and it has reached 32.5 billion dollars between 2014 and 2022almost three times more than in the period from 2016 to 2014. For this, more than 300 lines of credit have been agreed for some 600 projects.
The Indian Foreign Minister, Subrahmanyam Jaishankar, did not hide a few months ago that it is an economic policy that goes beyond the economy. Almost a year ago, Jaishankar stressed that he prefers this type of pact with other countries to traditional free trade agreements, alleging that in the last quarter of a century this type of agreement has affected “very negatively” its supply chains in the country. “If after 25 years of accumulated evidence you still do not listen, then we have a problem,” the minister said then.
Instead, through the conditional lines of credit and guarantees manages to promote the products and services of India, in a way that serves to create jobs in the same country. In addition, in the long run, the creation of transportation infrastructure will facilitate the export of Indian-made goods to its neighbors.
‘Under your policy’Neighborhood First’, the Government is committed to developing friendly and mutually beneficial relations with all its neighbours”, summarized Jaishankar this summer when he explained the extension of credit lines that he has granted to a country with as many economic problems as Sri Lanka. “The terms of these loans Soft loans are transparent, with a low interest rate, a moratorium on principal repayment, a long repayment period and built-in flexibility,” he added.
This program brings together various development assistance ranging from the economy to the fight against climate change, defense or education, and was announced by Modi during the 2014 election campaign.
But the real objective goes far beyond the search for good relations with neighboring countries, the creation of economic synergies or the development of its own productive market. India is trying to stand up to China’s influence in the region. According to a study by the research center AidData of the William & Mary’s Global Research Institute has shown that there is “significantly more likely” that the state bank ExIm Bank will grant loans to projects in a country if China has previously done so.
The expansion of local companies is also encouraged, so that they achieve large contracts. This is the case of the one achieved by the Adani group in the Colombo port of Sri Lanka, for which it will receive more than 700 million dollars.
However, Modi has publicly rejected that this type of investment has any purpose other than their prosperity, and criticizes precisely the policies that lead to agreements with dependency relationships.
As reported by the Financial Times, some of the beneficiary countries do not believe the bonhomie of the Modi government. In the Maldives, a campaign has been launched by the political opposition to prevent Indian investments in the country
In the set of development aid programs, the Indian state has allocated more than 107,000 million dollars since 2014, according to RIS analysts, still far from the 838,000 million that China’s counterpart program invested only in 2021, according to estimates the American Enterprise Institute.