Narendra Modi inaugurates Vibrant Gujarat Summit 2019 today: Meets can help states play role in economic diplomacy

Prime Minister Narendra Modi inaugurated the ninth edition of the Vibrant Gujarat Summit in Gandhinagar on Friday. Over 36,000 delegates from over 100 countries, five world leaders including chief guest President Shavkat Mirziyoyev of Uzbekistan, several senior ministers, and industry leaders will be attending the biennial three-day Summit this year.

As a quintessential business hub, aided no doubt by sustained publicity efforts, Gujarat has been able to promote its biennial Global Investor Meet (GIM) on a grand scale. However, Gujarat isn’t the first state to take its businesses to global investors. In fact, the honour goes to Karnataka which in 2000 organised what many consider India’s first GIM.

By the turn of the century, Bengaluru, Karnataka’s capital, had become India’s “Silicon Valley”—a hub for Information Technology. With such a solid reputation, Bengaluru played host to the first-ever GIM on 6 and 7 January 2000. The credit for ideating the meeting has often been given to then Chief Minister SM Krishna and his Cabinet colleague RV Deshpande.

File image of Prime Minister Narendra Modi. AP

File image of Prime Minister Narendra Modi. AP

The Karnataka government declared the Summit a success after reportedly gaining investments worth over Rs 20,000 crores, including one involving Rupert Murdoch-led News Corp. Whether the MoUs signed at the GIM successfully converted into investments is a separate debate. However, the Karnataka model laid the ground for Kerala, Gujarat, Madhya Pradesh and nine other states to launch their own GIMs.

The proliferation in GIMs across states has coincided with the boom in the economy as well as the renewed push for federalism in India.

GIM, an economic paradiplomacy

The period after 2000 saw India regularly achieving growth rates of over 6 percent each year. The growth rate in the first decade of the 20th century averaged about 8 percent. Consequently, India became the fastest-growing economy in the world by 2018. Over the course of two decades, India has also succeeded in bringing extreme poverty levels (by international standards) down to 3.1 percent of its population, according to the latest World Poverty Check data.

India’s economic success story has been arguably credited to the post-liberalisation free market policies. Such policies have made India a preferred destination for Foreign Direct Investment, attracting over $370 billion in investments since FY 2000-01. But it would be imprudent to think of a direct link between FDI inflows and the tons of MoUs signed in state-sponsored Summits. If various reports are to be believed, the rate of conversion of MoUs into real investments has remained abysmally low.

So, what do GIMs have to do with India’s growth story? If anything, ‘Global Investor Meets’ are good optics in the context of political economy, helping governments to promote their states as business-friendly and politically stable. Moreover, these meets help state governments steal the limelight while announcing promised investments worth billions of dollars.

Nevertheless, GIMs can become a major paradiplomacy tool in India. In his book, Federalism and International Relations: The role of subnational units, Panayotis Soldatos introduced the concept as “[…] direct and, in various instances, autonomous involvement in external-relations activities of federated states”. This simply means scenarios where a sub-division like a province or a city conducts diplomacy with another country.

Paradiplomacy has remained an underdeveloped idea in India since the Constitution only allows the Centre to conduct diplomatic relations. However, as India continues its economic march, economic considerations will increasingly become the driving force of its foreign policy. In this regard, investor summits provide state governments the platform to directly deal with international players for securing their local interests. As noted by an Observer Research Foundation (ORF) article, economic paradiplomacy will help states like Kerala which has a huge stake in West Asia, where over 5 million of its residents work.

The two biggest examples of economic paradiplomacy in India have been Narendra Modi and Andhra Pradesh chief minister N Chandrababu Naidu.

Under sanctions from the US and the West, Modi as Gujarat chief minister utilised Vibrant Gujarat Summit to woo the international community. In fact, Modi developed close ties with Japan, South Korea and China during his tenure as chief minister.

During his first term in office (1995-2004), Naidu promoted Andhra Pradesh as a cyber hub at investor summits across the world. After the bifurcation of Andhra Pradesh, Naidu has been touring the world to hardsell Amravati as a world class capital city.

Modi and Naidu’s examples highlight the possibility of state governments undertaking diplomacy within the framework of the federal system.

As states compete for foreign investments in the 21st Century, the Centre's financial leverage will continue to decline. This is likely to dramatically alter Centre-State relationship in India, creating the opportunity for states to play a more proactive role in economic diplomacy. Consequently, the Centre will have to play more of a supervisory role in keeping the states under check.



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Updated Date: Jan 18, 2019 11:52:44 IST

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