India Foreign Policy India\'s Growth

India Foreign Policy

India's growth is one of the most compelling economic stories. The country's economy has grown rapidly -- 9.7% in 2007 and 9.6% in 2006. Significant contributing factors to that growth have included substantial inflows of foreign direct investment and rising foreign exchange reserves (Economy Watch, 2008). The country has positioned itself as a source of IT and customer service outsourcing in particular in order to attract foreign investment. While internal reforms are part of India's economic miracle, foreign policy has also played a strong role, for without access to Western capital, internal markers are subject to growth constraints.

India's foreign policy on economics is driven by several factors, and it is the aim of this paper to explore each of them. The role of the states in dictating foreign policy will be analyzed. Each of India's states has its own programs for attracting foreign investment. To a certain extent, each of these states drives foreign economic policy. However, the central government still exercises control over many facets of India's economy, so the current foreign economic policy is a blend of state-based economic policy influences and the influence of the central government (Jenkins, 2003).

Another element of India's foreign economic policy is its relationship with the Gulf states. India has long traded with the Arab world, and now is in a position of dependency with respect to oil supplies. However, as both India and the Arab world experience strong economic growth, the number of economic linkages between the two has proliferated. The Gulf is now the second-largest trading partner for India behind the United States. Key elements of this relationship are maritime trade, Indian guest workers in Gulf countries and India's desire to attract Gulf money into its economy (Economic Times, 2010).

Economic diplomacy is a central component of India's foreign policy. The country has taken a leadership role among developing nations and seeks to act as a bridge between the developed and developing worlds. India promotes economic policies among developing nations that will help them to grow their own trade and strengthen their own relations with Western powers. India has also become a major proponent of technology and labor exchange in order to promote growth and break down societal and economic barriers (Embassy of India, no date).