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India Embracing Bilateralism Amid Global Uncertainty
Context: Union Finance Minister Nirmala Sitharaman highlighted the increasing importance of bilateral engagements in a world growing more fragmented and multipolar.
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- Speaking at the Indian High Commission in London during a moderated discussion on India’s development trajectory, the FM emphasised that bilateralism is emerging as the more pragmatic approach in an era of global uncertainty and weakening multilateral institutions.
- The discussion featured Lord Nicholas Stern, Professor at the London School of Economics, and N.K. Singh, former bureaucrat and BJP leader.
India-U.K. Trade Deal Not Linked to U.S. Tariffs
- While Sitharaman expressed optimism that the India-U.K. Free Trade Agreement (FTA) would be concluded “sooner rather than later,” she denied that the recently announced U.S. tariffs were pushing India and the U.K. to fast-track negotiations.
- On April 2, U.S. President Donald Trump announced tariffs of 10% and 26% on U.K. and Indian exports, respectively, sparking speculation about accelerated trade diplomacy between New Delhi and London.
Pitching GIFT City as India’s Financial Powerhouse
- During her visit, Sitharaman is actively promoting Gujarat International Finance Tec-City (GIFT City) as India’s emerging financial services hub.
- She met with Shriti Vadera, Chair of Prudential PLC, encouraging the insurance giant to explore opportunities in GIFT City’s Special Economic Zone.
- The Indian government views GIFT City as central to its vision of positioning India as a global financial services destination, particularly through its International Financial Services Centre (IFSC).
Focus on Education, Investment, and Professional Collaboration
- As part of the Dialogue, the two countries are also discussing a Bilateral Investment Treaty (BIT), mutual recognition of professional qualifications, and expanded collaboration in the education sector.
- Sitharaman said that both sides are exploring the possibility of U.K. universities establishing campuses in India, including within GIFT City.
- U.K. institutions such as the University of Southampton have already begun operations in India under the National Education Policy (2020).
- Queen’s University Belfast is set to launch courses in GIFT City next year, while the University of Surrey is also considering campus plans, The Guardian reported.
- The Minister acknowledged a recent decline in Indian student preference for the U.K., with more choosing the U.S. for higher education.
Importance of Bilateralism
Bilateralism refers to political, economic, or cultural relations between two sovereign states. It plays a crucial role in international relations due to:
- Focused Diplomacy: Enables direct negotiations tailored to mutual interests (e.g., U.S.-China trade deals).
- Economic Benefits: Facilitates trade agreements (e.g., India-Japan nuclear deal).
- Security Cooperation: Strengthens defense ties (e.g., U.S.-Israel military partnership).
- Conflict Resolution: Helps resolve disputes through dialogue (e.g., India-Pakistan Kartarpur Corridor).
- Cultural Exchange: Promotes people-to-people ties (e.g., France-Germany student exchange programs).
Challenges of Bilateralism in the Present Context
- Power Asymmetry: Stronger nations may impose unfair terms on weaker ones. The U.S.-Mexico trade relations under USMCA, where Mexico had to accept stricter labor laws.
- Geopolitical Rivalries: Bilateral ties can be strained due to third-party conflicts. The Australia-China relations deteriorated due to Australia’s alignment with the U.S.
- Economic Protectionism: Rising nationalism leads to trade barriers. The U.S.-EU disputes over steel tariffs.
- Sovereignty Concerns: Smaller nations fear dominance by larger partners. Sri Lanka’s debt crisis and Chinese port leasing (Hambantota).
- Changing Alliances: Shifts in global power dynamics disrupt partnerships. Russia-Ukraine war strained Russia-EU energy ties.
While bilateralism remains essential for tailored cooperation, challenges like power imbalances, geopolitical tensions, and economic nationalism complicate its effectiveness. Successful bilateral relations require mutual respect, transparency, and adaptability to global changes.
