India's 'Act East' policy is Prime Minister Narendra Modi's diplomatic initiative to promote economic, strategic and cultural relations with the vast Indo-Pacific region. 'Act East,' launched by Prime Minister Narendra Modi in 2014, and its early avatar, 'Look East,' launched in 1991, represent two different phases in the evolution of India's policy towards the Indo-Pacific region. Through Act East, PM Narendra Modi has given a new thrust to intensifying diplomatic, economic, and strategic relations with ASEAN, Japan, South Korea and now Australia.
In the post-Cold War period, India had a strong rationale to cultivate closer relations with the region's countries for mutual benefit. The Gulf War of 1990-91 severely affected the Indian economy due to an unprecedented oil price rise, accentuated by the fall of the Soviet bloc, on which the Indian economy was heavily dependent. India was, therefore, compelled to seek alternative regions for its economic sustenance. However, the immediate neighbourhood, South Asia, did not offer many opportunities for trade and investment. Political bickering, lack of trust, and the economic backwardness of the region compelled India to look to Southeast and East Asia for greener pastures. Realising that ASEAN and East Asia offered immense prospects for growth, India launched its Look East policy.
Yet , the region remained neglected. It was only under PM Narendra Modi's leadership that after 2014, India could forge robust partnerships with several countries in the region. India's relationship with ASEAN was strengthened, and Japan, South Korea, and Australia were added to the ambit of the Act East policy.
New Delhi's Act Asia policy today rests on three central pillars: Elaborate institutional mechanisms engagement, promote economic interests, including infrastructure development and connectivity, and common strategic interests.
Examining India's relations with ASEAN, Japan, South Korea, and Australia would show how a vast network of institutional structures has lent support to expanding bilateral engagements. India is a full-fledged member of ASEAN. Today, she is an active member of the ASEAN Regional Forum (ARF), East Asian Summit (EAS) and the ASEAN Defence Ministers Meeting Plus.
The same characteristic feature is seen in Japan and South Korea, the other two crucial pillars of Narendra Modi's Act East policy. Various institutional mechanisms bind their partnership in these forums, such as annual summits, strategic dialogue, economic dialogue and numerous forums on counter-terrorism, energy cooperation, UN reforms, cyber security, and maritime cooperation. Further, India and Japan have institutionalised a 2+2 Ministerial Dialogue. PM Modi emphasised extending the dialogue beyond the bilateral ambit, upgrading the trilateral US-Japan-India dialogue to ministerial. Equally important is New Delhi's participation in the QUAD meetings with the US, Japan, and Australia, particularly after 2017, which has underlined India's interest in exchanging views on the strategic environment of the Indo-Pacific region. Similarly, India and South Korea have forged several bilateral mechanisms to strengthen their partnership. Both countries' defence ministers and national security advisers have regularly met to promote strategic cooperation.
India's economic relations with ASEAN have grown dramatically in the last decade. India and the ASEAN have signed two trade agreements in goods and services, creating one of the biggest trade areas with a market of 1.8 billion people. India-ASEAN annual trade today accounts for over $131 billion in 2022-23 for the first time in history. A good deal of ASEAN private investment has also flowed into India in many sectors, including the construction of ports and highways, food processing, shipping, and auto components. Similarly, India's investment in ASEAN has grown considerably. In fact, India's relationship with ASEAN is a key pillar of PM Narendra Modi's Act East Policy. In an unprecedented gesture, the Leaders of ASEAN countries also graced the 69th Republic Day Parade as India's Guest of Honour. It was a proud moment for India that demonstrated PM Modi's diplomatic success in hosting the Leaders of all ten ASEAN countries within a short span of five years of the launch of the Act East Policy.
India's investment in ASEAN has grown considerably over the last decade. A similar pattern in India's trade with Japan and South Korea. In 2022-23, trade between the two reached a record $21.96 billion. One can see the same phenomenon in the case of India-South Korea trade. The Indo-Korea bilateral trade reached a record $27.8 billion in 2022.
The story regarding Japan's and South Korea's investments in India differs. Prime Minister Modi has shown great interest in acquiring Japanese investment for several CAPEX. Praising Japan for having done more for India's modernisation than any other country, Modi believes that Japan's technological and economic prowess can support India's development by transforming infrastructure and manufacturing sectors. In their first summit meeting in 2014, Modi and his Japanese counterpart, Shinzo Abe, set the target of doubling Japan's direct investment and the number of Japanese companies in India. Japan agreed to extend US$ 33.5 billion in public and private investments in India. This target has been successfully achieved. Prime Minister Narendra Modi then decided to set up many Japanese industrial townships and electronic parks in India. Abe agreed to support India's 'Make in India', 'Digital India' and 'Skill India' programmes.
The volume of Japanese private investment in India increased since 2014 owing to the Modi government's efforts, such as creating a special Japan Plus desk at the Ministry of Commerce and Industry to minimise the bureaucratic obstacles in clearing investment projects.
South Korean FDI to India has also steadily increased in recent years, reaching US$ 7.27 billion by the end of 2021. Korea's presence in the electronic and automobile sectors has become prominent. Hyundai, Samsung and LG have become household names across India.
India's Act East Policy is closely connected with its long-term vision of developing its Northeastern region (NER), considered a gateway to Southeast Asia. Prime Minister Modi is committed to developing the region's infrastructure of transport, highways, communication, power, and waterways.
In the past, the interests of the NER did not receive as much attention as required from the central and state governments. It hampered the region's development, which remained backwards without infrastructure facilities. Further, local insurgencies, disorder and external interference considerably influenced the region's progress.
Since Japan's interests in the NER are deeply rooted in history, a broad bilateral consensus existed to cooperate for the region's development. In their first summit meeting in 2014, Prime Ministers Modi and Abe emphasised the importance of the NER. After that meeting, the Tokyo Declaration underscored Japan's commitment to enhancing connectivity and development in the NER. It stressed the need to link the region with other economic corridors within India and Southeast Asia for economic progress. In 2015, Abe expressed his intention to provide Japan's official development assistance (ODA) loans for connectivity projects in the NER. In 2016, Japan reaffirmed its commitment to enhancing connectivity and expressed satisfaction with the progress of projects in the region.
Indo-Japanese cooperation in the NER received a big push, with the two prime ministers signing an agreement in 2017, establishing the India-Japan 'Act East Forum,' conceived as a platform for bilateral cooperation. The forum identifies projects for the economic advancement of the NER, with a focus on connectivity projects, disaster management and environment and people-to-people contacts through tourism and culture. Japan has also extended a substantial ODA loan, which would upgrade the National Highways (NH 40) and support India's connectivity initiatives in Bangladesh, Myanmar, and other neighbouring countries.
The connectivity projects in the NER have fostered greater integration within the NER and externally with neighbouring countries. After all, it is in India's Northeast where Prime Minister Narendra Modi's Act East policy and Japan's 'Open and free Indo-Pacific strategy' converge. Both countries are keen to extend their cooperation to the broader Indo-Pacific region. Unlike the Look East Policy, Act East emphasises the connectivity programmes that link India's Northeast region with ASEAN countries.
