The Sea as the New Theatre of Strategy

As India and China both turn from the land towards the sea, the coming decades of the Asian century will witness what one scholar calls a ‘clash of the dragon and the elephant’ — a churning of the oceans, or Samudra Manthan, that will reshape the global maritime environment.

Even a settled land boundary would not end this rivalry, since the two will continue to compete for influence across Africa, Latin America, Afghanistan and Central Asia. Geography will remain a persistent irritant, and the sea is where the contest is now sharpest.

India’s security challenge with China, long fought in the Himalayas, is increasingly playing out at the maritime level. As the Sino–Pakistan partnership deepens, India needs a strategy to checkmate China at sea — and its greatest advantage lies in its commanding position in the Indian Ocean and its warm ties with South-East Asia and Africa.

The more China trades with West Asia, Africa and Central Asia, the more its commerce flows through Indian Ocean sea lanes, making the ocean a potential new theatre of conflict.

A peninsula jutting into a vast ocean that bears its name, India sits astride the world’s busiest energy and trade corridors. Nearly the whole of its external trade and the bulk of its energy imports travel by sea.

Securing these sea lanes of communication (SLOC), from the Strait of Hormuz to the Strait of Malacca, is therefore not a peripheral concern but the very foundation of national prosperity and security.

The China Challenge and the Malacca Dilemma

The Strait of Malacca, roughly 900 km long, connects the Indian Ocean to the South China Sea and is a prime artery between East Asia and Europe. A vast quantity of oil — the majority of China’s imports — passes through it. Beijing’s fear that this lifeline could be choked in a crisis is known as the ‘Malacca Dilemma’.

Lying beside the strait, India’s Andaman and Nicobar Islands give it a natural sentinel position; the strait, in effect, is the ‘king’ of the Indian maritime chessboard.

China’s counter-strategy is the String of Pearls — a web of ports and facilities ringing the ocean — and a growing naval presence under its maritime initiatives.

India has responded by patrolling against piracy in the strait since 2006, deepening partnerships across the region, and asserting itself even in the South China Sea, where China’s defiance of international arbitration has heightened the salience of a rules-based maritime order.

The Legal Architecture: India and the Law of the Sea

India’s maritime policy has been shaped as much in conference halls as at sea. Its engagement with the evolving Law of the Sea reflects a consistent pursuit of freedom of navigation balanced with sovereign rights over resources.

▸ The UNCLOS Journey

1958	UNCLOS-I adopted the Geneva Convention, accepting freedom of navigation and sovereignty over territorial seas — but reaching no consensus on the width of territorial waters. India, whose proposal to require authorisation for foreign warships was rejected, declined to ratify it.
1960	UNCLOS-II floated a six-mile territorial sea plus a six-mile fisheries zone, but again failed to secure the required majority.
1968–70	The UN set up a Seabed Commission; a Declaration of Principles then declared the deep seabed and its resources the common heritage of humanity.
1976	India enacted its Maritime Zones Act, codifying a 12-NM territorial sea, a 24-NM contiguous zone and a 200-NM EEZ.
1978	The Indian Coast Guard was raised as an armed force of the Union to enforce these zones and safeguard maritime interests.
1973–82	UNCLOS-III, after nine years of negotiation, produced the modern Law of the Sea in 1982 with its five-zone framework; India was recognised as a pioneer investor for deep-sea mining.

▸ The Five Maritime Zones under UNCLOS

Zone	Extent	Rights
Internal waters	Landward of baseline	Full sovereignty
Territorial waters	0–12 NM	Full sovereignty (with innocent passage)
Contiguous zone	12–24 NM	Enforcement of customs, immigration, sanitation
Exclusive Economic Zone	24–200 NM	Rights over mining, fishing and oil/gas exploration
High seas	Beyond 200 NM	Open to all; global commons

India’s Maritime Strategy and Instruments

▸ Net Security Provider — from SAGAR to MAHASAGAR

India’s guiding maritime vision is to be a net security provider in the Indian Ocean. This is articulated through the doctrine of SAGAR — Security and Growth for All in the Region, which blends security cooperation with shared economic development for littoral neighbours.

The vision has since been broadened into MAHASAGAR — Mutual and Holistic Advancement for Security and Growth Across Regions — extending the same principles of security, capacity-building and prosperity to a wider partnership of the Global South.

▸ Naval Diplomacy and Exercises

The navy has become a versatile instrument of diplomacy — projecting power, building interoperability and delivering disaster relief. India uses a dense network of exercises and forums:

• MILAN (since 1995): a multilateral gathering of regional navies at Port Blair to share practices against piracy and trafficking.
• IONS (since 2008): the Indian Ocean Naval Symposium, a forum of littoral states for cooperation on regional maritime issues.
• Malabar (since 1992): a high-end exercise, now with the US, Japan and Australia, central to Indo-Pacific security cooperation.
• Bilateral drills: SIMBEX with Singapore and JIMEX with Japan deepen trust with key regional partners.

▸ The Indo-Pacific and Partnerships

The post-Cold War rise of Asian economies reframed the old ‘Asia-Pacific’ as the Indo-Pacific, with the US treating India as a lynchpin of the region.

India works this space through its Act East Policy, membership of the ASEAN Regional Forum, the Quad (with the US, Japan and Australia) and the Indian Ocean Rim Association (IORA), positioning itself as a preferred security and development partner against a backdrop of Chinese assertion.

▸ Towards a Blue-Water Navy

India aspires to a blue-water navy — one able to project power and operate in distant oceans, anchored by aircraft carriers. Steadily acquiring such capability, India aims to move from a regional force to a genuine oceanic power able to secure its interests from the Gulf to Malacca and beyond.

The Blue Economy and Port-Led Development

Alongside security, India pursues a Blue Economy — the sustainable use of ocean resources (minerals, oil, gas, fisheries and energy) for growth and human welfare, guided by the core principle of sustainability. This economic vision is delivered through a family of flagship initiatives.

Initiative	Purpose
Sagarmala	Port-led development — modernising ports and building coastal economic zones linked to freight corridors and industry.
Project Mausam	A cultural-strategic initiative reconnecting India with ancient maritime partners across the Indian Ocean Rim.
Maritime India Summit	A flagship investment platform that rallied dozens of nations behind India’s port and maritime infrastructure agenda.
IORA cooperation	Collaboration on fisheries, ocean energy, shipping and maritime exercises across the Indian Ocean Rim.

Issues and Challenges

Challenge	Explanation
Chinese encirclement	Expanding ports, bases and naval presence under the String of Pearls contest India’s maritime primacy.
Capability gap	Slow indigenous shipbuilding and limited carrier strength constrain blue-water ambitions.
Non-traditional threats	Piracy, trafficking, illegal fishing and the risk of sea-borne terror demand constant vigilance.
Coastal vulnerability	A long coastline and many islands remain exposed to infiltration, as past attacks have shown.
Contested legal order	Defiance of maritime law elsewhere threatens the rules-based freedom of navigation India depends on.

The Way Forward

• Build the blue-water fleet: accelerate indigenous shipbuilding, carriers and submarines to secure the extended maritime horizon.
• Deepen the SAGAR–MAHASAGAR vision: expand capacity-building, coastal surveillance and development partnerships with littoral states.
• Anchor Indo-Pacific coalitions: strengthen the Quad, IORA and ASEAN engagement to uphold a free, open and rules-based order.
• Harness the Blue Economy: scale Sagarmala and sustainable ocean industries to convert maritime geography into prosperity.
• Secure the coast: integrate the navy, coast guard and coastal police for seamless surveillance and rapid response.
• Champion the rule of law: lead diplomatically on freedom of navigation and peaceful settlement of maritime disputes.

Synthesis

India’s maritime strategy weaves together law, force, diplomacy and development: a settled legal framework of zones, a navy evolving towards blue-water reach, a dense web of partnerships from MILAN to the Quad, and a Blue Economy that turns the ocean into opportunity.

Bound together by the vision of a net security provider, these strands aim to make the Indian Ocean a zone of security and shared growth — with India at its centre.

VI. India’s Foreign Economic Policy

Understanding Foreign Economic Policy

Foreign economic policy is the way a state pursues its economic interests in its dealings with the world — through trade, investment, aid and integration. In India’s case, it has been shaped, above all, by ideas and crises.

A state develops national interests that always carry an economic component, and the dominant idea of the moment determines how it engages the world. Change comes only when the prevailing idea is convincingly seen to have failed — usually in the crucible of a crisis.

A distinctive Indian trait has been to extract from the world what it needs to serve its chosen model. When it pursued a closed, import-substitution economy, it drew resources and aid from global powers to sustain that model; when it embraced globalisation after 1991, it courted investment and made the case for its own concerns.

State ideas, in short, have always dominated economic foreign policy.

The Four Phases of Evolution

India’s economic engagement with the world has moved through four broad phases, each defined by a governing idea and the external relationships that idea required.

PHASE I (1947–66) — Import substitution & non-alignment

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PHASE II (1967–75) — Deepened controls & Soviet proximity

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PHASE III (1975–90) — Gradual, constrained rethinking

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PHASE IV (1991–present) — Liberalisation & global integration

▸ Phase I (1947–66): Import Substitution and Non-Alignment

India pursued non-alignment to preserve independence of decision-making, and import substitution to build a self-reliant industrial base. State intervention deepened after 1950; the Second Five-Year Plan (1956) and the Industries (Development and Regulation) Act, 1951 laid the foundations of a closed economy.

Crucially, India took aid from both superpowers: the US extended assistance and, from 1960, PL-480 food aid, while the USSR helped build heavy industry such as the Bhilai Steel Plant. A Balance-of-Payments crisis after 1956 did not shake the model — India instead doubled down.

Learning from the droughts and wars of the 1960s, it accepted the logic of investing in agriculture, laying the ground for the Green Revolution.

▸ Phase II (1967–75): Deepened Controls and Soviet Proximity

Two forces defined this phase. First, India’s search for a security guarantor drew it closer to the USSR, culminating in the Indo–Soviet Treaty of Friendship (1971) and barter trade that conserved foreign exchange.

Second, the machinery of state control was reinforced: the MRTP Act (1969) to curb monopolies, the Foreign Exchange Regulation Act (FERA, 1973) capping foreign equity at 40%, and the nationalisation of banks. US aid dipped as Soviet ties deepened.

▸ Phase III (1975–90): A Constrained Rethinking

A quiet recognition grew that import substitution was not delivering results. Government-commissioned studies argued that FDI and the private sector were needed for progress. Selective autonomy was granted in sectors such as IT and pharmaceuticals, and the MRTP threshold was raised.

But the shift stalled: a powerful domestic industrial class resisted, and the external climate soured after the Soviet invasion of Afghanistan (1979) strained ties with both blocs. Ideas for reform existed, but Cold War politics and domestic interests blocked their execution.

▸ Phase IV (1991–Present): Liberalisation and Integration

The year 1991 was the tipping point. A severe Balance-of-Payments crisis, coinciding with the collapse of the USSR, gave the state both the compulsion and the opening to reform.

India launched Liberalisation, Privatisation and Globalisation (LPG), opened to the US and its allies, shed anti-market rhetoric while retaining domestic autonomy, and deepened ties with ASEAN, Japan and South Korea. Symbolically, India began to transition from an aid-recipient to an aid-giver.

▸ Phases at a Glance

Phase	Governing idea	Key markers
1947–66	Import substitution, non-alignment	Five-Year Plans, IDRA 1951, PL-480, Green Revolution
1967–75	Deeper controls, Soviet tilt	MRTP 1969, FERA 1973, bank nationalisation, 1971 Treaty
1975–90	Constrained rethinking	Selective liberalisation in IT & pharma; stalled reform
1991–now	Liberalisation & integration	LPG reforms, global engagement, aid-giver

Contemporary Foreign Economic Policy

Since liberalisation, India’s economic diplomacy has matured into a multi-track strategy that balances openness with strategic autonomy and self-reliance.

▸ Trade and Free-Trade Agreements

India actively negotiates Free Trade and Comprehensive Economic Partnership Agreements to secure market access for its goods and services — including landmark deals with partners such as the UAE and Australia, a concluded agreement with the United Kingdom, and an ongoing negotiation with the European Union.

At the same time it has been cautious about pacts it judges harmful, notably opting out of RCEP over concerns about trade deficits and import surges.

▸ Self-Reliance and Strategic Autonomy

The contemporary watchword is Atmanirbhar Bharat (self-reliant India), pursued through instruments such as Production-Linked Incentive schemes to build domestic manufacturing and reduce import dependence — especially the widening trade deficit with China. This is openness with a strategic filter, not autarky.

▸ Multilateral Economic Engagement

• WTO: India defends the interests of developing nations on issues such as food security, public stockholding and special and differential treatment.
• BRICS & de-dollarisation: engagement with alternative financial arrangements and calls for a more balanced global economic order.
• G20 leadership: using its presidency to champion the priorities of the developing world and reform of global institutions.

▸ From Aid-Recipient to Development Partner

The most striking change is India’s emergence as a provider of development assistance and a voice of the Global South.

Through the Voice of the Global South Summits, a proposed Global Development Compact, the export of its Digital Public Infrastructure, concessional lines of credit, scholarships and initiatives such as vaccine assistance, India increasingly shapes the development agenda rather than merely receiving from it.

CASE STUDY — Economic Divergence and De-hyphenation with Pakistan

Through the Cold War, Pakistan often posted higher growth than India, yet India consistently prevailed in conflict. From the 1990s the trajectories diverged sharply: India’s growth and human development climbed while Pakistan’s slid. This widening gap led the strategic world to de-hyphenate the two — ceasing to treat them as an equal pair.

As India’s economy strengthens, so does its military and regional weight; a Pakistan that spends heavily on defence without a strong economy cannot sustain the same competition indefinitely. India’s wager is that deepening regional economic integration will eventually leave Pakistan the lone holdout, pressured over time towards normalisation.

Converting Growth into Power: The Four Ds

A strong economic foundation is not an end in itself; it is what allows India to meet what may be called the 3-D challenge. To these, foreign policy adds a crucial fourth dimension — the diaspora.

The Four Ds	What it demands	Foreign-policy payoff
Development	Generate resources to address social backwardness	Domestic stability underwrites external credibility
Defence	Fiscal empowerment to enhance strategic capabilities	Converts growth into hard power
Diplomacy	Gear diplomacy to an increasingly commercial role	Trade, investment and connectivity as statecraft
Diaspora	Mobilise the skills and capital of Indians abroad	A bridge for capital, technology and influence

To translate economic growth into durable strategic capability, a state also needs the institutional machinery to mobilise resources — the idea of a ‘Square of Power’.

In practice this means combining rising private investment with strong public investment in strategic industries such as defence and nuclear technology, so that wealth is consciously channelled into national capability rather than merely accumulated.

Issues and Challenges

Challenge	Explanation
Trade deficits	Large and widening deficits, especially with China, expose dependence on strategic imports.
Protectionism vs. openness	Balancing domestic industry protection with the need for competitive integration remains delicate.
Global headwinds	Tariff wars, supply-chain shocks and geopolitical friction complicate export-led growth.
Limited resources	Domestic development needs constrain how much aid and credit India can extend abroad.
Institutional imbalance	Voting structures in bodies like the World Bank under-represent developing nations.

The Way Forward

• Diversify trade: conclude balanced FTAs and expand export markets to reduce concentration and deficits.
• Build competitiveness: deepen manufacturing under self-reliance schemes while integrating into resilient global supply chains.
• Lead the Global South: institutionalise development partnership through the Global Development Compact, DPI exports and capacity-building.
• Reform global governance: press for fairer representation of developing nations in the WTO, IMF and World Bank.
• Advance strategic autonomy: engage plurilateral and multilateral arrangements on India’s own terms, balancing openness with sovereignty.

Synthesis

India’s foreign economic policy has travelled from a defensive, inward-looking model to a confident strategy of global integration on its own terms.

The through-line is constant — ideas and crises drive change — but the direction has reversed: from a nation that once extracted aid to sustain a closed economy to one that now extends aid, exports digital public goods and speaks for the developing world. The task ahead is to convert economic weight into durable strategic and diplomatic influence.