Around the world, countries are grappling with how to balance prioritisation of economic growth and cooperation with the imperative of protecting their country's security. This is a legitimate trade-off, particularly as countries seek to protect specific industries considered vital to their economic and national security.
As countries increase their use of economic tools for national security-related ends, however, dividing lines between valid national security considerations and economic coercion for vindictive or political ends are blurring. There have been many cases when use of economic tools has been more akin to arbitrary economic coercion.
The common thread is clear. These actions damage investment environments by creating the perception (or reality) of risk. The result, in many cases, is a significant decrease in foreign investment and, in some cases, a wholesale global effort to diversify supply chains away from the offending country.
India stands to lose if it does not learn from these examples. But it has far more to gain by reinforcing its reputation as a reliable destination for investment. India's economic transformation since the early 90s has been powered in large part by the trust it has gained in its business-enabling environment, allowing it to attract vast amounts of investment and spur the unprecedented growth of jobs and its economy. Now, it's in a unique moment - a global leader in services, and thanks to a move to reduce supply chain reliance on China, poised perhaps to emerge as a manufacturing powerhouse, with the workforce and skills to match its ambitions.
At the same time, India faces a familiar dilemma: how to protect its national security without appearing to take arbitrary action against companies or engage in economic coercion. This challenge is illustrated by the case of global aviation services company Celebi Aviation Holding, which recently had its security clearance and operating rights revoked by GoI for the latter's concerns about national security, following Turkiye's support for Pakistan in the post-Pahalgam terrorist attack India-Pakistan conflict. While the government must act in the country's security interest, it is important that this case is pursued in a manner that is seen to uphold due process.
The matter is now before the courts, which must be allowed to proceed without interference. But GoI's next steps, if not carefully approached, risk being viewed as economic coercion when viewed from outside. In particular, there is a risk that this action could be seen as an act of retribution against a Turkish company with a diversified set of foreign investors, in response to actions taken by the Turkish government.
Notably, Indian companies and investors hold substantial assets in Turkiye, and both Indian investors abroad and foreign investors in India expect economic tools to be used with care and fairness. Hastily considered actions against companies like Celebi risk undermining the remarkable progress India has made as a destination for foreign investment.
Fair processes and rule of law in the commercial environment within India are crucial for the country's success, and will likely yield benefits in two major ways:
Foreign companies and investors will have the confidence to invest in India if they do not fear arbitrary or capricious action being taken against them by the government.
Indian companies working around the world will reap the benefits of goodwill and stable investment environments elsewhere - free from the tit-for-tat economic coercion that arbitrary and unfair processes experienced by companies within India might spur.
If India treats foreign companies and investors in India fairly, GoI will have a strong foundation to stand on if it needs to go to bat for its own companies in other jurisdictions. This is extremely important for India in today's global economy. The country today is globally exposed and has overwhelmingly benefited from a rules-based system.
All countries are making decisions based on national security. But they need to do so in a way that appropriately weighs economic factors, ensures due process and sustains investor confidence. This is the path to ensure India's economic miracle sustains for the long term and cements India's position as the major player it desires to be on the world stage and in the global economy.
The writer is former deputy chief of mission, US embassy, New Delhi
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
As countries increase their use of economic tools for national security-related ends, however, dividing lines between valid national security considerations and economic coercion for vindictive or political ends are blurring. There have been many cases when use of economic tools has been more akin to arbitrary economic coercion.
The common thread is clear. These actions damage investment environments by creating the perception (or reality) of risk. The result, in many cases, is a significant decrease in foreign investment and, in some cases, a wholesale global effort to diversify supply chains away from the offending country.
India stands to lose if it does not learn from these examples. But it has far more to gain by reinforcing its reputation as a reliable destination for investment. India's economic transformation since the early 90s has been powered in large part by the trust it has gained in its business-enabling environment, allowing it to attract vast amounts of investment and spur the unprecedented growth of jobs and its economy. Now, it's in a unique moment - a global leader in services, and thanks to a move to reduce supply chain reliance on China, poised perhaps to emerge as a manufacturing powerhouse, with the workforce and skills to match its ambitions.
At the same time, India faces a familiar dilemma: how to protect its national security without appearing to take arbitrary action against companies or engage in economic coercion. This challenge is illustrated by the case of global aviation services company Celebi Aviation Holding, which recently had its security clearance and operating rights revoked by GoI for the latter's concerns about national security, following Turkiye's support for Pakistan in the post-Pahalgam terrorist attack India-Pakistan conflict. While the government must act in the country's security interest, it is important that this case is pursued in a manner that is seen to uphold due process.
The matter is now before the courts, which must be allowed to proceed without interference. But GoI's next steps, if not carefully approached, risk being viewed as economic coercion when viewed from outside. In particular, there is a risk that this action could be seen as an act of retribution against a Turkish company with a diversified set of foreign investors, in response to actions taken by the Turkish government.
Notably, Indian companies and investors hold substantial assets in Turkiye, and both Indian investors abroad and foreign investors in India expect economic tools to be used with care and fairness. Hastily considered actions against companies like Celebi risk undermining the remarkable progress India has made as a destination for foreign investment.
Fair processes and rule of law in the commercial environment within India are crucial for the country's success, and will likely yield benefits in two major ways:
Foreign companies and investors will have the confidence to invest in India if they do not fear arbitrary or capricious action being taken against them by the government.
Indian companies working around the world will reap the benefits of goodwill and stable investment environments elsewhere - free from the tit-for-tat economic coercion that arbitrary and unfair processes experienced by companies within India might spur.
If India treats foreign companies and investors in India fairly, GoI will have a strong foundation to stand on if it needs to go to bat for its own companies in other jurisdictions. This is extremely important for India in today's global economy. The country today is globally exposed and has overwhelmingly benefited from a rules-based system.
All countries are making decisions based on national security. But they need to do so in a way that appropriately weighs economic factors, ensures due process and sustains investor confidence. This is the path to ensure India's economic miracle sustains for the long term and cements India's position as the major player it desires to be on the world stage and in the global economy.
The writer is former deputy chief of mission, US embassy, New Delhi
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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