The Pulse

India’s Success Is Based on the Strength of Its Private Sector and Massive Workforce

Recent Features

The Pulse | Economy | South Asia

India’s Success Is Based on the Strength of Its Private Sector and Massive Workforce

What connects vaccine diplomacy to the Russian crude oil issue? Private Indian firms.

India’s Success Is Based on the Strength of Its Private Sector and Massive Workforce
Credit: Depositphotos

Some of its India’s recent successes on the international scene include its vaccine diplomacy in the time of the COVID-19 pandemic and the retaining of New Delhi’s simultaneous partnerships with the West and Russia following the invasion of Ukraine. (The latter is, obviously, a success from the perspective of New Delhi, not of the West.) Regardless, I would like to offer a different angle of looking at these developments. The backbone of India’s strength in both cases was not its diplomatic rhetoric, not influence exerted on other countries, and not the successes of government institutions or companies. The edge was instead provided by large private companies and the scale of the country’s cheap workforce.

Let me start with the pandemic. New Delhi successfully presented itself as a leader in vaccine sharing: a country from which vaccines were being shipped to many poorer nations. It is true that India developed its own vaccine and that this was achieved with the participation of public institutions. It is also true that the New Delhi government donated some of its vaccines to other countries. 

Yet, it must be stated that most of the vaccine doses being manufactured in India during the pandemic were not of Indian design (they were Western), were not being produced by public companies (but a private one), and were not being donated to other countries (but sold). The main bulk of production was carried out in the facilities of the Serum of Institute of India and the main vaccine produced there was one designed by AstraZeneca, a British-Swedish multinational company. The Serum Institute of India, a private firm, was chosen to manufacture AstraZeneca’s vaccine on a license because it had the largest vaccine manufacturing capacity in the world.

There is a certain similarity between the vaccine case and the current issue of Russian crude oil – though not on the diplomatic level, of course. The fact that India remained neutral toward the Russian invasion of Ukraine and did not condemn it even when pressed – and yet retained a strong partnership with the West – had nothing to do with Indian private companies. However, in 2022 India not only rejected Western pressure to condemn Russia but even decided to import gigantic quantities of Russian crude, and this directly involved India’s private sector. 

Before March 2022, India was hardly a significant importer of Russian crude. The change only occurred when Russian companies, being put in a tight spot, offered their goods to India at a huge discount. Again, the fact that New Delhi withstood Western criticism that followed the decision to increase Russian crude imports was a diplomatic success that goes to the account of the government institutions, not private companies. And yet, the very fact that India could made the decision to suddenly import much more crude from Russia in the first place stemmed from the fact that the country’s private companies offered the capacity to refine it. 

The two companies that run the largest refineries in India are private. These are the domestic mammoth concern, Reliance, and an international firm, Nayara Energy. These firms are capable of refining much more crude than public Indian companies. Without their capacities, such a scale of imports and their diversification – and the political capital that is being accrued thanks to the diversification of imports – would have not been possible for the Indian government.

Moreover, the fact that these companies (especially Reliance) began to not only import more Russian crude but also sell more oil products, including to Europe, is another aspect that Indian diplomacy is using in its rhetoric. Over the last year, India has become a much larger exporter of such products, mainly diesel and jet fuel, to Europe. Here, again, Reliance is playing a crucial role. 

Such developments make it easy for New Delhi to play a balancing game and engage in multilateral relations. Vaccine diplomacy was beneficial for India’s relations with the West (as it began with a private Indian vaccine manufacturer reaching a license deal with a Western pharmaceutical company) as well as relations with the developing world (where the vaccines where being sold or donated to from India). India’s manufacturing capacities also offered AstraZeneca much-needed diversification. The vaccine doses the firm was producing in Europe were destined for Western markets, and the doses manufactured in India were sent to poorer countries (partially with the help of Western funding). 

The issue of diversification as a tool of foreign policy also comes into play when it comes to the issue of Russian crude.

India’s position on Russia is a completely different story in the sense that it had an adverse, rather than positive, impact on how New Delhi is seen in the West. And yet the issue of Russian crude, as such, allowed India to play two sides and reap benefits on both fronts. On one hand, New Delhi extended a helping hand to Moscow in its time of need by accepting the offer of discounted crude. On the other, the country began to sell far more oil products  to Europe, which began to need such supplies much more after it sanctioned Russia. In both cases, New Delhi is not acting as a charity but doing good business. And in both cases, this game would have not been possible – not at this scale, that is – without the capacities of the private sector.

With this view, a certain comparison becomes apparent. The Serum Institute of India possesses the largest vaccine manufacturing capacity in the world. Reliance runs the world’s largest refinery. Both are Indian private companies. Both can avail themselves of the country’s massive cheap workforce; both have achieved an economy of scale. And the capacities of both have been capitalized by New Delhi’s diplomats.

These private companies, of course, don’t represent the only meaningful factors in understanding India’s international position. For instance, another important aspect in relations with Russia is the arms trade, which is a government-to-government initiative. Similarly, how New Delhi responded to Western criticism – how words were met with different words – had nothing to do with the private sector. And yet what I do want to point out is that the crucial role of Indian private companies in these developments has often been overlooked. 

This role is likely to become more significant in other key aspects of India’s foreign policy. For instance, the New Delhi government is hoping that the country’s private players will commence producing more advanced military products as well as semiconductors. Thus, in the future, India is much more likely to go the American way rather the Soviet/Russian one – becoming a country where even strategically important production is partially handled by giant private firms, while the government is then using this production as a tool in its foreign policy.