India's Neighbourhood First Policy: The Primacy Of Geo-Econo...| MENAFN.COM

Tuesday, 29 November 2022 11:26 GMT

India's Neighbourhood First Policy: The Primacy Of Geo-Economics

(MENAFN- NewsIn.Asia)

By Smruti S Pattanaik

New Delhi, July 15 (IDSA): In India's foreign policy neighbourhood constitutes the core. It is entwined with the security and stability of India's periphery which is homeland to diverse ethnic groups with familial ties and their socio-cultural affinities that often criss-crosses the border. Such connection was ruptured by 1947 partition. The majoritarian conception of nation building of the post-colonial states detested shared socio-cultural commonality and emphasised on 'exclusivity' of their national identity which only sharpened the rupture caused by partition. This attitude degenerated into a mind-set characterised by mistrust and suspicion preventing cooperation that could have optimised the economic potential of the region. India's over-emphasis on its security linkages with its neighbours made it extra-vigilant to the domestic politics and foreign policy of its South Asian neighbours. Neighbours felt such vigilance impeded on their sovereign foreign policy choices and constrained them to shape their internal politics. As a result neighbours resented India. India's neighbourhood policy, however, has undergone several shifts – it is slowly moving away from an overt security centric approach to forging development partnership with its neighbours as a means to ensure security.

Keywords: South Asia, neighbourhood policy, India's neighbours, development partnership, connectivity, geoeconomics, regional cooperation


India's neighbourhood [i] policy has evolved over the time. From the construction of the neighbourhood as its security periphery post-independence where India would not brook any external presence that may impinge on its security, to Vajpayee's conceptualisation of 'beneficial bilateralism' to nurse frayed ties in 1977, India moved to Gujral doctrine that abhorred reciprocity in bilateral relations. In 2004 its neighbourhood policy was defined by the then Prime Minister Manmohan Singh's as India's 'asymmetric responsibility' to Modi's 'neighbourhood first policy' with an emphasis on 'sab ke saath, sabka vikas and sabka vishwas' (With all, for the development of all and trust of all). India has traversed from perceiving its border as inviolable security limit to transgressing it in search of economic opportunities that connectivity and trade entails – geocentric military security parameter to geoeconomics with developmental underpinning of 'sabka vikas' and win-win situation. Its over-emphasis on bilateralism to uphold 'hegemonic' negotiating position to the discomfort of its neighbours, India is now open to subregional and regional multilateralism in its neighbourhood policy. Over the last seventy five years India has reinvented and reshaped its neighbourhood policy with dynamism in some and being imperious in others. With China's dominant economic presence in the region through trade and investment and its close defence relationship with the militaries, a dominant player in many South Asian countries the challenges to India's neighbourhood policy are immense. Though emphasis on a neoliberal geoeconomics foreign policy is a welcome change from the over emphasis on security; bureaucratic procedures with too many layers in the decision making structure that requires constant consultation between various ministries for implementing Indian funded projects in the neighbourhood, and most importantly tight string on budget placed by the Ministry of Finance, perhaps is not an efficient way to navigate the complexity of challenges India faces in the neighbourhood. Therefore, it would be interesting to analyse whether the prospects of geo-economics have finally trumped over the geopolitical considerations characterised by power rivalry and competition for influence to protect security interest as China emerges a major player in the region.

Structuring Post Partition neighbourhood Policy:

South Asia is Indo-centric region both in terms of the cultural connect, familial ties and geography. These are the factors that have deeply influenced India's neighbourhood policy. India'sneighbourhood policy post-independence was influenced by British India's frontier policy in which security of the empire formed the core. In this the socio-cultural and religious connect acted as cushion. It is not surprising that India shares an open border with Nepal and Bhutan. Speaking in the Parliament on foreign policy Nehru said:

We are also, if I may say so, interested in the future of many of those areas and peoples who inhabit the Frontier. We are interested, whatever the political or the international aspect may be, because we have had close bonds with them in the past and no political change can put an end to our memories and those old links that we had. (Parliament Debate, 17 March 1950, Column 1698)

India's anxiety was apparent when China occupied Tibet, which acted as a buffer between the two. This profoundly influenced its relations with Nepal, Bhutan and Sikkim. Speaking in the Parliament, Nehru said“any aggression on Bhutan or Nepal would be considered by us as aggression of India…. because of considerations of India's security.” Not just India was concerned about external threat to the Himalayan kingdoms but also about their internal political stability and its impact on India's security.

India often sought stability through inclusive representational politics in its neighbourhood to manage the spill over effect of conflicts on India. It was not surprising to note that India rejected the precondition placed by Rana regime to include a clause in the 1950 Treaty of Peace and Friendship that said“not permitting any agitation or activity aimed at reform or change in the other country…” (Selected Works of Jawaharlal Nehru, 1992, p.258). Rather, India suggested that“it is desirable to pay attention to the forces that are moving in the world—the democratic forces, the forces of freedom—and to put oneself in line with them.” (Lok Sabha Debates, 17 March 1950, Colum 1697) and take note of“invasion of dangerous idea from China”. And this can only be met by internal political reforms.(Selected Work, p.258). India preferred a 'middle way' – constitutional Monarchy – to avoid the total uprooting of ancient order(Rose, p.182) which according to it may affect political stability. Constitutional experts from India advised the Rana on political reform as there was the danger of 'persistent internal disorder'(Rose, p.181).

Nepal preferred a largely nominal association with Peking and close ties with British India.(Rose, p.166) Yet to extract concession during the critical stages Nepal dramatized and often exaggerated its relations with China (Rose, p.73). Nehru made it clear that the interests of India and Nepal are conjoined and emphasised, 'any possible invasion of Nepal would inevitably involve the safety of India' (Parliamentary debates, 17 March 1950, p.1697). India also represented Nepalese interest through the Indian Missions in countries where Nepal did not had diplomatic representation. Yet the security relationship that formed the core of 1950 Treaty, saw gradual erosion. In spite of India's role in restoration of Monarchy through tripartite agreement of 1951 , Monarchy perceived India as a threat for its support to the democratic forces in Nepal (Muni, pp.332-333). The intimacy of security relationship is illustrated from the fact that India continues to recruit Nepali Gorkhas in the Indian Army both armies accord each other's Army chief honorary rank of General in their armies. India was interestingly in 1965 secret agreement agreed that Nepal can import arms from UK and US after consulting India (Keesing's Record, 1969, p.23608). The 1950 Treaty has been contested by various regimes in Nepal.

Bhutan's position as a buffer between Tibet and British India served the purpose of both the British and Bhutan which desired to remain in 'introverted insulation' (Mehta, 2002, p.85). The 1949 treaty of Peace and Friendship only endorsed this position. India was conscious of Bhutan's significance to its security. Nehru urged the Parliament to support Bhutan-Assam boundary agreement where India had to give up some territory, (Parliament Debate, 1951, column.82) to accommodate Bhutan which considered its claim as a cultural and prestige issue and argued, good will is more important since India is“dealing with a State, which though not technically a part of the Union of India, yet is very closely allied with us” (parliament debate, August 1951, column 87) and such 'rectification of territory' would also to create a psychological feeling of oneness and kinship”(Parliament debate, Column 89) . During his visit to Bhutan in 1958 Nehru emphasised on the mutuality of the relationship. He also suggested to the King the need for democratisation at his own pace as it is difficult for Bhutan to escape the inevitability of change.(Mehta, 2002, pp.95-96). India's approach was of“shared concern and transparent sympathy, not of frightening Bhutan into friendship' (Mehta, 2002, p.85). India initiated a gradual development plan of building infrastructures. In addition to 5 lakh subsidy, New Delhi agreed to provide 7 lakhs a year for various developments in Bhutan in 1959 when Bhutan Prime Minister visited Delhi.

Article 2 of the 1949 Treaty specified that Bhutan foreign policy would be guided by India. In that spirit, India in a letter to China's Foreign Ministry on August 19th and 20th of 1959 drew its attention to the clear transgression of Bhutanese territory and occupation of Bhutanese. Nehru also wanted Bhutan to clearly mention in public that India would deal with Bhutan's border conflict with China. This was in spite of the fact that Bhutan's National Assembly had already delegated this responsibility on India. In 1962 Bhutan allowed India to raise the its border conflict with China. However, China refused to deal with India on the border question. India had realised that China would attempt to“isolate Bhutan from India so that it can deal with Bhutan separately”(Madhavan Palat, 2014, p.253). However since 1984, Bhutan and China are directly involved in negotiation to resolve their border. The difficulties of Bhutan was amplified during Doklam crisis as India contested China's claim over Bhutan's territory in the trijunction region. China has been pressuring Bhutan to resolve its dispute with China without linking the resolution to Sino-India border resolution. The two countries have now signed three-steps formula to resolve their border dispute to the discomfort of India.

Thimpu however insisted on exercising its right to establish diplomatic relations with external powers. Nehru cautioned that India-China conflict would rather complicate Bhutan's territorial integrity.[ii] Yet he said if Bhutan wants to go ahead there is very little India can do.[iii] In the course of bilateral relations, India moved away from the concept of suzerainty over Bhutan and recognised its independence. Before it became a member of UN, it was a member of International Postal Union and Colombo Plan (B.S.Das, p.300)

Since independence, India continues to have friendliest relations with Afghanistan with which it signed a Treaty of Peace and Friendship with Afghanistan in 1950. The long shadow of Pakistan over Afghanistan with Taliban takeover of Kabul on 15 August has raised concern in India. In the 1990s Afghan territory was used by Pakistan to train terrorists. India has US$ 3 billion investment in Afghanistan and the last decades was involved in developing infrastructure to provide connectivity to Afghanistan through Iran and capacity building. The fear that Afghan territory will be used against India under the Taliban regime has prioratised geopolitical imperatives.

Post partition, issues with Pakistan indeed burdened India's foreign policy as it extracted energy and attention of the Ministry of External Affairs (MEA). India did not accept the two nation theory but accepted it 'on the basis of some kind of territorial self-determination'. The issues that really hogged India's attention were: the Kashmir dispute, the Canal water dispute, evacuee property and the continued migration from East Pakistan. Nehru was also keen on signing a no war pact which he believed would create a favourable atmosphere to resolve outstanding bilateral issues. The migration of Hindus from East Pakistan was attributed to large scale arson and forced conversion of Hindus. The 1950 Nehru Liaquat pact was tailored to address the issue of safety of the minorities and their properties in East Pakistan. India was conscious of socio-cultural and familial ties that people of India and Pakistan shared and how developments in Pakistan would seriously impact on India. But interestingly, India's relations with West Pakistan was kept separate from its approach to East Pakistan. East Pakistan was also the place where majority of the minority-Hindu community lived.

Soon after Sri Lanka's emergence as an independent state in 1948, India refrained from getting embroiled in the citizenship issue there. After the introduction of franchise in the Donoughmore constitution in 1931, Indian Tamil and their citizenship emerged as important issues. Nehru had made it clear that the Indian community who were employed by the British in plantation in different part of the world should remain loyal to that country. The 1949 Citizenship amendment Act stripped plantation Tamils their rights of citizenship but India referred to it as 'internal issues' of Sri Lanka. As a part of Indo-Sri Lanka agreements signed by both Shastri and Indira Gandhi India agreed to receive some plantation Tamilswho were denied citizenship. It largely kept itself away from Sri Lankan Tamil issue. It was the riot of 1977 and 1983 that made India to change its policy and get directly involved in seeking a solution to the Tamil issue.

Cold war and Regional Geopolitics:

Post partition, India remained focussed on integrating princely states, writing a constitution, holding first election to the Parliament in 1952, reorganising states on the basis of language and managing fissiparous tendencies exhibited by some constituent units. India was apprehensive that global geopolitics fuelled by cold-war bloc politics may exploit its internal vulnerability. India was keen to construct a security perimeter that would bolster India's security, minimise external intervention and 'thereby both legitimize India's role as the managerial power in South Asia and augment its capacity to act autonomously of the two power blocs in the wider global arena'(Ayoob, 1991, p.421). The Cold War geopolitics encouraged each of unelected regimes in India's neighbourhood to court external powers as a means to assert sovereignty against India and to signal India that its support to democratic forces opposed to regimes would have a security cost. As a result India which had signed several treaties with its neighbours to protect its security interest saw the dilution of these treaties encouraged by external powers.

While it pursued nonalignment to preserve its foreign policy autonomy, Pakistan joined US sponsored SEATO and CENTO in 1954 to strengthen its defence against India and received massive military aid on the plea of fighting communist threat. The great power politics as demonstrated by their positions on Kashmir issue was India's first confrontation with cold war politics. India also refrained from exploiting the defence vulnerabilities of East Pakistan in the 1965 war which Pakistan fought on the basis of its ill-conceived dictum of 'defence of east lies in the west'. The 1972 Shimla Agreement prioratised dialogue to settle Kashmir issue. Pakistan, a close ally of the US facilitated US contact with China in July 1971 earning Pakistani military regime accolades. As ten million refugees flowed into India due to Pakistan army inflicted genocide, US and China threw their weight behind Pakistan referring the genocide as an internal affair. India signed a Friendship Treaty with the Soviet Union in August 1971 as it weighed military option to resolve East Pakistan crisis to seek the return of refugees. US sent its nuclear submarine USS Enterprise to the Indian Ocean threatening punitive action against India for its intervention in East Pakistan.

Nepal also attempted to dilute the 1950 treaty. King Birendra during his coronation in 1975 floated a proposal to declare Nepal as zone of peace. It received support of 112 countries including China and the US. Though he did not succeed due to India's opposition but several clauses of the treaty were undermined to warn New Delhi against supporting democratic forces. Bhutan King also indicated that the 1949 treaty needs to be 'updated' even though Bhutan was not bound by Article 2 of the Treaty(Kohli, 1982, p.195). Sri Lanka's pro-Western Prime Minister, Junius Jayewardene allowed the Voice of America station in Trincomalee which India suspected to be a CIA listening post. Jayewardene also sought military aid from US, UK, China, Israel and other countries to crush the Tamil militancy in the north making India anxious of its consequences. Some experts, however, argue that 'having an adverse strategic balance with extra-regional great power its (India's) credibility and thrust as a major player in the neighbourhood will be undermined”(Muni, 2003, p.195).

Assassination of Bangladesh President Sheikh Mujib in 1975 and the subsequent military takeover was welcomed by Pakistan and supported by the United States. India which played an important role in the liberation of Bangladesh, lost an important ally to its East. Bangladesh moved away from Indo-centric foreign policy and was eager to establish 'fraternal ties with the brother Muslim countries' and proposed SAARC as a regional cooperation mechanism to dilute bilateralism that remained leitmotif of India's foreign policy. Yet India prevailed to keep bilateral issues beyond the purview of SAARC.

The Janata regime, the first non-Congress government that assumed power in 1977 was keen to move away from the previous Congress government's policy and emphasised on 'beneficial bilateralism' as a focus of its neighbourhood policy. Vajpayee, the then foreign minister, argued that it is the 'Superior and imperious tone' that made good-neighbourliness a cliché(Vajpayee, 1979, p.3) and he wished to correct that. He realised that security comes through India's economic, political, social strength and stability of its democratic institutions and an environment of peace, trust and stability would help India. He argued, 'an open policy of friendship, mutually advantageous cooperation, and equal and beneficial bilateralism with our neighbours'.(Ibid., p.4) Short term agreement over the water sharing in Farakka set the regional tone for beneficial bilateralism. The government had a very short tenure to implement its vision on foreign policy. The 1981 election saw the return of Mrs Gandhi creating apprehension among its neighbours (Nervous Neighbours, 1980, p.490). Writing in Foreign Affairs, Mrs Gandhi had earlier explained, 'Our first concern has been to prevent any erosion of our independence.' (Gandhi, 1972, p.68)

China has played the equality, sovereignty card to counter India's security centric relations that tied its neighbours to India's security. Neighbours felt that such an approach undermined their sovereignty to pursue an independent foreign policy. Moreover, each of its neighbour shaped their security doctrine on 'Indian threat'. On the one hand India had to contend with the dilution of 1949 and 1950 treaties with Bhutan and Nepal, on the other hand it strictly guarded the security clause written into the treaty. India also realised that its proposed Treaty of Peace and Friendship and no war pact with Pakistan are non-starter. Even the 1972 Friendship Treaty with Bangladesh was redundant due to concerted campaign by anti-India elements. It was becoming evident that states were increasingly resisting the inherent security clauses in these treaties. Rather, to undermine India's security these countries played China card. Whether it was India's help in quelling the Janatha Vimuktti Peramuna (JVP) insurgency or sending the IPKF to enforce peace in Sri Lanka or sending troops under 'operation cactus' as President Gayoom faced a coup in Maldives India emerged as a security provider. 1988 brought hope for better India-Pakistan ties when Indian Prime minister Rajiv Gandhi met Pakistani prime minister Benazir Bhutto on the side lines of SAARC. India's economic blockade against Nepal in 1989 that exerted pressure on the King and created anti-India sentiments. On the positive side it finally led to the establishment of multiparty democracy and constitutional Monarchy.

By now India realised that Treaties with overt security clause which India signed with its neighbours are unlikely to guarantee its security. Its expectation that its South Asian neighbours will stay away from engaging external power did not bear fruit. Moreover with the end of cold war and with the dawn of democracy in the region India was both courted and contested. Terrorism and non-tradition security challenges emerged as major challenges in the post-cold war period which required close collaboration between states. Disintegration of Soviet Union also brought to the table the importance of economics of cooperation.

Post-Cold War Period: From Geopolitics to Geo-economics

India which initiated economic reforms in 1992 concentrated on strengthening its economy. Economic diplomacy gained currency as India grew around 10 percent. Even though it refrained from intervening on one side or the other, India continued to keep a close watch on the developments in the neighbourhood. Coalition politics brought a new dimension to India's neighbourhood policy. Gujral doctrine of non-reciprocal bilateral transaction with its smaller neighbours set a positive tone to India's policy towards its neighbours even though Pakistan was excluded from this framework. The regional political parties that emerge as important coalition partners in India exerted greater influence on India's neighbourhood policy. Restoration of democracy in Nepal, Bhutan's transition to democracy and constitutional Monarchy in 2008, elimination of LTTE in Sri Lanka in which India played a significant role in 2009 and election of Awami League in 2008 willing to address India's security concerns improved over all security environment and set stage for geoeconomics engagements.

  • 1990s and beyond: Contending with internal turbulence in the neighbourhood:

Electoral politics in the emerging democracies in the neighbourhood was characterised by zero sum competition between political parties. As a result India's role became part of electoral politics in those countries. Democracy in Nepal remained fragile characterised by factional politics eager to court the Palace to outbid each other. This allowed the King to remain powerful. The Bangladesh Nationalist Party (BNP) that is ideologically opposed to India remained a major challenge to any substantial improvement in India Bangladesh ties[iv] . Farakka issue was internationalised, issue of illegal migration emerged as contentious issue and transit issue was securitised by Bangladesh. After withdrawal of IPKF and assassination of Prime Minister Rajiv Gandhi by the LTTE, India kept itself away from Sri Lanka's ethnic conflict. It keenly watched Norwegian peace mediation in Sri Lanka's ethnic conflict. Nepal soon saw the Maoist underground movement taking the shape of insurgency in 1996, Afghanistan, post-Soviet withdrawal faced internal turbulence and resultant civil war and emergence of Taliban forced India to close down its diplomatic missions there. Expulsion of Lhotsampas from Bhutan in 1990 created a diplomatic dilemma for India. India steered clear of the crisis and evicted Bhutanese refugees from Indian territory and forced them to seek refuge in Eastern Nepal. India prodded both Nepal and Bhutan to resolve the Bhutanese refugee crisis through dialogue and refused to mediate on the issue given Bhutan's sensitivity. The 1996 Farakka Agreement with Bangladesh however provided hope of putting the bilateral acrimony behind.

The 1998 nuclear tests by both India and Pakistani posed new set of challenges to its neighbourhood policy. Lahore bus journey in 1999 created hope of a new era in India Pakistan relations was marred by Kargil intrusion. Attack on Indian Parliament by Pakistani based terrorists led India to mobilise its troop under op-Parakram in 2001. The issue of cross border terrorism continue to dominate its bilateral relations with Pakistan as Mumbai attack of 2008 by Pakistani terrorists exposed the link between terrorist groups and Pakistani military establishment. India supported US intervention codenamed“operation enduring freedom” in Afghanistan which dislodged Taliban from power. Return of BNP to power in Bangladesh in 2001 posed a new challenges to India. Insurgent groups from North East were provided shelter while Bangladesh continued to deny their existence. India took note of growing radicalism in Bangladesh and the consequences it may have for the stability of its bordering states. In Nepal, India was concerned about the Maoist violence and the linkages between the Maoists of Nepal and India. While it declared the Maoist as terrorist, it was critical of King Gyanendra's takeover of power in 2005 after sacking Nepali Congress government while China supported the move. Not surprisingly, Bangladesh and Nepal proposed China's candidature of SAARC as a quid pro quo for India proposal to admit Afghanistan. India's old fear of China using India's neighbours to undermine its regional dominance and question its leadership in the region came to the fore. India brought together the seven political parties and the Maoist to the negotiating table to stitch a 12-point agreement in 2005 finally put an end to constitutional Monarchy and led to the conclusion of republican constitution in Nepal.

The 1990s also reflected that India's tolerance of limited intervention in conflicts by Western countries while vociferously opposing China with which it has a long standing boundary dispute. The improvement of Indo-US relations post 1998 made such consultation on South Asia a regular feature. Though President Obama had proposed a role for China in South Asia in his first visit to Beijing, the deteriorating China-US relations has made India central to US policies towards the region. US dehyphenated its relations with India and Pakistan, both countries have extensive counter terror cooperation and are part of quadrilateral dialogue (QUAD). Both the countries have synergised their approach to Nepal, Bangladesh and Sri Lanka even though they differ on Pakistan and Afghanistan. Given the internal political dynamics in India's South Asian neighbourhood, such coalition of interest has proved effective as was seen in the context of mainstreaming Maoist in Nepal and nudging the military backed caretaker government to hold election.

  • Economics of Cooperation:

The decade beginning with 2000 witnessed geo-economic thrust in India's foreign policy to advance India's geopolitical interest. This shift in diplomacy in the neighbourhood was conditioned by four factors: first, the changing nature of security which required greater collaboration, second, India's own economic growth that required prioritising connectivity through tailor-made credit lines, third, developmental priorities of its neighbours that made them to seek capital for investment and fourth, as mentioned, China's growing presence and its investment in the neighbourhood. India enjoys extensive trade relations and is the largest trading partner to the countries in the neighbourhood except for Pakistan and Bangladesh. The trade balance with the countries of the region has been in India's favour. Most of the traded commodities are primary goods or raw material that feed domestic industries in these countries. India's Free Trade Agreement with Sri Lanka has propelled a growth in Sri Lanka's export to India. India proposed that its neighbours can benefit from India's economic prosperity as economic reform started showing results.

While the Cold war period witnessed a string of“peace and friendship” treaties/agreement with dominant security features, post-cold war period made India to see its neighbours as 'development partners'. India has, since 1950s provided development aid both bilateral and also under the Colombo Plan. It stood fifth among the donor countries and was the first developing state to be included in the plan (Dutt, 1980, p.672) In 1961, India established Economic Coordination Division at MEA. Though it expanded in 1964, the establishment of ITEC program provided a direction.

This transition from security to a larger economic engagement made India to look at its border from geoeconomics framework. Regional integration, comprehensive economic partnership, trade and connectivity became new language in diplomacy. It modernised integrated check posts, improved trade facilitation and agreed to cross LoC trade between two parts of Kashmir, set up border haats with Bangladesh and reinstated border trade in Nathula. Along with these changes, India transited from its emphasis on exclusive bilateral framework to trilateral, quadrilateral and subregional groupings. Such groupings also made economic sense.

Since 2000 it has announced US$1 billion for reconstruction in Afghanistan which increased to US$3 billion that were allocated to developing physical infrastructure, laying electricity transmission lines, building hospitals and schools. It provides nearly US$10 billion in credit, grant and aid to Bangladesh since 2011. It has extended US$1.8 billion credit line to Sri Lanka and US$15.2 million as grant for Island wide ambulance service. It has extended US$2 billion worth of grant and credit line to Maldives.

It focussed on capacity building through ITEC program and provided scholarship to students to study in India. It poised itself as 'security provider' to its neighbours through its humanitarian assistance and disaster relief in several occasions, for example: 2004 Indian Ocean Tsunami, 2007 Cyclone Sidr in Bangladesh, and 2008 cyclone Nargis in Myanmar, the drinking water crisis in Maldives in 2014, Nepal earth quake 2015 and flood in Sri Lanka 2016. It supplied vaccines to the neighbourhood after the first Covid-19 wave. It has instituted currency swap provision through the Reserve Bank of India for its neighbours to overcome foreign currency crisis.

While it have invested in hydropower projects in Bhutan which remains a major source for Bhutan's GDP, it has also increased Bhutan's debt to India. The two countries have now moved to Joint Venture in harnessing hydropower. India has moved away from bilateralism and has engaged both the countries in the BBIN (Bangladesh-Bhutan-India-Nepal) framework and as a result, Bangladesh is keen to invest in hydropower sector in both Nepal and Bhutan and the four countries are engaged in cross border electricity trade.

China's investment and their efficiency in implementing project in time made India to have a relook at its existing structure in disbursing aid, grant and implementing line of credit which has is bourgeoning since 2001. In 2012, India established a three separate divisions, Development Partnership Administration I, II and III within the MEA to coordinate its economic engagement abroad. A forth one for advancing cultural connectivity is established recently. The major handicap is making finance available and also aid absorbing capacity of the projects. MEA's 2020-21 budget as a percentage of the overall Government of India budget is 0.52 % which has seen a steady decrease since 2018 when it stood at 0.61 %.(Parliament Standing Committee, 2021, p.5)“just like the trend for MEA's budget, the proportion of allocation under the sub-head 'Technical and Economic Co-operation' had dipped from Rs. 7333.79 crore to Rs. 6617.37 (BE 2020-21)”(ibid., p.22).[v] This remains a major handicap. MEA receives additional funding from other ministries and also technical support while implementing its projects abroad.

There are several challenges to India's geoeconomic engagements. The Parliament Standing committee has repeatedly emphasised on the fact that there should not be any constraint while budgeting MEA's 'Scheme' section that comprises of Technical and Economic Cooperation with other countries…as it directly impinges on our bilateral engagements and international image' (Parliament Standing Committee., p.12). This has been a constant refrain even with the past standing committees but nothing has been done to rectify this.

While SAARC stays dormant as a regional cooperation mechanism, China has leveraged its relationship with the South Asian countries by establishing an informal cooperation mechanism to overcome the institutional hurdle of not being part of SAARC. It regularly holds the China-South Asia business forum. It holds regular consultation with the countries of the region. On July 27, 2020, Chinese Foreign minister Wang Yi held a video conference with the foreign ministers of Nepal, Pakistan and Afghanistan ostensibly strengthening anti-epidemic cooperation and boosting socioeconomic recovery' and also to further BRI (PRC, 2020). On 27 April 2021 China convened a video conferencing of Foreign Ministers of South Asian countries emphasising on oriental tradition of“good neighborliness” to further Covid 19 cooperation (PRCa, 2021). India and Bhutan chose not to attend. China-South Asian Countries Poverty Alleviation and Cooperative Development Center projected as alternative to SAARC was inaugurated on 8 July in Chongqing with China's assistant foreign minister Wu Jianghao and the ambassadors of Afghanistan, Pakistan, Nepal, Sri Lanka and Bangladesh in attendance (PRCb, 2021). Though India initiated the SAARC Covid 19 fund, regional cooperation on Covid 19 has remained bilateral initiatives.

The Continuum in India's neighbourhood policy:

While the geopolitics and geoeconomics are conditioned by external environment there are several 'givens' in India's neighbourhood policy which India has often failed to nurture and leverage in its neighbourhood policy. After withdrawal of British from the subcontinent, the ethno-cultural and linguistic ties provided hope to the territorial nation states to look beyond their boundaries. Nurturing these cross-border ties have remained predominant feature in India's neighbourhood policy. The decision to have open border with Nepal and Bhutan flows not just from the keenness of India to bind these two countries in a security architecture but also to allow the continuous flow of culture, tradition and languages furthered by inter-marriages, kinship relations that have remained a major characteristics in cross-border ties. Though such ties with Pakistan and Bangladesh is governed by formal structures of visa, it is not surprising marriages between families divided by partition have almost became non-existent post-1965 war.

These ethno-cultural and religious ties while have furthered relations between the countries in the region, for example boosting Buddhist, Hindus and Muslims pilgrimage to the sites considered sacred. Such affinity has also affected India's bilateral relations at times of ethno-national crisis. For example role of Tamilnadu in shaping India's approach to Tamils in Sri Lanka, ethno-linguistic ties have influenced India's approach to Madhesis. Flow of refugees to India as a result of this cultural linkages has been one issue that concerns India. The continued migration of Hindus post-partition, Chakmas seeking refuge in India, the Bangladesh crisis of 1971, Tamil crisis in Sri Lanka 1983 – India has seen a steady flow of refugees due to the cross-border affinity. In many instances, refugee crisis can be attributed to lack of democratisation, political alienation of minorities and creation of monolithic states that do not recognise diversity. India has pushed for representational politics to localise the conflict and to manage its spill over effects.

India shares open border with both Nepal and Bhutan where the nationals of the two countries gets national treatment in India and baring few sectors, all government job including civil service are open to applicants from these two states.

The socio-cultural connect has motivated India to ease visa process. It provides largest number of visas to Bangladesh, it even liberalised visa for Pakistan in 2012. India remains a place of pilgrimage for major religion. Cultural aspect of India's neighbourhood policy remains underexplored. Though India in recent past has celebrated Tagore's 150th birth anniversary and Nazrul centenary there is a need to nurture literary and common historical heritage. India's diversity, resilience of democratic institutions, democratic continuity, its culture would remain its major soft power attributes.


Given the budgetary constraints that the MEA confronts it has to juggle to prioritise projects that can be completed with the available fund. Delay in the completion of projects also results in cost escalation. India cannot match Chinese investment in the neighbourhood. Therefore it prefers to work with friendly countries for joint investment. Neighbourhood has been a space for external powers jostling for influence. Unlike in the past where India was opposed to such presence of external powers, it appears that given growing Indo-US convergences India is not averse to such presence and has seen these countries as alternative to growing Chinese presence. For the past few years it is collaborating with Japan, Russia and the United States to leverage its geoeconomics presence in the neighbourhood. While Japan and US are part of QUAD, India continue to share good relations with Russia. These collaborations signal a major foreign policy shift. Whether it is participating in the“non-critical” aspects of Rooppur power plant and setting up transmission line to evacuate nuclear energy in Bangladesh or its collaboration with Japan both in the Western Container Terminal (WCT) and redevelopment of Trincomalee oil tank farm are some instances where India has moved away from bilateral framework to engage friendly countries.

India and China are in competition shape domestic politics that would favour their political and economic presence. Though China refrained from intervening overtly in domestic politics, it is no more hesitant to express its political preference to sustain governments that furthers Beijing's interest. It intervened to brought the warring left factions in Nepal together to ensure the political survival of the then Prime Minister K.P.Oli. It threw its weight behind Rajapakse regime in 2015 election and did not hesitate to advertise how Chinese investment has created jobs in Sri Lanka. In Maldives it stood behind President Abdullah Yameen's government when Commonwealth was critical of Yameen's repression of oppositionand warned India against intervention in Maldives. More recently it warned of“damage” to its relations with China if Bangladesh think of joining QUAD, Its co-opted Pakistan's military to implement China Pakistan Economic Corridor (CPEC) so that its projects are not opposed by other political actors. It has assiduously built its reputation as a country that does not interfere in internal affairs of others through anodyne reiteration for 'sovereign equality and non-interference' in all its joint statements with the countries of the region.

As China makes inroad, India is not no more concerned about democracy and inclusive government as a panacea for stable 'periphery'. For example: it remains less vocal on Tamil rights in Sri Lanka, Madhesi rights in Nepal or rights of Rohingyas, for that matter contours of democracy in the neighbourhood. It more concerned of strategic impact of China's presence. As a result the opposition and marginalised groups that always looked towards India to use its influence to nudge governments in the neighbourhood for inclusive politics have lost their lever.

India has used both bilateral and multilateral mechanism to leverage its security concerns. It has introduced joint border patrol mechanism to guard porous border with Bangladesh, have regular meetings between Deputy Commissioner and Superintendent of police between the border areas of two countries, coordination mechanism between foreign ministers, joint patrol by maritime and coast guards. It has annual India-Nepal Oversight Mechanism, annual joint Surya kiran series of exercises, trilateral dialogue and naval exercises between India-Sri Lanka and Maldives and the recently concluded Colombo Security Conclave. While connectivity projects, cross border energy trade will also help India in developing its periphery. India's engagement with SAARC, BIMSTEC and BBIN mechanisms are likely to augment its neighbourhood policy. 

Seamless transport connectivity to boost economic integration, energy and grid connectivity along with people to people contact would remain at the core of India's neighbourhood policy as economic diplomacy gains centre stage. India needs to bridge the gap between promise and delivery on the ground efficiently. However this approach would be work in progress. Compared to the past India has streamlined project financing and implementation. High Impact Community Development Program, its aid and grant programs and scholarships to students to study in Indian institutions, prioritising and liberalising health visa for medical treatment in India, capacity building are some of the policies that India has pursued earnestly. Though socio-cultural and familial ties binds India with its neighbours, adding culture to the development partnership administration shows how India want to leverage its socio-cultural connection while pursuing economics of the relations tailored to provide economic stake to its neighbours. Persuasion of geo-economic tool is likely to provide India a much more stable periphery than what geopolitical approach has been able to deliver.

[i] This article analyses India's relations with SAARC countries in its conceptualization of South Asian neighbourhood.

[ii] On September 29, 1959 Nehru writes to Dorji clarifying India's position. Recent developments in Tibet and on our borders have emphasised the need not only for vigilance but for great caution with regard to any step that might be taken….No foreign country can, in these circumstances, commit aggression on Bhutan without taking the risk of a war with India.

[iii] Nehru said,“so far as the broader question of Bhutan dealing with her external affairs is concerned, we would like to assist in the process and to help Bhutan to train her people so that she can ultimately undertake this responsibility.”

[iv] BNP was in power from 1991-1996 and 2001-2006. This remained most turbulent period in India's relations with Bangladesh.

[v] According to MEA the budgeting and disbursement depends on local conditions that affects the implementation process. Sometimes delay is happening because of multiple stakeholders involvement in executing the projects abroad. Parliament Standing Committee, Action Taken Report, 2021,p.22


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This article appeared in: Author Dr. Smruti S Pattanaik, is Research Fellow, Manohar Parrikar Institute for Defence Studies & Analyses (MP-IDSA) and Member, Editorial Board, Strategic Analysis (Routledge)


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