Love Thy Neigh­bors

With Naren­dra Modi firmly in the driv­ing seat, In­dia’s South Asian neigh­bors watch his ev­ery move with great an­tic­i­pa­tion.

Southasia - - CONTENTS - By Hus­sain H. Zaidi The writer is a free­lance con­trib­u­tor.

Will the new govern­ment in In­dia get along with its neigh­bors, es­pe­cially ‘arch-ri­val Pak­istan?

One of the ques­tions thrown up by the de­ci­sive vic­tory of Naren­dra Modi-led Hindu na­tion­al­ist Bharatiya Janta Party (BJP) in In­dian elec­tions is how the new govern­ment would get along with its neigh­bors, es­pe­cially, 'arch-ri­vals' Pak­istan? An an­swer to this ques­tion en­tails look­ing at not only New Delhi's po­si­tion in South Asia but also its global am­bi­tions.

South Asia is clearly dom­i­nated by In­dia. It's the re­gion's top ter­ri­to­rial and mil­i­tary power, and the fore­most econ­omy and trad­ing na­tion. In­dia ac­counts for 74 per­cent of South Asia’s pop­u­la­tion, 75 per­cent of its GDP, 79 per­cent of its cross-bor­der trade and 81 per­cent of FDI in­flows. In ad­di­tion, In­dia is the most sta­ble (to many, the only sta­ble) democ­racy in the re­gion and, to­gether with Pak­istan, it is a nu­clear state.

Some neigh­bor­ing coun­tries are also very much de­pen­dent on In­dia, eco­nom­i­cally or mil­i­tar­ily. Take Bhutan and Nepal, both land­locked and least de­vel­oped na­tions, shar­ing land borders with In­dia and China.

The 1950 Treaty of Peace and Friend­ship be­tween In­dia and Nepal pro­vides for free move­ment of people and goods be­tween the two coun­tries. This means that the Nepalese can work and own property in In­dia and that ex­ports from Nepal are given pref­er­en­tial treat­ment in In­dian mar­kets, of course on re­cip­ro­cal ba­sis. In­dia is also Nepal's largest trad­ing part­ner ac­count­ing for more than half of Nepal's global ex­ports as well as im­ports.

In­dia has ex­er­cised a lot of in­flu­ence on Bhutan's for­eign and trade poli­cies as its largest trad­ing part­ner, ac­count­ing for 88 per­cent of its ex­ports and 56 per­cent of its im­ports. New Delhi is also Thim­phu's cap­i­tal source of bi­lat­eral eco­nomic as­sis­tance. In­dia pro­vides tran­sit fa­cil­ity for Bhutan's for­eign trade and has made sub­stan­tial in­vest­ments in power projects in the coun­try.

It is one thing to be a re­gional power; it is quite an­other to be a re­gional leader. In­dia has en­joyed the sta­tus of a South Asian power but does it have the cre­den­tials of a re­gional leader? For the lat­ter, a coun­try needs to com­mand the trust and re­spect of its smaller neigh­bors and not their fear. How­ever, most other South Asian na­tions feel that In­dia is out to bully them, es­pe­cially when they have had bi­lat­eral dis­putes (ter­ri­to­rial, shar­ing of river wa­ters, etc.) with the lat­ter. These coun­tries look to New Delhi’s grow­ing mil­i­tary ex­pen­di­ture with grave sus­pi­cion. This has on the one hand pre­vented In­dia from as­sum­ing lead­er­ship in the re­gion, much to the for­mer’s dis­ap­point­ment, and on the other made its neigh­bors look out­side for help and me­di­a­tion.

On its part, New Delhi's am­bi­tions go be­yond be­ing a re­gional power to be­come a ma­jor world power. And given its eco­nomic size and mil­i­tary mus­cle, it is widely seen as be­ing well on course to ac­quir­ing that sta­tus. Glob­ally, the coun­try is ranked fourth in terms of con­ven­tional mil­i­tary strength and sev­enth in terms of ter­ri­to­rial power. For half a decade, New Delhi has also been the world’s largest im­porter of arms.

Ever since it shunned so­cial­ism and em­braced a free mar­ket econ­omy in

the early 1990s, In­dia’s econ­omy has grown sub­stan­tially. It is the world’s sec­ond largest mar­ket be­hind China and the ninth largest econ­omy.

Be­tween 2004 and 2011, In­dia’s eco­nomic out­put grew on aver­age at more than eight per­cent a year, mak­ing it one of the globe’s fastest grow­ing economies. The growth rate came down to 5 per­cent in 2013. In­dia is ranked 18th and ninth, re­spec­tively, in terms of ex­ports and im­ports glob­ally.

This rosy eco­nomic pic­ture has its seamy side as well. In­dia re­mains mired in poverty and back­ward­ness. More than 69 per­cent of the pop­u­la­tion (842 mil­lion) earns less than $2 a day (2010 data re­ported by the World Bank) while per capita in­come is barely above $1400.

Two im­por­tant in­di­ca­tors of eco­nomic per­for­mance are the Global Com­pet­i­tive­ness In­dex (GCI) and the Hu­man De­vel­op­ment In­dex (HDI). On both, In­dian rank­ing is low: fifty-sixth out of 142 coun­tries on GCI and 136th out of 186 on HDI. In­dia is also well short on en­ergy and thus vul­ner­a­ble to any global sup­ply shock, which may up­set its growth mo­men­tum. This shows that In­dia, notwith­stand­ing some of its eco­nomic ex­ploits, has still a long way to go be­fore it is pro­moted from a re­gional to a world power.

The chal­lenge for the new govern­ment in New Delhi will be twofold: to make In­dia as­sume lead­er­ship in South Asia and to ac­cel­er­ate the coun­try's quest for achiev­ing a world power sta­tus. In or­der to con­jec­ture how ef­fec­tively will In­dia be able to grap­ple with this twin chal­lenge, the cre­den­tials of Modi and the BJP need to be taken into ac­count. Both are ex­po­nents of 'Hin­dutva' and there­fore di­vi­sive. Though ex­on­er­ated by the courts, the Modi-led BJP state govern­ment is widely seen to be be­hind the mas­sacre of Mus­lims in 2002 Gu­jarat com­mu­nal rights. There­fore, Modi's ca­pa­bil­ity to lead a bil­lion­plus mul­ti­eth­nic, 'sec­u­lar' In­dia has fre­quently been put un­der ques­tion. By elect­ing Modi to power, the ma­jor­ity of In­dian vot­ers have af­firmed that he is ca­pa­ble of leading In­dia. All the same, a sig­nif­i­cant mi­nor­ity may con­tinue to har­bor sus­pi­cions as to his cre­den­tials.

By the same to­ken, In­dia's South Asian neigh­bors may sus­pect that the new pre­mier will adopt a pol­icy of ag­gran­dize­ment to­wards them, thus ac­cen­tu­at­ing their mis­trust of the 'big brother.'

It will not be fair to at­tribute Modi's vic­tory only to his Hindu na­tion­al­ism cre­den­tials. If Modi is a Hindu na­tion­al­ist, he has also the rep­u­ta­tion of be­ing very sound in man­ag­ing the econ­omy. A ma­jor el­e­ment of his elec­toral cam­paign was the prom­ise of re­viv­ing the econ­omy and mil­lions of In­di­ans be­lieve that he will be as good as his word. What­ever may be his po­lit­i­cal out­look, he is a neo-lib­eral when it comes to pro­mot­ing busi­ness. That is why he en­joys the sup­port of mega In­dian businesses as well as that of multi­na­tional com­pa­nies work­ing in the coun­try.

The eco­nomic fac­tor will there­fore make Modi seek nor­mal, if not good, re­la­tions with the coun­try's neigh­bors. At present, by its stan­dards, In­dia has a very low level of eco­nomic en­gage­ment with other South Asian na­tions. For in­stance, out of In­dia's $ 289.56 bil­lion ex­ports, only $13.26 bil­lion worth are sold in South Asia, while out of the coun­try's $489 bil­lion im­ports, only $2.21 bil­lion worth are bought from the re­gion. Ac­cord­ingly, South Asia ac­counts for only 4.5 per­cent of In­dia's global ex­ports and 1.91 per­cent of the coun­try's global im­ports. For sure, Modi would like to achieve a sig­nif­i­cant in­crease in these fig­ures know­ing well that greater eco­nomic en­gage­ment in South Asia will boost In­dia's in­flu­ence in the re­gion. And if New Delhi gets the most fa­vored na­tion (MFN) sta­tus from Is­lam­abad, it will be a big achieve­ment on the part of the new govern­ment. For that, the Modi govern­ment will need to build, at the very least, cor­dial re­la­tions with its western neighbor, which in­ci­den­tally also has a busi­ness-friendly govern­ment at the mo­ment keen to nor­mal­ize eco­nomic re­la­tions with In­dia. The emerg­ing Afghan sit­u­a­tion will also have sig­nif­i­cant im­pli­ca­tions for Indo-Pak ties.

Though for­mally not a part of South Asia, China is not only a great power it­self but a neigh­bor­ing coun­try as well. Both In­dia and China have a his­tory of mis­trust. How­ever, both know well that a mil­i­tary stand-off will put brakes on their eco­nomic am­bi­tions. There­fore, they have put po­lit­i­cal dis­putes be­hind them and agree that en­hanced eco­nomic co­op­er­a­tion should be the ba­sis of their re­la­tions. With Modi at the helm, the trend in bi­lat­eral re­la­tions is likely to con­tinue.

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