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