House of Commons - Foreign Affairs

Select Committee on Foreign Affairs Fourth Report

2 INDIA RISING

6. The FCO strategy document outlining the UK's international priorities, published in March 2006, describes India as a major actor that will have significant strategic influence in the future. It states:

As the world's largest democracy, India will have a growing influence in international affairs and on the global economy. It will have particular strengths in the service and knowledge sectors, while broadening the base of its growth. Like China, India will face challenges in maintaining the pace of reform and managing the pressures of rapid growth and uneven development between regions. But its traditions of democracy and rule of law will help it to seize the opportunities and manage the tensions created by rapid change. India will be an increasingly significant strategic partner for the UK, building on our close links, shared values and common interests. [

7. Two main factors have enabled India's recent rise in political and economic importance to the UK: economic reforms, and the end of the Cold War.[8]

Economic reforms

8. India's economy was stagnant in the first half of the 20^th century, averaging only 0.8% annual GDP growth.[9] After India gained independence from British rule in 1947, its economy improved a little. From 1950 to 1980, GDP growth averaged 3.5%. However, this did not compare well with the high economic growth rates achieved in this period by some other Asian countries, such as Japan and later South Korea, Taiwan, Thailand and Malaysia.[10] Moreover India's population grew almost as quickly between 1950 and 1980 so income per head increased by an average of just 1.3% a year.[11] A key factor in the low rate of growth was Prime Minister Nehru's vision of India as a self-sufficient secular country with a state-dominated economy. Although commended at the time by the international community, his policies are now seen by many commentators to have created an inefficient public sector, stifled private business and prevented India from benefiting from the post-war boom in world trade.[12]

9. In the 1980s some liberalising economic reforms were introduced. These enabled average GDP growth to increase to 5.6%. Yet the turning point came when India experienced a balance of payments crisis in 1991. This triggered more significant reforms. Although many of the measures taken were gradual, they signalled a clear break from the past[13] and "set India on its present growth path".[14] Dr Chris Smith, associate fellow, International Security programme, Chatham House, told us:

10. Since 1991, India has seen an average GDP growth of 6.2% a year. Over the last three years, economic growth has been even higher: it was 7.2% in 2003, 8% in 2004 and 8.5% in 2005.[16] As Mr Rahul Roy-Chaudhury, research fellow for South Asia, International Institute for Strategic Studies, told us, such high levels of growth have resulted in:

The end of the Cold War

11. A key pillar of India's foreign policy in the decades immediately following independence was Third World solidarity.[18] Nehru was one of the founders of the Non-Aligned Movement in 1955, comprised of a large section of the developing world which declared itself neutral in the Cold War. However, despite its 'non-alignment', India became a close ally of the Soviet Union in the 1970s. It signed a formal treaty with the USSR in August 1971. This treaty included mutual defence provisions[19] and gave India the arms it needed to fight and defeat Pakistan in the then East Pakistan and assist the creation of Bangladesh. India also failed to condemn the Soviet invasion of Afghanistan in December 1979.

12. The collapse of the USSR in 1991 opened up new diplomatic possibilities for India, both with regard to its neighbours and to the world's great powers.[20] Federico Bordonaro wrote:

After the end of the Cold War, India has progressively emerged as the South Asian potential hegemon and as a power with global ambitions.

India's foreign policy

13. In recent years, India's foreign policy has focused on elevating India's regional and international standing and achieving energy security. Federico Bordonaro explained that India's strategy divided the world into three geopolitical circles:

The first one is the near or immediate neighbourhood and it encompasses India and its territorial waters. No intrusion from external powers into this space is, or will be, permitted by Delhi. The second circle is the so-called extended neighbourhood of South Asia and encompasses the whole Indian Ocean littoral. Here, competition with China and Pakistan will likely be stiff both for strategic dominance and political influence. Finally, the third circle is the global stage itself on which India aims to play an increasingly influential role.[

14. Mr Roy-Chaudhury told us that New Delhi policy makers wanted India to play "an increasingly important role in the international system" and "to take on greater responsibilities and tasks in the international community."[23] Dr Gareth Price, head of Asia programme, Chatham House added:

15. At the same time, India has not entirely shifted away from its traditional interests. The FCO described India's international relations as trying "to find a balanced way through its traditional NAM [Non-Aligned Movement] loyalties and emphasis on south-south cooperation, and its increasing interest in the US."[25]

UK-India bilateral relations

16. The FCO told us that relations with India were "now closer than they have ever been across a broad range of policy areas".[26] In 2004 Prime Minister Tony Blair and Indian Prime Minister Dr Manmohan Singh launched a Joint Declaration (the Prime Ministers' Initiative) which established annual summit meetings and detailed five main areas of cooperation: foreign and defence policy, security challenges, public diplomacy, including educational and cultural links, economic and trade issues, and sustainable development.[27]

17. At the 2005 UK-India summit, the Prime Ministers announced the UK-India Education and Research Initiative to improve educational and research links between India and the UK. At the last UK-India summit the Prime Ministers announced a new package of measures for cooperation between the two nations on counter-terrorism and a new area of cooperation on climate change.[28]

18. The Foreign Secretary, Rt Hon Margaret Beckett MP, told us:

I think the summits have been extremely effective. More to the point, we are not the only ones to say that they have been; the Indian Government have also said so in warm terms. I think that the summits led to a strengthening and deepening of the bilateral relationship between different Ministers and between the Governments as a whole. Quite a number of specific outcomes stem from, as I see it, the strengthening and intensification of those links at the summits.

[For example we…] had been talking to officials in India for some time about the possibility of developing a demonstration power plant, using carbon capture and storage for coal power, in partnership with India [..]. It was not making as much headway as people had thought, for no particular reason that anyone could put their finger on. I raised the issue with the Prime Minister and I am delighted to say that the obstacles seem to have been miraculously waved away.

19. The Joint Declaration also established the UK-India Joint Economic and Trade Committee (JETCO) to "enhance bilateral trade and investment in specific sectors". A UK-India Investment summit was held alongside the political summit in October 2006.[30] The UK and India also have a forum to discuss bilateral economic issues and economic policy agendas, in the context of globalisation, the Economic and Financial Dialogue, which meets annually.[31]

20. We conclude that the UK and India enjoy excellent bilateral relations on a wide range of shared interests. We recommend that the Government sets out in its response to this Report how bilateral relations between the UK and India could be strengthened further in the future.

7 Foreign and Commonwealth Office, Active Diplomacy for a Changing World: The UK's International Priorities,

Cm 6762, March 2006, pp 24-25

Back

8 C. Raja Mohan, "India and the Balance of Power", Foreign Affairs, vol 85, number 4 (July/August 2006), p 19 Back

9 Gurcharan Das, "The Indian Model", Foreign Affairs, vol 85, number 4 (July/August 2006) Back

10 Edward Luce, In Spite of the Gods; The Strange Rise of Modern India, (London, 2006), p 27 Back

11 Gurcharan Das, "The Indian Model", Foreign Affairs, vol 85, number 4 (July/August 2006) Back

12 Edward Luce, In Spite of the Gods; The Strange Rise of Modern India, (London, 2006), pp 27-28 Back

13 Gurcharan Das, "The Indian Model", Foreign Affairs, vol 85, number 4 (July/August 2006) Back

14 Q 67 Back

15 Q 7 Back

16 Percentage GDP growth given by calendar year. Figures from the International Monetary Fund's World Economic Outlook Database, September 2006 Back