Written evidence submitted by Charu Lata
Hogg, Asia Program, Chatham House
INDIA'S ROLE IN THE REGION AND ITS LINKS
WITH ITS NEIGHBOURS
India is one of the world's fastest growing
economies and has been making efforts to be recognised in the
global arena. While it has undisputed influence within the region,
with a US-led international consensus emerging on letting India
take the lead on some regional issues, its relationships with
its neighbours are both complex and on some issues, seemingly
intractable. India's political and economic path to becoming an
international power must necessarily cross the trajectory of its
neighbours' aspirations. Energy reserves in Bangladesh, Nepal,
Pakistan, and Myanmar and even as far as Central Asia are a focus
for India's industrial needs. Yet instability within most of India's
immediate neighbours and India's own complicated relationships
with most of its bordering countries has worked against both enhanced
regional cooperation and growth.
An unresolved historical legacy, political differences
over disputed resources and territory and in recent time's issues
relating to cross-border terrorism have worked as a barrier to
greater economic integration in the region. Most notably regional
economic mechanisms like South Asian Association for Regional
Cooperation (SAARC) and South Asian Free Trade Association (SAFTA).
SAARC still remains a largely consultative body, which has shied
away from undertaking even a single collaborative project in its
20 years of existence. While most of the failings of SAARC could
be laid on the door of India's tensions with Pakistan, there appears
to be a deep resistance to doing anything collaborative in the
region as a whole. Smaller countries like Bangladesh have used
SAARC as a regional dispute settlement mechanism while both India
and Pakistan have projected their political differences in dealing
with SAARC.
While India is increasingly aware of the benefits
of creating a free market of 1.3 billion people in the South Asian
region in addition to sourcing its energy needs, the shadow of
disputes with its neighbours-primarily Bangladesh and Pakistan-and
its inherent political cost, has caused a definite shift in its
policy towards regional integration. India's quest for energy
security is now driving an aggressive diplomatic move towards
the greater Indian Ocean region covering East Africa, East Asia,
South Africa and the Caspian Sea. There is a perception that for
far too long, India has allowed an obsessive relationship with
its immediate neighbours dominate its foreign policy concerns.
Within the present United People's Alliance (UPA) government,
there is a definite attempt at pushing the frontiers by engaging
with bigger powers—the United States, Russia, China and
EU as part of building up a new paradigm.
Even as it attempts to carve out a larger concentric
circle of influence internationally, India remains troubled by
and troubling to its neighbours. Political opposition, stemming
from domestic resistance to being subsumed under India's overarching
influence and India's reluctance to "giving in" to the
demands of its neighbours has largely dominated bilateral relationships
within South Asia. India's size and its growing economic status
have created regional and international expectations that it will
both use its influence to help resolve its neighbours' conflicts.
Correspondingly, it has also generated fear that it will meddle
in these conflicts to enhance its own interests. India's foray
to intervene in the Sri Lankan ethnic crisis by sending the Indian
Peace Keeping Force (IPKF) into the island generated suspicions
of its designs while its attempts at avoiding military assistance
to Sri Lanka during the recent escalation of conflict has been
met with equal mistrust and wariness.
India has a set of bilateral relationships with
its neighbours, which vary in both political and economic intensity.
The dispute over Kashmir is central to India's foreign policy
concerns and draws on much of its diplomatic energy and resources.
The rivalry between nuclear-powers India and Pakistan has also
played itself out in the region, often fanning ethnic, ideological
and religious separatism. India has accused Pakistan of acts of
terrorism within its boundaries and in the region of Jammu and
Kashmir. Pakistan has similarly accused India of fermenting dissent
and supplying arms to the Baluch tribes in Baluchistan. There
is great concern within India that the bordering states of Nepal
and Bangladesh and more recently Sri Lanka are being used as bases
for terrorists from Pakistan to infiltrate India.
Despite the political hurdles, the refined focus
of India's foreign policy and its interests in the region remain
largely economic. India remains watchful of increasing Chinese
trade and investment links in Bangladesh, Pakistan and Sri Lanka
but does not anticipate a territorial threat. There is a deep
realisation within Indian policy-makers that only peace in its
immediate neighbourhood will bring India credibility as a regional
power and also economic dividends. The challenge for Indian diplomacy
lies in convincing its neighbours to view India as an opportunity,
not a threat, which so far remains a daunting task.
INDIA'S
BILATERAL RELATIONS
WITH PAKISTAN,
SRI LANKA,
BANGLADESH AND
NEPAL
Pakistan: India and Pakistan have been arch
rivals since the partition of the sub continent over 50 years
back. Their animosity has its roots in religion and history, and
has escalated into a dangerous arms race. The main bone of contention
between the two neighbours remains Kashmir. Pakistan argues that
Kashmir should have become part of Pakistan in 1947 because the
majority of its population is Muslims; they say that numerous
United Nations resolutions mean that Kashmiris should be allowed
to vote in a plebiscite to decide between India and Pakistan.
India argues that Kashmir belongs to them because of the Instrument
of Accession signed by the Maharaja in October 1947, which handed
over to Delhi powers of defence, communication and foreign affairs.
Kashmir's special status within the Indian constitution was confirmed
in 1950, allowing it more autonomy than other Indian states. Under
the Indian constitution, Jammu and Kashmir is a state, and went
to the polls as a state. India has resisted UN intervention and
argues that under the Simla Agreement of 1972 both countries have
agreed to solve the Kashmir question through bilateral negotiations.
It has also resisted a plebiscite in Kashmir saying that because
elections have been held which demonstrate that people living
there want to remain part of the Indian union.
India and Pakistan have twice gone to war over
the territory, in 1947-48 and in 1965. In 1971, India and Pakistan
fought again over Bangladeshi independence. The trajectory of
Indo-Pakistan talks on Kashmir have not all been downhill. A composite
dialog process continues between the two sides. In September 2006
Foreign Secretaries from both sides met to review the progress
of the Dialogue and agreed that the negotiations on eight subjects
have been productive and recommended continuation. Indian and
Pakistani commanders are discussing pulling troops back from the
21,000 ft Siachen glacier. While there is no agreement on Kashmir,
there has been convergence of ideas on improving access and cross-border
visits between the demarcated territories in Kashmir. Trade between
the two sides is promising. India enjoys a trade surplus with
Pakistan and would like the Most Favored-Nation (MFN) status for
its exports of chemicals, plastics, petroleum products, pharmaceuticals,
rubber, iron ore and tea. Bilateral trade has increased from $157
million in 1997-98 to $343 million by March 2004.
Of mutual interest to both sides is a natural
gas pipeline from Iran through Baluchistan and Sindh in Pakistan
to India. While discussions for this $4 billion project were initiated
eight years ago, tensions have stymied progress and given US unsettlement
over the deal and security issues within Pakistan, any positive
developments seem unlikely. While the larger issues still remain
unresolved, there has been some movement on smaller issues. Both
sides agreed to re-affirm the Indus Water Treaty and reached an
agreement to jointly survey the boundary pillars at Sir Creek,
a small coastal seven mile strip along the Gujarat coast. The
governments have agreed to establish a vital nuclear hot line
to avert risk of accidental launch, and to upgrade an existing
hotline between India and Pakistan's senior military officers.
Sri Lanka: Sri Lanka is an interesting test
case for regional cooperation both in terms of its economic relationship
with India and its willingness to view regional trade with a wide
variety of states as an opportunity. In 2000 it signed its first
Free Trade Agreement (FTA) with India and five years later signed
one with Pakistan. Pakistan is ready to eliminate tariff for imports
from Sri Lanka by 2008 and increased trade is already showing
dividends to both economies. India, not surprisingly, dominates
the bilateral economic relationship with Sri Lanka and accounts
for almost 15% of total Sri Lankan imports (biggest source of
Sri Lankan imports) and with US$400 million in FDI is the third
largest investor in Sri Lanka. It is also the fifth largest destination
for Sri Lankan exports accounting for about 4% of total Sri Lankan
exports. From India's point of view, Sri Lanka is a relatively
small market: It accounts for around 2% of total Indian exports
and less than 1% of its imports and Sri Lankan investments in
India are insignificant. The benefits of this cooperation are
already impacting growth in the economy through a rapid increase
in infrastructure links (70 airline flights per week including
by private airlines), a slew of ambitious proposals to improve
connectivity such as a land bridge and ferry services from the
Sri Lankans, Indians providing the bulk of tourism revenue in
Sri Lanka, and an increase in investment flows in both directions.
Yet relations between the two countries continue to have an edge
particularly, on India's resistance to sign a bilateral Defence
Cooperation Agreement and a Memorandum of Understanding on the
rehabilitation of Palaly Airfield. Arms procurement from China
and Pakistan by the Sri Lankan government continues to rankle
India which stays unwilling to adopt a more direct role in conflict
resolution in Sri Lanka.
Bangladesh: India dominates Bangladesh's external
security concerns and India has regarded Bangladesh more as an
irritant than a threat. The two countries share at least 54 common
rivers and have an agreement on the Ganges, but have so far failed
to arrive at a common consensus on water sharing. Dhaka is concerned
over the consequences of India's plans to divert rivers flowing
into Bangladesh which threatens the country's agriculture and
the viability of the economy. Immigration from Bangladesh to northeast
India is an emotive political issue as New Delhi continues to
claim that approximately 20 million Bangladeshis are living illegally
in India and should be repatriated, an allegation Dhaka denies.
India continues to construct a fence along the 4,000 km border
with Bangladesh, further aggravating Dhaka. The 8 feet security
fence, parts of which are being electrified, cuts a swathe through
some of India's densest rainforests, and is expected to be finished
by the end of 2006. The decision was largely a reaction to the
recent spate of bombings in Bangladesh and an attempt to curb
cross-border insurgent and arms trafficking, but had created further
tension in a relationship already tainted by Bangladesh's refusal
thus far to agree to provide a transit route for gas from Myanmar
to India. The January 2005 tri-nation agreement remains stalled
as Bangladesh continues to demand trade parity in compensation
for allowing Myanmar gas to transit through its soil. For Bangladesh,
the economic fall-outs have been loss of $125 million in revenue
as transit fee for the Myanmar pipeline, stalling in signing a
Free Trade Agreement (FTA) with India which would open up a larger
market for its exports and failure to access raw materials and
market for its garment industry.
Nepal: Security, transit and water issues have
bedeviled Nepal's relationship with its bigger neighbour. While
Indo-Nepal relations were primarily covered by the Indo-Nepal
Treaties of Trade and Transit which had to be periodically renewed,
they remain contentious. Though water sharing has never been a
source of serious conflict in the bilateral relationship, there
has been contestation over efforts to use water resources through
hydropower, irrigation, flood management, and navigation. Two
early projects (on the Kosi and Gandak rivers) caused serious
strains in the relationship. The Kosi/Gandak agreements, initially
signed in 1954/1959, were amended in 1966/1964 to take care of
Nepalese concerns, but the sense of grievance was not wholly removed.
The Tanakpur episode during which India failed to inform Nepal
that it was making use of a small piece of Nepalese territory
to construct an embankment to protect Nepalese territory from
possible backwater effects from the Tanakpur Barrage, has loomed
large in the Nepalese consciousness contributing to the fall of
the government. There is also concern within Nepal that India
has used its 1999 India Nepal transit treaty, as a bargaining
tool for access, with constant threats of reducing transit points
that could adversely affect Nepal's economy.
Charu Lata Hogg
Asia Programme, Chatham House
December 2006
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