Modi and India’s Policy towards Its Immediate Neighbours – Trade and Commerce over Politics

‘Tsu-NaMo’ has become the new word to describe Narendra Modi’s spectacular victory in the recently concluded Lok Sabha elections in which he, as the Prime Ministerial candidate, guided his party, the centre – right Bharatiya Janata Party, to a clear majority.  After winning 282 seats in the 543-seat lower house of the Parliament, Modi-led BJP will certainly have more elbowroom in driving India’s foreign policy.

Even before he had been sworn-in, Modi began his diplomatic outreach, inviting the leaders of the South Asian Association for Regional Co-operation (SAARC) countries for his swearing-in ceremony on May 26. This initiative was appreciated as Pakistan’s Prime Minister Nawaz Sharif, Sri Lanka’s President Mahinda Rajapakse and other SAARC leaders attended his swearing in; turning an otherwise domestic event into a truly international event.

The Future of ‘Coalition Dharma’

But could a weaker Modi – at the mercy of the All India Anna Dravida Munnetra Kazhagam (AIADMK) and old ally Shiv Sena – have invited Rajapakse and Sharif to his swearing-in? The answer is certainly no. Fractured mandates in the previous elections came in the way of India’s strategic interests, resulting in regional groups dictating terms to the government. The Dravida Munnetra Kazhagam (DMK), a Tamil Nadu based ethnocentric party, pulled out of the Congress-led United Progressive Alliance (UPA) government over the Lankan Tamil issue in April 2013 after India supported a diluted U.S. backed resolution against the island nation. The UPA government had been held to ransom since the end of the civil war in 2009 by the DMK and another Tamil party (AIADMK).  India had to walk a diplomatic tightrope to not only appease Tamil sentiments but also keep Sri Lanka happy. This has significantly damaged its once fledging relationship with the island nation.

The Trinamool Congress led by Mamata Banerjee – a former ally of the UPA, which rules West Bengal – blocked the implementation of the Teesta water sharing treaty and the land boundary treaty. The latter’s ratification was not only blocked by the Trinamool but also by the main opposition party BJP after it refused to support a constitutional amendment that was necessary to implement it. The river water sharing treaty was abruptly scrapped in September 2011 and the enclave exchange between India and Bangladesh has not yet taken place.

Unlike Manmohan Singh who had to follow the ‘coalition dharma’– an erudite byword for coalition compulsions, Modi has no such baggage, and his National Democratic Alliance (NDA) includes neither the Trinamool Congress nor one of the two major Tamil parties. Marumalarchi Dravida Munnetra Kazhagam (MDMK) led by Liberation Tigers of Tamil Eelam (LTTE) sympathizer Vaiko is an ally but has failed to win any seat. His protests against inviting Rajapakse for the swearing-in fell on deaf ears, signalling that no fringe regional player can throttle India’s strategic interests. A business friendly Narendra Modi is being seen as a leader who would aggressively pursue ‘economic diplomacy’ with key countries including those in our neighbourhood, safeguarding its core interests backed by credible military power while shifting towards a policy of using soft as well as hard power.

Modi’s Handling of the Ministry of External Affairs

The Ministry of External Affairs – which handles India’s external relations – has gone to Sushma Swaraj while Gen. (Retd) VK Singh would assist her as Minister of State (MoS).  The 62 year old Swaraj is the first lady to independently hold this portfolio. An articulate orator, she is the best choice to be the foreign minister given her experience as the Leader of Opposition when she called on various international leaders. But her personal rapport with Modi is something one needs to look at in the days to come. Gen. (Retd) VK Singh is the first retired general turned minister.  As a former army chief, he is aware of the security situation in the Af-Pak region, border tensions with Pakistan and China and latter’s growing military might in Asia.  Modi might formulate his external security policy working in tandem with him. He has also been given the independent charge of the Ministry of North East region. Though this ministry is not directly related to external affairs, the North East features prominently in India’s relations with Myanmar, Bhutan and of course China.

Modi is keen to develop infrastructure in this highly neglected region which could serve India three purposes – at the outset it would help in facilitating trade ties with the above mentioned three countries along with Bangladesh.  The plan of a possible Kunming-Kolkata road route via Myanmar and Bangladesh would also get a fillip. Secondly, the North East region will finally get integrated into the ‘economic ecosystem’ of South Asia. Finally, better infrastructure would help in the easy movement of troops in the border regions during times of security emergencies.

Economic and Political Diplomacy with the Neighbours

It was quite expected much before the official statement about Modi’s first foreign visit to Bhutan that he would begin his string of foreign tours with India’s neighbourhood. Thwarting all speculations, he decided to travel to Bhutan first, a country that is friendliest to India in its neighbourhood and whose economy is closely linked to that of India. Despite pressure from China, Bhutan has refrained from taking any step that could be detrimental to India’s interests.

Bangladesh was among the choices for his first foreign visit as well. According to Bangladesh News 24 hours, Modi might sign and implement the Teesta water sharing treaty after consulting all the stakeholders. Bangladesh also had its elections in January 2014 in which Prime Minister Sheikh Hasina returned to power. India considers her to be pro-India and the incoming government would also like to mend ties with Bangladesh.  Sheikh Hasina was one of the first leaders to congratulate Modi. He has reportedly accepted her invite to visit Bangladesh. But it is uncertain whether the land boundary deal would be implemented since there are many ultra-nationalist elements in his party, especially in the Assam unit, who are opposed to giving away more than 10,000 acres of land.

India’s bilateral trade with Bangladesh has been on the rise since 2008. Trade now stands at $ 5 billion, up from $ 3 billion five years back. Trade imbalance has reduced considerably in favour of Bangladesh. The Modi government could collaborate with its Bangladesh counterpart to develop key infrastructure between the two countries. The Kalaura-Latu rail route could be reopened while direct flights from Chittagong and Dhaka to Guwahati and Agartala could become a reality. A steamer service between Kolkata and Dhaka would certainly boost tourism and trade in both countries.  One big decision that would have long-term consequences is the revival of the Myanmar-Bangladesh-India gas pipeline – securing India’s future energy needs.

On the southern maritime front, while the UPA II surrendered to narrow electoral compulsions while dealing with its island neighbour, China made inroads into Sri Lanka by bagging various infrastructure projects. The $ 1 billion Hambantota port in Southern Sri Lanka and another $ 500 million port terminal at Colombo Harbour indicates China’s desire to expand its maritime foothold in the Indian Ocean. India even lagged behind China in providing aid to Sri Lanka. While China’s aid crossed $ 2 billion by 2013, India’s aid stood at a measly $ 298 million.

Modi could push for stronger economic ties with the island nation by increasing India’s investments, especially in infrastructure. India’s overall investment had already reached $ 1 billion in 2013. While India’s investments in Sri Lanka are significant and should be lauded, it is way behind China’s aggressive investments that have already crossed billions of dollars. Modi could undo many of the mistakes of the UPA government like declining an earlier offer to build the Hambantota port and prioritize investments in the post-war Northern Province.

While meeting Rajapakse, Modi raised the issue of repeated attacks on Indian fishermen and rehabilitation of war-ravaged Tamils, for whom he demanded full implementation of the 13thAmendment, underlining India’s deep concerns for Lankan Tamils. India and Sri Lanka share long historical and cultural relations, which have endured the test of time. But if humanitarian concerns become the only focus in Indo-Sri Lankan relations, India will see Sri Lanka drifting towards an assertive China.

On the Himalayan front, Modi has promised Nepal Prime Minister Sushil Koirala that he would visit Nepal soon. The BJP manifesto has promised to review India’s neighbourhood policy, alarming many journalists and civil society leaders like Kanak Dixit, who fear that Modi would threaten the secular transformation of the Himalayan nation. But the covert overthrow of a duly elected government by the world’s largest democracy looks improbable. Modi would prefer to deal with the centrist Nepali Congress rather than anti-India Maoists who are in the opposition.

Just like in Sri Lanka, China has spread its economic influence in Nepal in the past few years by heavily investing in key infrastructure projects such as dams. Between July and December of the previous fiscal year, it surpassed India as the largest contributor of FDI in Nepal. India, wary of this fact, would concentrate on increasing its investments in an attempt to keep Nepal under its sphere of influence.

With China, a SAARC observer, Prime Minister Modi shares a close relationship. As Gujarat’s Chief Minister, he had visited China in September 2011. Just after winning the elections, the Chinese establishment compared him to former President of the U.S., Richard Nixon, who was instrumental in warming up to Maoist China. The Chinese establishment feels that just like the late U.S. President, the BJP leader would usher in a new era in Sino-Indian relations. The Chinese government has already begun its diplomatic engagement with foreign minister Wang Yi arriving in New Delhi on June 8.  His bilateral meeting with External Affairs Minister Sushma Swaraj and Prime Minister Modi will focus on deepening economic ties between the two countries. India and China have come a long way since 1962 – the year of the India-China border war. Now 51 years later, China has become its biggest trade partner. While modernisation of the military could take place in the background, Modi’s focus would be on greater economic ties with China than military belligerency. This would mean a balancing act by India. Respecting the mandate he has received, which is for economic revival and not war mongering, Modi would encourage more bilateral trade between the two countries – from $ 70 billion currently to over $ 100 billion by the end of 2015. Bridging the trade deficit with China – at around $ 30 billion – would be among the Indian government’s priorities, which it could do by encouraging more exports to world’s second largest economy.

Shifting focus towards India’s North West, Afghan President Karzai’s meeting focussed on India’s developmental efforts in the war-torn nation and the Herat consulate attack that was repelled with the help of the local forces. With the U.S. President Barack Obama announcing his plans to withdraw the U.S. troops by the end of 2016, Afghanistan could well go the Iraq way, where militants have wreaked havoc ever since the U.S. withdrew its troops in 2011. India, wanting to avoid such a situation, should increase its involvement in the training of the Afghan security forces. With an eye on economic infrastructure, India’s investment is expected to only increase in the coming years. Indian companies have already invested $ 2 billion while New Delhi has already pledged $ 1.5 billion in aid. Afghanistan will also become crucial to India’s energy needs once the new Turkmenistan-Afghanistan-Pakistan-India energy corridor, which is aided by the Indian PSU GAIL, is completed in 2017.

While the majority of war-mongering Indians feel that Modi would attack Pakistan, there is no reason he would want to take such a step. Modi could take a more hard-line stance against infiltration from Pakistan Occupied Kashmir (which the Centre is now reportedly proposing to rename as Pakistan-Occupied Jammu and Kashmir) by stalling peace talks if cross border terror continues. In his interviews to various news channels, he repeatedly said that terror and talks cannot go hand in hand. This is similar to what the UPA also maintained.  Modi should continue Vajpayee’s Pakistan policy. A statesman like Vajpayee continued peace talks despite the Kargil war and parliament attack as he prioritised a peaceful future for the neighbourhood, not an uncertain one.

With Ajit Doval as the National Security Advisor (NSA), the government probably will adopt a tougher security policy against Pakistan.  The reason – the former Intelligence Bureau (IB) chief, who spent six years in Pakistan – is said to be deeply suspicious of Pakistan.

Modi’s image as a ‘development man’ will also reflect in his dealings with Islamabad. During his meeting with Prime Minister Nawaz Sharif, Modi pushed for full trade ties with Pakistan and also raised the issue of granting Non Discriminatory Market Access (NDMA) status to India. Many Pakistani businessmen had already clamoured for deeper trade ties with India. South Asia is one of the least economically integrated regions in the world and building commercial relations is the first step towards integrating the two big countries. The Woodrow Wilson International Centre for Scholars, a U.S. think-tank, suggests that normalised trade relations will bring the official cross-border exchange to $ 40 billion, from today’s $ 3 billion. The report also suggests a win-win situation for both the countries as Pakistan can increase its exports eight-fold whereas Indian companies will be able to penetrate a brand new market. While terrorism and 26/11 dominated the talks between the two leaders, and would continue to do so in future bilateral meetings, economic relations will be the new way forward.

Heralding a New Era in India’s Foreign Policy?

Narendra Modi’s first day in office was unique for a new Indian Prime Minister. Never has a newly sworn-in Prime Minister begun his tenure meeting the SAARC leaders. International issues rarely find a place in India’s political discourse, except when political leaders show jingoism towards Pakistan and nowadays even towards China and Sri Lanka. It has been a too inward-looking country – plagued by its own problems of food, clothing and shelter – to care about events happening beyond its boundaries. But India has to evolve into an outward looking country to become a global superpower. With globalisation interlinking the world economy, events unfolding in one corner of the world affect India’s economy, making international affairs along with economic diplomacy indispensable in today’s world. Focusing on deeper economic relationship with India’s neighbours will give the initial fillip to India’s ambitions in South Asia; before it can go global.

Disclaimer: The views expressed in this article are personal.

Originally published in stsfor.org in June 2014.

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