India, China and the Neighbourhood in South Asia

As India is trying to manage the fallout from the first major border skirmish since 1975 with China in which a substantial number of jawans were killed, it would do well to assess the broader political and economic impact on the regional situation. The growing ambitions of the two countries are seeing them bumping against each other not only along their 2,100-mile border but also in competition for power on many fronts across South Asia.

Though promoted as economic initiatives, China’s Belt and Road Initiative (BRI) and Maritime Silk Road (MSR), have strategic undertones. On the maritime front, China is extending its influence across the Indo-Pacific region. The BRI also provides China an opportunity to expand in India’s neighbourhood as for instance in the case of the China-Pakistan Economic Corridor (CPEC), which has brought the Chinese presence close to the Indian border whether in Pakistan Administered Kashmir or in the Sir Creek area.

China’s alignment with Pakistan and deepening relations with other South Asian countries has already upset the geopolitical balance in the region, a region which New Delhi has dominated for decades. India must decide on how to secure its interests in this unbalanced environment as this situation may tempt our smaller neighbours to play one power against the other, undermining India in its own backyard.

Military conflict spilling onto trade restrictions

While India and China are in dialogue to restore the status quo ante, India has initiated a range of economic measures aimed at Chinese firms to make it difficult for them to access the Indian market. Clearly New Delhi is indicating that it will not continue trade and investment relations as normal if China does not agree to return to the status quo of April 2020.

India suspects China is routing goods to India through their common trade partners in South Asia under the South Asian Free Trade Area (SAFTA), and by taking advantage of bilateral pacts with Singapore, Japan, South Korea, and Sri Lanka. According to media reports, the Indian government has decided to impose stricter checks on cargo from Sri Lanka, Bangladesh, South Korea, and the Association of South East Asian Nations (ASEAN) countries to clamp down on such routing of imports. This could result in financial losses to exporters from these countries as shipments are going to be held up for increased customs scrutiny and a demand for 'country of origin' certificates. Sri Lankan business persons have already voiced concern about these actions

Smaller South Asian countries maintaining distance

India has played, at least till date, a dominant role in shaping the economic and political configurations of most of its smaller neighbours. China has, however, over the years expanded its presence in South Asia, including through investments under the BRI, its transcontinental infrastructure strategy and with closer political ties with countries such as Nepal and Sri Lanka. The smaller countries in South Asia — Nepal, the Maldives, and Sri Lanka — have decided to stay silent about the conflict between New Delhi and Beijing.

Nepal, Sri Lanka, and Bangladesh, which were once Indian allies, have recently tilted toward China. Despite New Delhi’s objection, every South Asian nation, with the exception of Bhutan, has signed on to China’s BRI. The ongoing China-India conflict could reverberate in South Asia, leading to new relations in the region. Perhaps it is time to look into India’s relations with each of its neighbours, which now seem to have become less cordial if not in a shambles despite the Narendra Modi government’s Neighbourhood First policy.

Modi’s 'Neighbourhood First' Policy

Soon after being elected as prime minister in 2014, Narendra Modi had invited his counterparts from Afghanistan, Bangladesh, Bhutan, the Maldives, Nepal, Pakistan, and Sri Lanka — members of the South Asian Association for Regional Cooperation (SAARC) — to his inauguration. It was a grand gesture of public diplomacy one that no previous prime minister had done. Modi used the occasion to announce his Neighbourhood First initiative, a new focus on prioritizing relations with SAARC member-states.

At the start of his first term, Modi devoted a considerable amount of time, attention, and energy to regional foreign-policy issues. In June 2014, he went to Bhutan on his first foreign visit as prime minister. Later that year he visited Nepal twice and in 2015 went to Sri Lanka, Bangladesh, Afghanistan, and Pakistan. Notwithstanding this very promising start, New Delhi’s relations with its neighbours have worsened across the board.

India’s relations with Bangladesh had developed into a consummate partnership after Modi concluded the boundary agreement with Sheikh Hasina in 2015, ending a contentious issue of “enclaves” that had remained unresolved since the creation of East Pakistan in 1947. Yet, this positive impact disappeared after the National Register of Citizens (NRC) was prepared in Assam. The Bharatiya Janata Party (BJP) had made illegal immigration from Bangladesh a key campaign issue in the 2019 national election. Though the objective was to identify ‘illegal immigrants’, the ruling BJP used it to create fear among the Muslim minority and threatened to expel anyone who could not produce the requisite documents. Bangladesh, which could be forced to accept many deportees, strongly objected to the NRC. Not surprisingly, relations with India have since cooled considerably.

After the devastating earthquake in Nepal in April 2015, the Indian government had acted promptly and sent critical aid. This had created much warmth and goodwill. However, later that year, when Nepal was about to adopt its new Constitution, India imposed an informal economic blockade on the landlocked country. Perhaps it was done to gain the votes of the people of northern Bihar and Uttar Pradesh who have kinship relations with the Madheshis. The blockade was disastrous for the Nepalese economy: the price of rice doubled and a cylinder of cooking gas became at least five times more expensive. Petrol and diesel virtually vanished from the market. In this situation, China stepped in to help, setting the stage for Nepal to reduce its dependence on India. Not surprisingly, the reservoir of goodwill for India that its disaster assistance of 2015 had generated quickly evaporated. Now in 2020, Nepal’s parliament has approved a new map that includes land claimed by India, making relations their worst in years.

In Sri Lanka, Gotabaya Rajapaksa’s election in 2019 as the president has brought back the Rajapaksa brothers who have long built close ties to Beijing. This has forced New Delhi on to the back-foot.

India nearly went to war with Pakistan in 2019. The frequent border skirmishes between India and Pakistan could easily get out of hand, triggering a “limited war” between the two nuclear armed states. While tensions were simmering down in mid 2019, New Delhi’s abrogation of Article 370 in August 2019 to revoke the special status of Jammu and Kashmir led to a dramatic deterioration in India-Pakistan ties.

In Afghanistan, the Taliban continues to rise in power and influence. This has set back decades of Indian efforts to get a foothold in Afghanistan through investment and diplomacy. It appears that Bhutan is the only country in South Asia that still has a reasonably cordial relationship with India.

Whither ‘Neighbourhood First’ policy

Prime Minister Narender Modi’s decision to promote the Neighbourhood First policy was based on the twin objective of projecting India as a global power and as a supportive benefactor of neighbouring states. The question then: how has a policy welcomed by most of India’s neighbours unravelled within six years?

It remained successful as long as the high rate of economic growth brought prosperity and economic security to broad sections of the Indian middle class. With the economic downturn, Modi was forced to look inward and fall back on ultra-nationalist platforms of Hindutva. The abrogation of Article 370, the dismemberment of Jammu and Kashmir, the enactment of the Citizenship Amendment Act (CAA) and threats to implement a nation-wide NRC are a part of this process of consolidating power. Clearly, the Modi government has been more concerned about domestic issues than its image in the international community and the alienation that some of its 'domestic' policies have caused among India’s immediate neighbours.

There are other factors. For example, India’s increasing tendency to interfere in the domestic affairs of its smaller neighbours, either citing security implications or to offset the target country’s unfriendly strategic choices. Interference in Nepal’s internal affairs because India was unhappy with the new Constitution was completely undiplomatic. India’s participation in the economic blockade led to Kathmandu complaining to the United Nations, prompting its Secretary-General to highlight “Nepal’s right of free transit, as a landlocked nation as well as for humanitarian reasons”. Now, according to newspaper reports, New Delhi has been actively encouraging Nepalese political groups to topple the K P Oli regime in Kathmandu.

Highlighting the need for the CAA, Home Minister Amit Shah in Parliament named Bangladesh along with Pakistan and Afghanistan, as places where he said non-Muslim minorities were facing persecution. The India’s Ministry on External Affairs said that the CAA was an "internal matter". However, it needs to be noted that when you bring three neighbouring countries into domestic politics, the issue ceases to be purely a domestic one. Making negative remarks on these countries causes resentment.

India’s home minister’s repeated statement about “illegal” immigrants from Bangladesh, calling them “termites” and threatening to push back about four million into Bangladesh has angered not only Bangladeshi politicians but also the common people of the country. Soon after the CAA was passed, Bangladesh’s Foreign Minister A.K. Abdul Momen cancelled his scheduled visit to India. This was followed by the cancellation of Bangladeshi Home Minister Asaduzzaman Khan’s visit and postponement of two meetings on river management between officials from the two countries in New Delhi. In the extended neighbourhood, the Organization of Islamic Cooperation (OIC) has expressed concern over the CAA while a smaller grouping of Muslim nations, including Malaysia, Turkey, Iran, Qatar, and Indonesia, have been even stronger in their condemnation of India.

Accusations of Hindu majoritarianism as well as media coverage of people coming out on the streets against the government’s policies and its heavy-handed response has further chipped away at India’s soft power as well as its reputation as a diverse and democratic society.

Where do we go from here?

South Asia remains a very poorly integrated region in economic terms. Intra-regional trade is less than 2% of GDP compared with over 20% for East Asia. Regional institutions such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and SAARC could be vehicles for Indian influence in setting regional standards for trade, investment, and other forms of cooperation. Unfortunately, these have failed to be effective.

In complete disregard of its earlier promises and in a manner that could hurt India’s national interest in the longer run, the Modi government has also been reducing the already limited amount of aid and loans to the neighbouring states. In 2017, the Parliamentary Standing Committee on External Affairs had noted that,

There has been a sizeable reduction in aid and loans to countries in our immediate neighbourhood such as Maldives, Bhutan, Sri Lanka, Afghanistan and Bangladesh. The Committee contends that the quantum of aid to a country under this head is viewed as a reflection of India’s diplomatic engagements with its immediate and extended neighbourhood.

China has very deep pockets and has used state-backed financing, marketed in recent years as the BRI, to offer the types of large-scale infrastructure projects that these countries are crying out for. India simply does not have the resources to match China.

India needs to ask itself whether the policy of closer alignment with the United States (US), along the policy path that India is already pursuing, is the best way to meet the challenges posed by China. The Modi government needs to examine the real capacity of the US to deliver active military assistance to India in the event of a war with China. Despite the US-Japan Security Treaty that enjoins the US to come to Japan’s military defence if it comes under attack, the US did not come to Japan’s aid in the latter’s ongoing dispute with China over the Senkaku/Diaoyu islands. In fact, the US even refused to recognise Japan’s sovereignty over the islands for fear of getting embroiled in a military conflict.

The strategic problem that India faces is how to secure itself and promote its national interests in a grossly unbalanced strategic environment. India has abandoned the policy of non-alignment and has moved away from the South Asian regional community towards an alliance with the West to contain China. This is dangerous for India and for the rest of South Asia. India needs to walk away from that trap. It needs to focus on its long-term interests and build sustainable and long-term relationship with her neighbours. And, for that, India needs to resolve its border disputes with her neighbours: China, Nepal and Pakistan.

The border dispute between India and China can be resolved only if both India and China are willing to make compromises. In all such disputes, particularly those that carry the legacy of the colonial past, a certain give and take is necessary. Last year, during the informal summit at Mamallapuram, President Xi Jinping suggested the need to build a trilateral partnership between China, India and Pakistan free from the influence of third parties. The idea of a trilateral dialogue and cooperation is the only way to go forward.