In the present era of increasing globalization, the economic diplomacy has assumed precedence over political diplomacy and thus, regional economic integration is being increasingly emphasized upon. The economic logic of globalization tends to push back political differences among nation-states and economic engagements are no more hostages to political non conformity. But South Asia remains alien to this global reality, economic logic of globalization is yet to gain precedence over political issues in this region. Only an imaginative economic diplomacy holds the key to overcome this impasse and put the region on the path of integration, development and stability.
Since India is the largest country in South Asia, the primary responsibility for addressing the concerns of this region lies with India. The fact that India shares border with majority of the countries of South Asia, adds both to India’s opportunities as well as challenges in this region. Further, in recent years the gap between India and the other member states of SAARC if anything has further increased to a completely non-comparable level.
But the question is how India will foster and accelerate regional integration in the region? The answer is that the toolbox approach will not do. So the bottom line is that the contentious issues and the principle of reciprocity if it can be should be left aside by India. India must pursue her economic diplomacy in the South Asia within the framework of ‘hubs and spokes’ in which India is placed as a hub in the centre and the spokes of connectivity are reaching out to other member states of SAARC. The paradigm departure from the principle of reciprocity in Indian bilateral engagement in South Asia was first devised and propounded by the former Prime Minister of India Mr Inder Kumar Gujral through ‘Gujral Doctrine’, although it generated great hopes but was not pursued seriously. Subsequently to address the need of regional integration in this region, India announced the New Neighbourhood Policy in 2005 which Inter alia laid emphasis on developing border areas so as to foster better connectivity with our neighbours to facilitate movements of goods and people and to give a full play to the strong cultural affinities which exist among the people of the subcontinent so as to generate and enforce a sense of togetherness and shared identity.
This research paper endeavours to outline the need of political commitments, review of protectionist policies, resolution of issues aimed to expedite bilateral trade and investment among SAARC nations by the process of harmonising standards and customs procedures. The paper also critically analyses the facets of bilateralism India has professed till now and suggests newer approaches and tries to study and compare as to how India’s success in South-East Asia can be replicated in South Asia.
International relations witnessed a paradigm shift in its very orientation, approach and outlook with the onset of last decade of the 20th century. Now the focus has drastically shifted from ‘geo-politics’ to ‘geo-economics’ so much so that economic diplomacy has started taking precedence over political diplomacy. The significant result is that free trade and deregulation is vigorously mooted by the various nation-states. Analysts have termed this transnational phenomenon as the process of globalisation, where the political differences among the nation states are constantly being pushed back in order to foster bilateral and multilateral economic co operations. Some geo-political strategists do not shy away from attributing this global phenomenon to the emergence of United States as a clear hegemon in the post-cold war era and its subsequent endeavour to reinforce its political and economic ideology internationally, but the significance of globalisation in resolving international problems and its global acceptance should not be subdued under such negative criticisms.
Since one of the important aspects of globalisation is regional multilateral co operations, South Asia as one of the major regional demarcation of United Nations could not have remained immune to this historic global development of such a political and economic significance. South Asia which is home to roughly one fifth of world population comprises of countries of India, Pakistan, Bangladesh, Bhutan, Nepal, Maldives, Afghanistan and Sri Lanka and is also the most populated and most densely populated geographical regions of the world.
The South Asian Association for Regional Cooperation as an economic cooperation organisation is playing a pivotal role in giving pace to the process of regional integration in the region. SAARC which was a brain child of the erstwhile President of Bangladesh, Mr Zia Ur Rehman, came into existence on December 8, 1985 after four years of deliberations and negotiations consequent to its proposal. The primary objectives of SAARC enshrined under Article I of the SAARC charter included promotion of the welfare and quality of life of the people, accelerating economic growth, social progress and cultural development, promotion of collective self-reliance, providing mutual assistance, strengthening cooperation with other developing countries and among themselves in international forums on matters of common interests.
Now India’s interests in South Asia is multifarious, ranging from economic, geo-political, border security on one side to historical, cultural and ethnic on the other. India’s foreign policy has undergone a fundamental departure from its earlier moorings owing to the changes in both external and internal determinants and South Asia holds an increased importance for India’s policy makers.
India occupies a predominant position in South Asia in terms of her size, population, economic and technological development, military capabilities and so on. In recent years India has scored an impressive economic growth, achieved the status of nuclear power, and assumed a leading role in global affairs. The policy makers in India are very well aware of the fact the present international order is not unipolar, bipolar, polycentric or even multipolar, but it is more akin to the situation of ‘non-polarity’ hence they do very well realise that importance of regional economic cooperation needs acknowledgement with more seriousness.
Since India is the largest country with 76 per cent population and 73 per cent territorial area in South Asia, so it becomes too obvious that the primary responsibility for addressing the concerns of this region lies with India. The fact that India shares border with majority of the countries of South Asia, adds both to India’s opportunities as well as challenges in this region. Now it is very evident that in the last two decades India has moved from the status of a typical developing country to a position of global economic player so in many ways it enables our policy makers to pursue a vigorous and proactive economic diplomacy in south Asia and also allows India to act as a bridge between south Asia and the mainstream global economic system.
India’s Economic Engagement With SAARC and Its Significance:
India’s engagement in South Asia is important for more than one reason:
First, we have already seen that in the present age of increasing globalisation, the foreign policy practice of nations demonstrates that the economic diplomacy has assumed primary place in inter-state relations. Thus peace, stability and development in South Asia are contingent on the way India conducts her economic diplomacy in South Asia.
Second, regional economic integration is an emerging trend in the period of globalisation and it is increasingly being viewed as an important factor in regional growth and prosperity. Now when South Asia remains among the least integrated region in the world and as India occupies the central position in South Asia, her economic diplomacy has crucial role to play in the process of regional integration in South Asia.
Third, the manner in which India ascended to become an emerging global power in her own right, it is very certain that India’s rising power cannot be sustained, if her economic diplomacy falters in South Asia. Thus the best bet for India in this situation is her imaginative economic diplomacy because the rise of south Asia with and because of India will have a more lasting global impact.
Fourth, in an era where nation states are increasingly emphasising upon weeding out their political differences in order to foster bilateral and multilateral economic engagements, South Asia displays opposite tendencies. Successive efforts of regional integration and economic development are beset by domestic as well as regional conflicts and political indifferences. Economic logic of globalization is yet to gain precedence over political issues in South Asia. Now India alone is placed in the position to operate the key to overcome this impasse.
In short, as India strives to emerge as a global player, economic engagements with SAARC nations have added significance for her future. India’s economic diplomacy in south Asia holds crucial position in realizing this goal of a stable, peaceful and prosperous South Asia’ which is beneficial to both India and the countries of the region.
India’s Bilateralism with SAARC Nations:
India’s bilateral engagement in South Asia takes the form of trade, investment, development assistance and aid as well as the provision of credit lines.
India has laid due emphasis to promote trade relations with her neighbours through trade and transit agreements, duty free access to imports from Least Developed Countries, opening border trade, developing infrastructure in border areas, entering in to bilateral Free Trade Agreements etc.
India’s trade with South Asian countries has increased from US$ 2.4 billion in 2000-01 to US$ 10 billion in 2009-10. In 2010-11, out of India’s total global trade of US$ 600 billion, India’s trade with South Asian countries is US$ 13 billion. Now there are two broad features of India’s trade with South Asia. First, the trade balance is always hugely in favour of India, which needs to be addressed to a reasonable extent. Second base of tradable items is not diversified which needs to be more inclusive.
The capital investment in other countries by India public sector and private sector and companies has emerged as one of the noticeable tool of economic diplomacy and engagement in other countries including countries of South Asia. Though, at present, the Indian investment in south Asia is not significant, but it is likely to rise in future due to continuous encouragement to such investment by India .Till the year 2010-11, the total overseas investment by Indian companies in the world was US$ 100 billion, of which South Asia accounted for only US$ 10 billion. Indian investment in South Asia is largely concentrated in such sectors as transport, telecommunication, energy and water and sewerage.
Since the middle of the last decade India has also emerged as potential donor of developmental assistance to other developing nation and the countries of the South Asia receive lions share in these development assistance. India has been contributing to the human resource development in developing countries through participation in India’s flag ship scheme called Indian Technical and Economic programme (ITEC), which was initiated in 1964. South Asian countries are the main beneficiaries of this programme. India has stepped up the ambit and the reach of these programmes in recent years.
India’s Relations with Individual SAARC members: A Brief Study
India and Sri Lanka:
The relationship between India and Sri Lanka is more than 2,500 years old which is based on a profound and enduring companionship with shared historical experiences, and civilizational commonalities. In recent times, the remarkable feature of the bilateral relations between India and Sri Lanka is that the both countries have developed adequate strength to withstand any stresses and strains. There is no denying the fact that the relation didn’t remain consistently warm and sincere but considering the importance of their bilateral relation both the nations have made comprehensive conversion in their relationship in order to make it conclusively a very cordial one.
India signed a Free Trade Agreement with Sri Lanka in 1998 and after it came into operation in 2000, the bilateral trade between the two nations rose from US$ 685 million in 2000-01 to US$ 2541 million in 2010-11. Erstwhile external affairs minister of India, S.M. Krishna who participated in the 7th session of the Indo-Sri Lanka had assured ‘development and partnership’ and said that as far as India is concerned it would like to work very closely with Sri Lanka.
India and Pakistan
Former Prime Minister of Pakistan Late Benazir Bhutto once said, “There is a little bit of India in every Pakistani and little bit of Pakistan in every Indian’’. Long-time adversaries India and Pakistan- who have fought three major wars in the 63 years of their independence- are still in conflict today as their governments butt heads over such varied issues as trade, water, Kashmir, Afghanistan, terrorism and even cricket.
But there is no denial to the fact that the potential gains from increased economic integration between India and Pakistan are very large. Even though both countries are members of the South Asia Free Trade Area (SAFTA) established in January 2006, trade between the two countries is unnaturally small and the scope for gains from increased trade correspondingly large. Total trade (exports and imports) between India and Pakistan in 2010-11 amounted to a little more than US$2 billion, but still Pakistan accounts for less than 0.5 per cent of India’s trade, and India accounts for a little over 1 per cent of Pakistan’s trade compared with the very large trade shares following the independence of the two countries in 1947.
India and Maldives:
Until recently, India’s engagement with the Maldives had not been on the same level as with other neighbourhood nations. The same could be said of the Maldives’ ties with India. The existence of strong institutional mechanisms and greater understanding of bilateral relations at the political level in India, in particular, led to the strengthening of the relationship. The first and foremost expectation from ‘New Maldives’ is for India to help in the creation and sustenance of democratic institutions in the atolls nation. There is much warmth and respect in Male, the nation’s capital, for the way India has transformed into a ‘leader in global democracy’. The total bilateral trade between India and Maldives was of US$138 million in the year 2010-11.
But bilateral relation between Maldives and India has hit an all-time low in the aftermath of some controversial decisions taken by the island nation. The ties between the two countries have strained after the cancellation of the GMR airport contract, the largest single Indian investment in the island nation, but the real reason for New Delhi’s anguish is said to be the anti-India sentiments being aired by some parties in President Mohamed Waheed’s coalition.
India and Nepal
India-Nepal relationship is shaped by the centuries old socio-cultural, historical and geographic linkages. Extensive people to people contacts permeate all aspects of the lives of the people of India and Nepal and transcend borders and governments. Welfare of the people of the two countries is interlinked and developments in one country invariably have an impact on the other. Few other sovereign states in the world can take pride in a relationship as wide-ranging and multi-faceted as that shared between India and Nepal.
The Treaty of Trade and the Agreement of Cooperation between the two countries was signed on 27th October, 2009 at Kathmandu, Nepal. The Treaty aims at improving bilateral trade between the two countries by increasing the mutually agreed points of trade, expansion in the list of items included for preferential trade, simplification of trade procedures, improving Nepalese supply capacities, provision of two level institutional mechanisms for problem resolution etc. The bilateral trade between India and Nepal reached to the tune of US$2717 million in year 2010-11.
India and Bangladesh
Though India and Bangladesh share a long common culture, economic and political history but the political relationship between India and Bangladesh is characterised by periodic cycles of hiccups. Relations have improved significantly, after Bangladesh’s clampdown on anti-Indian groups on its soil, such as the United Liberation Front of Assam, Bangladesh’s Prime Minister Sheikh Hasina’s state visit to India in January 2010 followed by Indian Prime Minister Manmohan Singh’s visit to Bangladesh in Sept 2011, and continued dialogue over the controversial Farakka Barrage.
Bangladesh is an important trading partner for India. The two-way trade in 2010-11 was US$ 4053 million with India’s exports to Bangladesh accounting for US$ 3606 million and imports US$ 446 million.
India and Bhutan
India and Bhutan’s relations are a model for an ideal bilateral partnership. Visiting King of Bhutan Jigme Khesar Namgyel Wangchuck said, ‘Despite vast differences in size and population, our relationship stands as a model of partnership and cooperation.’’
The current Free Trade Agreement between India and Bhutan, namely Agreement on Trade, Commerce and Transit was signed in New Delhi on 28th July, 2006 for a period of ten years with effect from 29th July, 2006. Under this Agreement, India provides transit facilities to landlocked Bhutan to facilitate its trade with third countries and movement of goods from one part of Bhutan to another through Indian Territory. India’s trade with Bhutan has increased substantially from US$199.71million in 2006-07 to US$ 377.57 million in 2010-11.
India and Afghanistan
Indian involvement in Afghanistan is extremely sensitive because of the delicate and often deadly power games in South Asia, with Pakistan vehemently opposed to it, because it is detrimental to Pakistan’s strategic calculations. At this critical juncture, the strategic cooperation agreement between India and Afghanistan signed on 0ctober 4th 2011 assumes greater importance. Hailing the agreement Indian Prime Minister Manmohan Singh had said, ‘‘India will stand by the people of Afghanistan as they prepare to assume the responsibility for their governance and security after the withdrawal of international forces in 2014.’’
India & Afghanistan signed the Preferential Trade Agreement on March 6, 2003 in New Delhi. This agreement would remain in force till either party gives to the other a notice for its termination.India’s trade with Afghanistan has increased substantially from US$ 216.48 million in 2006-07 to US$ 557.81 million in 2010-11.
Process of Regional Integration: Challenges, Impediments
At present, South Asia displays two major negative tendencies, which have deep bearing on the success of India’s economic diplomacy in South Asia.
First, the economic capacities of South Asia in terms of trade volume, economic production and technology etc. are not commensurate with the population, geographical size and natural resources of the region. This reflects on the level of growth and productive capacity of South Asia. With 20 per cent of the global population, South Asia contributes to less than 6 per cent of the global GDP, only 3 per cent of the global trade and 1.7 per cent of the global flow of FDI. This reflects on the pattern of growth and development in South Asia. With one-fifth of the global population,the region is home to 40% of the world’s poor, with 29.5% of its population living on less than $1 a day. Undernourished children number more than 250 million and the region has the highest number of unregistered births in the world. All these factors contribute to instability and social tensions in the region. It has not succeeded in reaping the benefits of globalization and economic integration as other regions of the globe have succeeded. Reasons are not far to seek.
Second, the process of regional integration is persistently slow in South Asia. The trade, investment, transport, communication and other forms of linkages among South Asian countries are far less in comparison to their similar linkages with other regions and countries of the world. Present data on South Asia show so much untapped economic opportunity: of the region’s total trade volume of $517.5 billion in 2007, only 4% was intraregional trade.
The prevailing inter-state and intra-state conflicts and tensions in South Asia undermine the process of growth and integration in South Asia. The South Asian countries do not have any common perspective of regional peace and security, which increases the trust deficit among them and leads to the involvement of external actors in the issues of regional peace and security. The lack of viable democratic process, domestic political dimensions and instability adds to woes of growth and integration. The economic logic of globalization is yet to take precedence over the political conflicts and tensions of South Asia.
SAARC has traversed two and a half decades of tumultuous events. While the infrastructure and institutional framework for forging a strong, integrated South Asia is in place but there are no significant achievements in progress towards its goals and objectives. As of now there is little significant relevance of SAARC in respect of reducing bilateral tensions, enhancing regional security. And if we talk of promotion of economic well- being of people, that is almost negligible. India as the ‘core’ state of South Asia has been making efforts to soften the political and strategic divergence among SAARC member countries through greater economic and socio-cultural co-operation.
But the question is how India will foster and accelerate regional integration in the region? The answer is that the toolbox approach will not do. So the bottom line is that the contentious issues and the principle of reciprocity if it can be should be left aside by India. India must pursue her economic diplomacy in the South Asia within the framework of ‘hubs and spokes’ in which India is placed as a hub in the centre and the spokes of connectivity are reaching out to other member states of SAARC.
The paradigm departure from the principle of reciprocity in Indian bilateral engagement in South Asia was first devised and propounded by the former Prime Minister of India Mr Inder Kumar Gujral through ‘Gujral Doctrine’, although it generated great hopes but was not pursued seriously. The ‘Gujral doctrine’ was a five-point roadmap which sought to build trust between India and neighbours, of solution to bilateral issues through bilateral talks and to remove immediate quid pro quos in diplomatic relationship between India and her neighbours. The doctrine had its critics, who felt that India would be surrendering intelligence assets in neighbouring countries without any surety that neighbours would keep their side of the bargain of not harbouring any anti-India activity
Subsequently to address the need of regional integration in this region, India announced the New Neighbourhood Policy in 2005 which Inter alia laid emphasis on developing border areas so as to foster better connectivity with our neighbours to facilitate movements of goods and people and to give a full play to the strong cultural affinities which exist among the people of the subcontinent so as to generate and enforce a sense of togetherness and shared identity.
Now, the fresh opportunities for India to foster regional integration are not less pronounced.
First, in the last twenty years, India has moved from the status of a typical developing country to a position of a leading economic player which enables her to pursue a vigorous and proactive economic diplomacy in South Asia. India can act as a bridge between South Asia and global economic system. Second, the Indian progress attracts her neighbours and provides a new opportunity for them to advance. Third, the new trade liberalization regime in the region in the form of South Asian Free Trade Area (SAFTA), if pursued seriously has the potential for increased regional integration. Fourth, the economic logic of globalization is strong enough to side-line the political differences among nations to forge partnership for growth.
India’s official position on neighbourhood was aptly articulated by the former foreign secretary Shyam Saran when he maintained that India would welcome more democracy in the neighbourhood, promote SAARC as logically sustainable venture and as a compliment to bilateral relationship with neighbours. Further, the position of some members of SAARC who perceive it as a vehicle primarily to countervail India or seek to limit its room for manoeuvre is not acceptable to India. He, therefore, considered it as a challenge for India diplomacy to conceive neighbours that India is an opportunity and not a threat and that far from being besieged by India, they have a vast, productive hinterland that would give their economies far greater opportunities for growth than if they were to rely on their domestic markets alone. India would want South Asia to emerge as a community of flourishing democracies, sympathise with democratic and secular forces and respect independence and sovereignty of neighbours.
Tushar Bharadwaj 3rd year B.A.LL.B.(H) student at Amity Law School, Delhi(G.G.S.I.P.U.)
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