India harps on a Neighbourhood First strategy, but old allies in South Asia have now begun to lean more towards China

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Walking down Thamel, Kathmandu’s bustling tourist hot spot, in 2017 was not quite the same as before. Once Western tourists in quest of karmic salvation thronged its busy thoroughfares in the enthralling shadow of the Himalayas. On the surface, Thamel had not changed much, only its cosmopolitanism had somewhat thinned to resemble a special zone in China. The glitter of the dollar had been overshadowed by the shine of the Renminbi.

India’s bilateral relations with Nepal are somewhat a legacy of history. Movement of people across the borders of the two nations have been unfettered for centuries cemented as they are by commonalities like religion and culture. Nepal’s newly minted constitution aims to uplift the mood of a nation stuck in the crevice of a lower-middle-income trap. Data released by Nepal’s Department of Industry (DoI) shows that $80 million had been pumped into the Nepalese economy by China between mid-July 2017 and the first half of the current fiscal. As in the two previous fiscals (2016-17 and 2015-16), China had topped the charts in foreign direct investment (FDI) flows into Nepal. Chinese commitments for investment at about $457 million stood at 86.66 per cent of total FDI commitment in Nepal over the period. India came second with an FDI pledge of $37.11 million.

Prime Minister Narendra Modi made his first foreign trip to Nepal soon after taking oath and exhorted the “extra dimension” in India’s relations with Nepal. He also laid the foundation for a new police academy in Nepal. That academy however materialised through a $350 million gift from China. The Chinese built the academy over two years and handed it over to the Nepalese paramilitary forces last year.

India’s commitment to build major hydropower projects pledged in the Mahakali Treaty in 1996 are still in the pipeline, adding to the list of promises not kept. The track record of India-funded projects in Nepal is poor. The growing discontent turned into disgruntlement in September 2015, when Madhesi protesters seeking amendments to Nepal’s new constitution blocked its Birgunj checkpost on the India border for two long months.The Birgunj checkpost had till then accounted for 60 per cent of the land-locked nation’s foreign trade and was a conduit for fuel and medicine supplies from India. The agitation at the checkpost therefore, resulted in an unofficial economic blockade of Nepal. The Nepalese government blamed India for it since the Madhesis are ethnic groups from Bihar and Uttar Pradesh now settled in the mountain kingdom. In desperation Nepal turned to its northern neighbour, China, for essential fuel supplies.

Says Suresh Raj Neupane, Bureau Chief of Nepal’s Kantipur Daily, “Economic Blockade, coming just months after an earthquake that ravaged the impoverished country, amplified the sufferings of the Nepalese in the harsh Himalayan winter and turned the popular mood decisively against India. Nepal’s Prime Minister Khadga Prasad Sharma Oli headed straight to China asking for oil and China obliged.” Nepal’s leaning toward China at that juncture was the beginning of a geopolitical transformation that overturned India’s traditional dominance over the region. The fiasco has been one among several in India’s neighbourhood that have shaken the foundations of traditional diplomatic relations.

The Maldives
The Maldives archipelago in the Indian Ocean had traditionally been an Indian ally till the dictatorial President Abdulla Yameen took charge in 2012 and silenced all his detractors.Exiled president Mohamed Nasheed, who was ousted in a coup in 2012, sought India’s help to restore democracy and order to the tiny, but prosperous nation – but India did not oblige. Meanwhile, a hegemonistic China spread its tentacles across the archipelago. In December 2017 China and the Maldives signed a free trade agreement (FTA). In April 2018, the Maldives asked India to take back one of the two helicopters gifted to Male.

Ambassador Ashok Sajjanhar, President, Institute of  Global Studies, analyses the trend. “President Yameen of the Maldives is playing both the China and Pakistan cards, as well as moving closer to Islamic extremism. India is watching the situation carefully and has advised Yameen’s government to fairly and transparently conduct the presidential election due next month.”

Neighbourhood first
Much of South Asia, with exceptions like Bhutan and Bangladesh, seems to be turning away from New Delhi of late, raising questions about India’s Neighbourhood First strategy for the region. All of  South Asia barring India, now participates in China’s Belt & Road Initiative. Not only have South Asian nations confirmed their participation in the initiative for pan-Asia connectivity along the ancient Silk Route, but have connived at most of the big ticket development projects being taken over by Chinese enterprises.

China is no longer a sly dragon waiting in the shadows. It is using all its might to lure away India’s traditional allies. China is blatantly wooing South Asia with resources and easy access to financial assistance. China has earmarked a $1.34 billion assistance for Nepal, a 73 per cent increase over the previous year. The Maldives gets about $970 million from China. Chinese assistance to Bangladesh, Sri Lanka and Myanmar are $13 billion, $ 3.11 billion and $2.52 billion respectively.  

China is now opening its diplomatic doors to Bhutan too and has drawn up a meticulous five-year-plan to charm the kingdom in the eastern Himalayas. Bhutan is now opening up to China too. It has offered contracts for infrastructure building projects that used to earlier be given to Indian companies, like the Rs 1,800 crore contract to build hydro-electric projects at Punatsangchhu and Mangdechhu, to Chinese ventures.

The moot question at this juncture is whether India’s traditional allies are simply jumping onto the Chinese bandwagon lured by the glitter of the Renminbi, or is India’s ‘Neighbourhood First’ strategy wanting too? The response mechanism of our massive bureaucratic regimen, for instance, seems to often be out of sync with diplomatic exigencies.

“We are witnessing a few broad trends in India’s near neighbourhood, which one can define as encompassing Nepal, Bhutan, Bangladesh, Sri Lanka, the Maldives, and parts of the Indian Ocean, essentially areas where India has traditionally been the most important external power,” says Dhruva Jaishankar, a Fellow at the Brookings Institution India. “One is a growing economic and political openness from what were often very closed societies,” says the international relations expert, “they are looking beyond India to other partners, as is natural.”

The trend is going viral as is evident in the shifting dynamics of India’s diplomatic relations with the Maldives - relegating New Delhi to a sleeping giant in the undergrowth of a verdant South Asia. Jaishankar offers a word of caution too. “There are certainly myriad differences with all these countries, from fishing, trade, and border security issues,” he says, adding, “But the Indian commentariat is unfortunately guilty of ignoring the near abroad and resorting to alarmism when these differences become more pronounced.”

Ambassador Sajjanhar says, “It is felt that China invests only to exploit and harvest natural resources for its own use without being mindful of the impact on the ecology and sustainability of the projects.”

So, apparently while Prime Minister Modi was touring the world and winning acceptance for India across a wider geopolitical arena, some of its allies in the immediate neighbourhood had begun to drift away. The need for greater diplomatic attention to the region is now imminent. India needs to increase aid and assistance to its neighbours. It needs to emphasise on connectivity in the region. It needs to redefine the roles of regional institutions beyond SAARC (the South Asian Association for Regional Cooperation).  

“The best strategy that India can adopt is to reach out to its neighbours and countries further afar like Iran, Central Asia, and Africa etc. with commitments of infrastructure, human resources and capacity development projects etc.,” suggests Ambassador Sajjanhar. “Here the key will be quick and efficient delivery,” he says, adding, “This is the area where China has normally scored over India.”