Webinar, World

Economic subjugation by India of its Periphery Countries and question of International Sovereignty of SAARC Nations

Nordic Institute of Stability Studies, a Denmark-based think tank organized an International Webinar on, “Economic subjugation by India of its Periphery Countries and question of International Sovereignty of SAARC Nations”.

Muhammad Athar Javed, DG NISS opened the webinar with the statement that “economic power of a state really matters in making favourable decisions for a state. And country’s economy is really much dependent on foreign investments. India has enjoyed substantial regional influence across South Asia due to its size, comparative economic might, and historical and cultural relevance to the region.” “China’s increased involvement in South Asia poses a challenge to India as the regional economic and diplomatic heavyweight”, he remarked. Javed further stated that the bilateral relations between India and Nepal, a landlocked country have now been stuck in a stalemate, with SMEs being left behind. Nepal’s trade deficit has been steadily increasing, particularly with India. During the first 10 months of the fiscal year 2019/2020, the trade deficit was around US$7,890,508.99, with Nepal’s trade deficit with India amounting to US$4769, 50429 (about 60 percent of the total trade deficit)”.

“A lot of South Asian countries are welcoming regional and extra regional great powers in the Indian Ocean region. Despite India’s phenomenal economic growth, China’s rise and growing hold on South Asia is providing the region with much-needed balance of power. Moreover, small countries in South Asia have resisted forging strong links with China, and their policies have been shaped to please Indian authorities to some extent”.

Athar Javed hopes for an active role of SAARC which in turn could “ensure economic and political stability in the region by increasing regional dialogue on common issues. Lack of regional cooperation suggests that the India’s excessively imbalanced economic power and antagonistic interactions with periphery countries have hampered the SAARC’s effectiveness. It is just happening due to India’s extensive and coercive economic diplomacy”.

Prof. Dr. Scott Lucas, professor of Emeritus, University of Birmingham, UK, talked about “power rather than domination, and said he wanted to avoid domination not because power cannot beat domination, I think it can beat it. I still stuck with the idea of power as a political analyst because I think there is risk quite often when we talk about domination at least among many of my colleagues from US and UK. This is because domination is usually thrown out as a political term. One person’s domination is another person’s cooperation”, he said.

Dr. Scott further remarked that “We would have Iranians even today talk about American domination, while the Americans talk about the Iranians attempt to dominate the region. Pakistan talks about India’s domination and vice versa, back and forth we go. It doesn’t really help us to evaluate the power which may include to get an advantage of someone else, short term rather than the long term, but power does not simply operate in a win lose situation, sometimes it can be a win-win situation, sometimes it can have mixed results. In other words, power is a kaleidoscope rather than a seesaw of one side up and one side down. No one talks about the British domination anymore because the British do not have that type of power and indeed one might argue that we don’t talk as much about European economic domination, is it because the European Union is 27 countries instead of one? So, we identify with certain nation states because of their size, possession and because of politics”. (e.g. India in this case).

“The way that the Europeans exert power is different than the Americans do or the Chinese do it because the history of how the economic bloc formed is different. But among many examples including central and south Asia the domination has not been preserved, indeed has not been a priority for the economic interaction. So, if we are to look at the question from a historical point of view, we look at the contemporary position of the region. The context here is that we are in the midst of a changing international system in the 21st century. The Chinese project is an alternative for the economic system, an alternative approach to development it is at the heart of the challenge which is put to some extent the talk about resistance economies.

“My interest is in terms of avoiding erosion for projections of power and by that, I mean erosion in a double term. One is of course the practical application of economic power to erase another country’s autonomy (sovereignty) or to erase another country’s autonomy that is the essence of domination. But I am also interested in erosion of power as an analyst and that is that the projection of power quite often within a region and globally in some senses to me tied into the post-1945 world. The actual dynamic is erased because we go back to the win lose power construction”.

Mr. Robert Gallimore, educationist and Security Expert was of the view that “South Asia is one of the most important regions of the world. It is home to one-fourth of the human race, has a vast reservoir of talent in many fields. And the countries of the region are nuclear powers. India is going for Imperialism a policy of extending a country’s power and influence through colonization, use of military force, or other means. India is a great power in the region and many of its neighbours are dependent on her”.

Dr. Anil Sigdel, Founder, Nepal Matters for America, Washington DC said that “in the 21st century, engaging with Asia has both strategic as well as economic dimensions and therefore goes beyond the rise of the Indo-Pacific. India has a major role to play in this spectrum of connectivity. India expressed its willingness to cooperate in Nepal’s desire for economic growth – which looked like a good news at some point, India was in a historical economic transformation, and their interests seemed to have converged with Nepal’s economic development, however, that presumed partnership of development and growth as pledged or expected never took off the off the ground, and I don’t believe it will.” The reason Dr Anil said “is because the nature of India’s policy of international development cooperation is such, and in its neighbourhood is even more. India’s willingness to partner only goes to the extent that Nepal aligns with India’s economic and strategic interests and goals, which is not an easy task for Nepal – in fact, runs counter to the legitimate and autonomous decision making of a sovereign nation. The fact India is not even partnering with Nepal, because the underlying motive is economic subjugation. Therefore, Nepal’s any hope to make India’s growth as springboard for its own progress I believe is misunderstood – yes there might be some spill over effects, but there is also a danger of being even more overwhelmed by India’s economic might”.

Anil also link bilateral space with numerous domain of cooperation, “One should note that this is a bilateral space where there is convergence in some domains, competition in others, and some divergences. This makes India play around to keep Nepal engage. So even after lot of hype about India’s rise and positive impact for Nepal, as Modi expressed his policies in those lines, actually I only see continuity in India’s economic engagement with Nepal, which is clearly India first, and in that India first Nepal can only be in the losing side given the difference in size and capacity. Yes there will be some token assurances and messages, such as India’s ministry of external affairs has juggled with its budget allocation and priorities and somewhat shows slightly increased priority on Nepal’s development assistance (Even the increase on Nepal development cooperation is much smaller than what it did at the same period to Indian Ocean nations like Maldives, Seychelles, Mauritius due to its SAGAR policy)—but these are low level activities of allocation that does not match Modi’s words nor does it reflect India rising with all its neighbours – to recall Modi’s policy – “sab ka saath sab ka bikas” we “all rise together”  in the neighbourhood”.

“Nepal is a kind of a gullible neighbour, can easily be duped, if not, then through some arm twisting or other tools, sometimes even embargos …

India’s international cooperation policy, it employs its Exim Bank Line of Credit instrument – but this has been criticized in Africa of being very colonial. In all cases of Exim LoC it is like this, an example here”:

For example India-Sierra Leone agreement of $30 million dollar on irrigation, tractors and hydraulics:

“Financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. Out of the total credit by Exim Bank under the agreement, goods, works and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India”

“India and the global development organizations guard any protectionist policies from Nepal – but India itself is a protectionist when it is on the losing side – we have examples from Bangladesh – I mean talking about neighbours only, not to mention other global export powerhouses from which India try to protect its markets. Trucks of ginger going out of Nepal to India is often stuck in India’s all kinds of non-tariff barriers and given all kinds of reasons to justify- which all boils down to Nepal’s lack of autonomy in business vis-à-vis India – or the economic subjugation of India to Nepal. India wants Nepal to highlight the advantages Nepal has had from ties with India and be happy about it, do not complain and remain submissive. As a human nature, Nepal looks towards China as an option; again Nepal itself gets bad name for that of being unappreciative, ungrateful, even disloyal by with its enemy China and snubbing India”.

“More emphasis is given to connectivity now, so India has worked on constructing pipelines, as India is the major supplier of energy to Nepal, but it can be of concern if India uses the pipelines to twist arms when needed, in the end the dependency of Nepal on India is only growing. Indian Economic and strategic goals are totally opposite and not in the favour of Nepal. In simple words India is doing less for Nepal and even don’t allow to complain. India is sole supplier of energy to Nepal. Indian Exports to Nepal is higher than the exports to Russia that mean Indian Exports are very much dependent on Nepal”.

Mr. Shakthi De Silva, Assistant Lecturer, Department of International Relations, University of Colombo, Sri Lanka stated that “In view of the broader strategic implications of the use of economic power by major powers and the sovereignty concerns this may have on smaller states, I decided to look at two cases, discussed a lot in contemporary media: the Hambantota Port and China-Laos Railway. Before diving into these cases however, let me briefly discuss the Indian Adani project”.

“In May 2019 the former Sri Lankan government signed a tripartite MOU with India and Japan to develop the east container terminal of the Colombo Port. Naturally, this was very much in India’s national interest because it was next to the Colombo International Container Terminal, where China Merchants Ports Holdings holds an 85% stake in a BOT agreement for 35 years. The new Sri Lankan Government, allegedly on the basis of protecting national assets from foreign ownership, decided to unilaterally refuse to comply with the MOU and decided to develop the East Container Terminal through its own funds. Of course, the justification by the Government was to protect national assets but the decision actually came about because of pressure from port union workers and civil society activists. The Government’s decision however strained relations with Japan and India. India, in particular, was very vociferous in pointing out their opposition to the cancellation”.

Shakthi described state-to-state negotiation process and said that “Indian pressure led to a reassessment of Sri Lanka’s posture. In March 2021 the Sri Lankan Government decided to allow the Adani Corporation to develop the West Container Terminal at the Colombo Port. A report by the Hindu newspaper claims that “Whether it was the former ECT deal or the current WCT agreement, it remains unclear how the Adani Group became the chosen investor from India. Until now, there is no indication of a competitive bidding process or of the selection process. Or the rationale used to select the investor.” Adani now holds majority stakes with its local partner John Keells, while Sri Lanka Ports Authority holds just 15% in the West Container Terminal project, unlike in the East Container Terminal deal when Sri Lanka Ports Authority had 51% controlling stakes. This, in itself, is an indication of the pressure that India asserted in the negotiation of the deal”.

“Another issue that comes into mind when we talk about maritime issues is the Indian illegal poaching of fish in Sri Lankan waters. This issue is one of the most longstanding problems that Sri Lanka has encountered since independence. Bottom trawling – which was banned from Sri Lankan waters in 2017 – which to those who may not know involves dragging heavy nets across the seafloor to catch a large volume of fish, causes severe damage to the marine ecosystem. Tamil fishermen in the North and East protested early this month stating that Sri Lankan authorities’ failed to stop poaching by Indian fishermen and protect the impoverished local fishing communities. Whenever the Sri Lankan navy captures illegal Indian fishermen in Sri Lanka’s waters, we have been forced to immediately hand them over to Indian officials. As a result, the lack of punishment encourages more and more fishermen to violate Sri Lanka’s maritime boundary on a daily basis. Of course, the fishermen dispute and the violation of Sri Lanka’s maritime boundary is a topic warranting discussion at a future event and therefore I will get back on track to the two cases I decided to discuss for this seminar”.

“The two case studies: the China-Laos Railway and the Hambantota Port in Sri Lanka allows us to examine whether major power investment projects are indicative of ‘Debt Trap Diplomacy’ or instead are examples of ‘Win-Win’ partnerships between countries of the Global South. I will begin by sketching what these two narratives actually imply”.

“In sum, what do these projects tell us about how major powers should engage with South Asian countries and how South Asian countries should be wary about major power involvement in their domestic economies? What lessons should be derived from these when we manage bilateral ties with India? Firstly, both projects the China-Laos railway project and the Sri Lanka Hambantota port warn of the danger of accumulating debt. India finances through non concessional loans which would put Sri Lanka and other South Asian countries at risk of defaulting on its debt obligations. This is something that policymakers in the region have to be very careful of. Furthermore, the two projects that I discussed also warn us of the importance of conducting upper feasibility studies before allowing Indian firms to invest in megaprojects”. He presented a comparative study of India and China and said that, “the case studies also point to the importance of remembering the major powers such as India, do not invest in small countries out of some sense of altruism therefore whenever we negotiate bilateral agreements, South Asian countries must ensure that our national interest is promoted and that policymakers are in no way worst to accept bad deals”.

“Finally, both cases warn us of the importance of breaking the hazy image those media portrayals of investment projects now although the media tended to highlight both projects that I mentioned earlier with China-Laos project and Hambantota port as having dangerous implications on Laos and China it appears to not be reflective of this much tight debt trap diplomacy. Consequently, just remember that the reverse is also true in the media, as it portrays in gain investment in a very attractive manner, we must take it with a grain of salt make sense of whether the project is actually beneficial to the country but these are lessons that I believe strongly that South East Asian policymakers should keep in mind as they engage with India”.

Ms. Rajani Thapa PhD student of International Relations & Diplomacy at Tribhuvan University, Nepal, highlighted India’s past (Before the British Raj) and present (After the British Raj) in terms of economic miracles. “Like British Raj which had conducted economic subjugation  and influenced and controlled political order of India’s for more than 2 centuries—Republic India( since 1947) has shown similar attitude in Nepal(controlling economy and politics).  India is like becoming heir of British Raj”.

“European countries have colonised different countries and exploited the meaning in terms of their economic power whereas the US after World War II, it emerged as a dominant superpower turning away from its traditional practices towards increased international involvement. The US became a global influence in economic, political, military, cultural, and technological affairs. After that the US established the US dollar as a word currency, the United States has not subjugated colony but like Great Britain in the 19 centuries has benefited economically from a stable international political order, Ms. Rajani remarked.

“The economic blockade of 2015 was imposed due to India’s dissatisfaction over Nepal’s new constitution. However, India step back eventually and Nepali had endorsed the constitution. The stepping back gave a room for clear western influence in Nepal. India is very close to Nepal from cultural, social, geographical, and linguistic perspective but it has imposed blockades on Nepal many times. When your neighbour tries to kick you out then you try to have friendship with another neighbour, in case of Nepal it is China.  Or take a step back, which gave a room to western influence in Nepal. India implies top to bottom approach, top leaders to public whereas the West apply bottom-up approach, that is why West have a good influence in public forum. Prime Minister Modi took over the office in May 2014 and his first decision was to invite the head of state of all South Asian countries in his swearing in ceremony, emphasising on the importance of Nepali and immediate neighbours and he stated the Neighbourhood first policy”.

“So, this implied Indian engagement level with its immediate neighbourhood and India fostering deeper economic security and cultural integration. Indian Prime Minister Narendra Modi visited Nepal four times during his centre of six year; however all is not well between Nepal and India at a government-to-government level. At times sudden difference crop up in the relations, like last year in 2020. Before 2020 there was a talk between our countries head-to-head, ambassador to ambassador but the aftermath was the same because of their power economic subjugation. Subsequently, the Indian RAW chief, army chief, and minister foreign secretary visited Nepal between October and December 2020 and they indirectly suppressed Nepal through political power and economic subjugation since Nepal depends so much for its exports on India. Lastly, still to this day we experience their kindness which is secretly economic subjugation”.

Mr. Saurav Raj Pant, PhD. Student of International Relations & Diplomacy of Tribhuvan University, Nepal included background factors behind India’s economic subjugation of periphery countries, and said that “One of the key reasons behind India’s renewed emphasis on its neighbourhood was to counter China’s increasing presence in South Asia. Contrasting the growth in India’s trade with South Asia from 2014-19 despite lacking the advantages available to India in terms of geographical proximity. India and Nepal want connectivity and development partnership, water resources and energy cooperation projects to counter energy crisis in Nepal, and investment in multiple projects to boost economy of Nepal. In recent years India has been assisting Nepal in development of border infrastructure through development of 10 roads in Terai Area. The total economic assistance earmarked under aid to Nepal in FY 2019-2020 was INR 1200 Crore”.

“Indian firms are among the largest investors in Nepal, accounting for more than 30% of the total approved foreign direct investments. There are about 150 Indian ventures operating in Nepal engaged in manufacturing, services (banking, insurance, dry port, education and telecom), power sector and tourism industries”.

“Some large Indian investors include ITC, Dabur India, Hindustan Unilever, VSNL, TCIL, MTNL, State Bank of India, Punjab National Bank, Life Insurance Corporation of India, Asian Paints, CONCOR, GMR India, IL&FS, Manipal Group, MIT Group Holdings, Nupur International, Transworld Group, Patel Engineering, Bhilwara Energy, Bhushan Group, Feedback Ventures, RJ Corp, KSK Energy, Berger Paints, Essel Infra Project Ltd. and Tata Power, India etc.”.

Indian blockade on Nepal in 2015 had forced Nepal to signed a agreement with China securing transit rights for importing goods in 2016. In 2019, Nepal signed a Protocol on Implementing Agreement on Transit and Transport and six other agreements with China. In May 2020 as India’s Defense Minister inaugurated a new road up to the Lipulekh Pass. Nepal protested the move and “accused India of changing the status quo without diplomatic consultations”.

“Indo-Nepal relations were primarily covered by the Indo-Nepal Treaties of Trade and Transit which had to be periodically renewed and would at times cause concern to both sides. Presently, both countries have moved beyond these issues to cooperate in other areas”. “Close linkage between security interests and economic relations. It brings out that economic relations have been a major instrument for India in meeting its security interests linked to Nepal”. India’s Public diplomacy and strategy entails mostly macro political management, which currently emanates from meeting of current RAW Chief and PM KP Sharma Oli. The Infrastructure building projects in Terai & Himalaya and engagement with Nepali experts and political leaders are some of the main strategies of India.