Economic policy

Does India pursue a hegemonic economic policy in South Asia?

Experts say New Delhi, which operates the world’s sixth largest economy, is taking economic measures to “subjugate” its immediate neighbors like Nepal.

Throughout human history, a strong economy has always shaped and accompanied political power, and countries have used their financial superiority to establish political dominance over others.

India, home to the second largest population in the world, abounds in rich resources spread across its vast tracts of land.

Although 68% of India’s population lives on less than $2 a day, New Delhi has not been shy about exerting its influence in the region, using its economic power to dominate relatively small neighbors such as Nepal and Sri Lanka. according to several experts who last spoke at a webinar on India’s economic policies in South Asia, organized by the Nordic Institute of Stability Studies (NISS), a Copenhagen-based think tank.

New Delhi is the city of the world six biggest economies in terms of nominal GDP and third in purchasing power parity (PPP).

According to Robert Gallimore, an educationalist and security expert, India follows an “imperial policy” to exert its power and influence across South Asia.

“India is a great power in the region and many of its neighbors depend on it,” Gallimore said during the webinar.

India aims to play a major political role in the Indo-Pacific region, using its economic might and developing partnerships with neighbors like Nepal, according to Anil Sigdel, founder of Nepal Matters for America, a think tank based in Washington DC.

“India was in a historic economic transformation, and its interests seemed to have converged with Nepal’s economic development,” Sigdel said during the same webinar, moderated by NISS chief executive Muhammad Athar Javed.

“However, this presumed development and growth partnership, as promised or expected, has never taken off, and I don’t think it will,” Sigdel told the webcast, expressing his disappointment with India’s approach to Nepal.

Nepal in the crosshairs

The main reason behind the failure of the partnership is India’s veiled political interests in Nepal, Sigdel sees. “India’s willingness to partner only goes so far as Nepal aligns itself with India’s economic and strategic interests and objectives, which is not an easy task for Nepal – in fact, it goes against the legitimate and autonomous decision-making of a sovereign nation”.

Even the relationship between Nepal and India cannot be described as a partnership because India’s “underlying motive is economic subjugation”, according to Sigdel.

Despite Indian Prime Minister Narendra Modi’s rhetoric about its neighborhood first policy, New Delhi’s relations with Nepal and other neighbors appear to show an India-first policy, where Kathmandu can only be “on the side of losers,” Sigdel said.

Nepalese students shout slogans during a protest against New Delhi ushering in a new route through disputed territory between India and Nepal, in Kathmandu, Nepal in 2020. (Niranjan Shrestha/AP Archive)

Other Nepalese observers think similarly to Sigdel. Rajani Thapa, a researcher in international relations and diplomacy at Tribhuvan University, Nepal, finds strong similarities between India’s period of colonization under Britain, called the British Raj, and its current aggressive economic stance towards its neighbors.

“Like the British Raj, which had carried out economic subjugation and influenced and controlled the political order of India for more than two centuries, the Republic of India showed a similar attitude towards Nepal (control of its economy and its politics) since its independence in 1947,” Thapa said during the webinar. “India is like becoming the heir to the British Raj.”

As strong evidence of India’s toughness on Nepal, it recalls the South Asian giant’s 2015 economic blockade of Nepal due to New Delhi’s aversion to Kathmandu’s new constitution. But Indian pressure on Nepal trickled down as Kathmandu began moving closer to the west, she added.

While Modi has visited Nepal several times as Indian prime minister and the two countries share common cultural traditions, political tensions between the countries have not seemed to give way to any real rapprochement, Thapa said.

“The RAW Indian leader, his army chief and his foreign secretary visited Nepal between October and December 2020 and they indirectly suppressed Nepal through political power and economic subjugation because Nepal is so dependent on India for its exports. Even today, we experience their kindness which is secretly economic subjugation,” she said.

Rajani Thapa, a researcher at Tribhuvan University, Nepal, finds strong similarities between India's period of colonization under the UK and its current aggressive economic regional position.

Rajani Thapa, a researcher at Tribhuvan University, Nepal, finds strong similarities between India’s period of colonization under the UK and its current aggressive economic regional position. (Credit: Muhammad Athar Javed/TRTWorld)

India is the largest foreign economic power in Nepal, accounting for over 30% of total approved foreign direct investment. According to Saurav Raj Pant, another researcher in international relations and diplomacy at Tribhuvan University, there are about 150 Indian companies operating in Nepal in the manufacturing, service sectors (banking, insurance, dry port, education and telecommunications). ), the electricity and tourism sectors. Nepal.

“India is Nepal’s only energy supplier. Indian exports to Nepal are higher than exports to Russia, which means that Indian exports depend a lot on Nepal,” Sigdel also pointed out.

Like Nepal, Sri Lanka is also coming under Indian economic pressure over various issues despite its close ties to New Delhi, according to Shakthi De Silva, assistant lecturer in international relations at the University of Colombo, Sri Lanka.

Various studies highlight “the importance of remembering that big powers like India don’t invest in small countries out of altruism,” Silva said during the webinar. “Whenever we negotiate bilateral agreements, South Asian countries must ensure that our national interest is promoted and that policy makers are by no means the worst in accepting bad agreements,” he said. he adds.

Can China counterbalance India?

Pant points to another factor, China’s growing presence in South Asia, as one of the reasons for India’s aggressive economic policies towards its neighbors. But Indian pressure tactics appeared to further increase China’s involvement in the region.

“The Indian blockade on Nepal in 2015 had forced Nepal to sign an agreement with China guaranteeing transit rights for the import of goods in 2016. In 2019, Nepal signed a protocol on the implementation of the Transit and Transport Agreement and six other agreements with China,” Pant said during the webinar.

Sigdel also sees a growing Chinese presence in Nepal to counterbalance Indian power. “By political nature, Nepal sees China as an option,” he said.

Despite India’s pressure tactics, Beijing’s increased involvement in South Asia “poses a challenge for India as a regional economic and diplomatic heavyweight,” said Javed, the webinar organizer.

“Many South Asian countries are hosting major regional and extra-regional powers in the Indian Ocean region. Despite India’s phenomenal economic growth, China’s rise and growing grip on South Asia provides the region with a much-needed balance of power,” Javed said.

But smaller South Asian countries have been more hesitant to forge strong ties with China, fearing India’s wrath, he added.

Javed hopes for a more active SAARC (South Asian Association for Regional Cooperation) role in ensuring regional economic and political stability by strengthening dialogue on common issues.

“The lack of regional cooperation suggests that India’s grossly unbalanced economic power and adversarial interactions with peripheral countries have hampered SAARC’s effectiveness. This is happening simply because of India’s extensive and coercive economic diplomacy,” he concluded.

Source: World TRT