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India and South Asia: From Balancing to Bandwagoning?

E. Sridharan
October 24, 2011

Do recent events and the logic of the past indicate that we are at the beginning of a shift in policy by India’s neighbors from attempting to “balance” India to “bandwagoning” with India over the long run? Why do India’s neighbors, particularly Pakistan, but also to a lesser extent Bangladesh, Sri Lanka, and Nepal, not bandwagon with the region’s largest and fastest-growing economy for their own interests? Why has their behavior, bilaterally and in the South Asian Association for Regional Cooperation (SAARC), been one of trying to balance India in various ways; Pakistan’s attempt to hard-balance, that is, match India militarily, or other countries’ attempts to soft-balance India through diplomatic maneuvers or non-cooperation or exploiting insurgencies within India, or draw upon extra-regional, particularly, Chinese support?  

There is an extended debate in the international relations literature on balancing versus bandwagoning when new poles of power emerge. This basically concludes that weaker states’ decisions to balance or bandwagon depends upon the threat perception from the emerging pole, whether there are shared interests or not, and by implication, the kind of accommodation or side payments – implicit or explicit – offered as inducements by the emerging pole to potential allies. On regional cooperation and alliances, states are sensitive to not just absolute gains but relative gains since relative economic gains, particularly if cumulative over time, can convert into military advantage. Hence, it is not enough to point to the absolute gains from trade but to reassure potential partners that relative gains, if any, will not convert into anything threatening. When India was a closed economy, the smaller neighboring states found no advantage in bandwagoning with it, but India’s liberalization and high economic growth of 7 to 9 percent has changed the picture. Does the possibility exist for India to induce bandwagoning by offering economic incentives combined with political and security reassurances, and what are the incentives for other states, particularly Pakistan, to respond?

The recent visit of Prime Minister Manmohan Singh to Bangladesh would appear to inaugurate a new chapter in Indo-Bangladesh cooperation with the settling of the border by agreeing to a settlement on the issue of the large number of cross-border enclaves in each other territories, a legacy of a ragged partition. This carries forward the cooperative turn in Bangladesh policy towards India that was started by the Awami League government, including winding down the covert support to India’s northeastern insurgent and other terrorist groups.

Likewise, the October visit by the Nepalese Prime Minister to India resulted in a Bilateral Investment Promotion Agreement and a $250 million credit line, both significant steps forward in a touchy relationship. Additionally, the October visit by the Afghanistan President resulted, after a total commitment so far of $2 billion in Indian aid, in both a trade and economic cooperation agreement. This included an investment promotion agreement, as well as a highly sensitive security cooperation agreement including capacity building for Afghanistan’s armed forces, indicating a tilt towards India. 

On the Pakistan front, it has also recently been reported that following the September talks between the Commerce ministers of the two countries, as part of the resumption of the comprehensive dialogue process, Pakistan might move from having a short positive list of items allowed to be imported from India (1938 product lines) and a long negative list of 12,000, to a short negative list of sensitive items except for which everything else will be allowed to be imported – in other words, Most Favored Nation (MFN) status without calling it that. In return, Pakistan wants a relaxation of non-tariff barriers by India. If this liberalization does come about, it will represent a step forward. While Pakistan will not bandwagon with India, I would argue that the foundations for a long-term policy shift towards significantly greater trade and economic cooperation with India have been laid by the developments since the May 1998 nuclear tests and their aftermath.

The developments following the 1998 nuclear tests have changed Pakistan’s options in two ways, both of which would probably make it less inclined to resist greater economic cooperation in the future, provided any Indian economic gains are not convertible into security gains. First, explicit nuclearization with a demonstrated missile capability has assured Pakistan’s security. Secondly, the failure of Kargil has demonstrated that using nuclear capability as a shield to launch a military offensive to force India to come to the table on its terms on Kashmir is no longer a feasible option.

Because of these factors, Pakistan is more secure vis-à-vis a possible Indian military threat than ever before, as well as less able to threaten conventional force to resolve the Kashmir dispute.  From its viewpoint, therefore, it has less to fear and much to gain from greater economic engagement with India. The January 2004 agreement on a composite dialogue on a basket of issues (including trade and energy cooperation besides Kashmir, but without holding dialogue and progress hostage to Kashmir) was a reflection of this logic. This policy opened up space for creative solutions on Kashmir including talk about making borders irrelevant without rewriting them and even talk of joint control of both sides of Kashmir.

Having achieved security vis-à-vis India by nuclear deterrence, Pakistan has two broad options. The first is to use nuclear deterrence as a shield to launch conventional offensives, an option no longer possible after Kargil and 2002, or to use terror strikes to try to change India’s positions. The latter, which it should be clear since 2008, has failed. The second is to recognize these to be dead-end strategies and engage with India in trade and economic cooperation to build confidence so as to soften Indian positions in the long run. Logic points in this direction and we should therefore not be surprised to see an incremental policy shift, however gradual, in this direction.

South Asian intra-regional trade and SAARC’s share of India’s total trade is very low: 2.15 percent in 2009-10, 4.69 percent for exports, and a paltry 0.57 percent for imports. India has a huge trade surplus with each principal neighbor, except Bhutan. While the low figure reflects the relative size of India, it also reflects the relative failure of the regional integration process. Incentives for trade cooperation with India are greater for the smaller neighbors. India, therefore, has considerable margin to reduce trade tensions and political resentments arising from its trade surplus (its exports are seven to eight times its imports from Pakistan, Bangladesh, and Sri Lanka), increase its political influence and incentivize a pro-India political orientation by increasing its imports from its neighbors. This will be relatively unimportant for India in economic terms but very important in political terms.

India’s South Asia policy, if it wants to induce bandwagoning toward itself, has to take into consideration the security sensitivities of Pakistan as well as its deterrent capability, and the sensitivities of India’s smaller neighbors on a range of issues including feared loss of sovereignty and distinctness of their identity. It has to combine incentives such as non-reciprocal trade openness with reassurances on vital threat perception issues including military posture, as well as treatment of its Muslim and other minorities. This would be a vital factor in the threat perceptions of Pakistan and Bangladesh; India should lead but not be domineering. Good precedents are the revision of the Indo-Bhutan Treaty in 2007 to remove obsolete provisions and the agreement to consider amending the Indo-Nepal Treaty of 1950, both of which were desired by the smaller country. While the ideal way towards regional integration would be the adoption of a regime of common norms and policies, this is not feasible given that SAARC bars the discussion of domestic issues. Hence, the best way forward for Indian policy would probably be the bilateral route of improving relations with its neighbors with non-reciprocal openness in parallel with other efforts, including aid – India being an emerging donor – but tying such cooperation to reciprocity on basic Indian security concerns such as terrorism and insurgency.

E. Sridharan is the Academic Director of the University of Pennsylvania Institute for the Advanced Study of India.


India in Transition (IiT) is published by the Center for the Advanced Study of India (CASI) of the University of Pennsylvania and funded by the Nand and Jeet Khemka Foundation. All viewpoints, positions, and conclusions expressed in IiT are solely those of the author(s) and not specifically those of CASI and the Khemka Foundation.

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