INDIA IN TRANSITION. The road ahead for India-Nepal relations

A momentous task awaits Prime Minister Narendra Modi and the newly elected Prime Minister of Nepal, Sher Bahadur Deuba. The two have to maintain the momentum of the India-Nepal relationship (revived by former Nepal Prime Minister Pushpa Kamal Dahal) and alleviate the bitterness that had crept in during Dahal’s predecessor, Khadga Prasad Sharma Oli’s term. While several reasons can be cited for the plummeting of India-Nepal ties during Oli’s tenure, his accusation of India initiating an economic blockade against Nepal is noteworthy.

Oli blamed India for blocking crucial border points, maintaining that it was unimaginable Nepal could face a “blockade in the 21st century”. While many believed that a Nepali ethnic group called the Madhesis had initiated the blockade, there were others who implied that New Delhi had a role to play. Though New Delhi denied its involvement, the accusation itself was not surprising; Modi had been sympathetic to the Madhesi concerns, persistently asking the Nepali government to redress their grievances.

Moreover, it seemed unlikely that a transport disruption of that magnitude and duration could be caused without India’s backing. At international forums, India might have censured the West’s use of economic coercion, but in the past, New Delhi has itself used economic muscle for political purposes. The Nepal blockade seems an illustration of how India makes strategic use of economic pressure to pursue political ends.

Considering the ethnic and cultural proximity of Nepali Madhesis to the people in Bihar and eastern Uttar Pradesh, New Delhi’s involvement was not unforeseen, nor was the use of economic statecraft to achieve the end. Through the use of economic instruments such as embargoes, economic blockades and financial sanctions, India has, in the past, sought to promote its interests or support core policy issues in other countries. Yet, compared to the West, India has only selectively spoken about its economically coercive policies. Nepal, South Africa, and Pakistan are important cases in this regard.

In the case of Nepal, India extended its support to the Madhesis without formally admitting it. Acknowledging aiding an economic blockade that was causing scarcity of essential supplies in Nepal would have tarnished India’s image abroad, especially since it shares a special relationship with the Nepali people.

Meanwhile, Nepal raised the issue of India’s “trade blockade” at the UN in October 2015. During this time, the fear of international condemnation loomed large over India, which, ironically, often uses a moralising tone in its diplomacy. In the event, accepting initiating or even aiding the blockade would have been implausible for India.

However, there have been cases when India not only made explicit declarations of using economic coercion but also lobbied for similar international action. India used economic coercion against South Africa from 1946 to 1993 when it found the actions of the South African government discriminatory and detrimental to the interests of the Indian diaspora living there. Commencing pre-independence, the measures continued post-independence with renewed fervour.

In December 2001, India imposed restrictions on Pakistan, which would have economic effects. When Jaswant Singh, then the External Affairs Minister, unambiguously spoke about the restrictions, arguing that “the Government of India has no option but to take the steps,” domestic constituencies were certainly on his mind. Following the suicide attack on Indian Parliament, India had traced the links of the terrorists to Jaish-e-Mohammed and Lashkar-e-Taiba, two organisations believed to be operating out of Pakistan. Hence, Singh’s statement was about demonstrating resolve not only to Pakistan but also to audiences at home.

While the leaders of several Western states (and even emerging powers such as Brazil and Iran) have articulated their approach to economic coercion, Indian leaders have often shied away from the subject. Yet, there seems a general awareness in the foreign policy establishment that India has employed such policy instruments, which are still available to pursue policy goals.

References and acknowledgements about economic coercion by the Indian foreign policy establishment however, have been uncommon and abstruse. In a candid interview in 2012, the then Minister of External Affairs, Salman Khurshid, made an allusion on being questioned about China’s use of economic coercion on Vietnam, remarking, “Don’t we all use economic muscle?”

Moreover, Indian officials and leaders have often only discussed the subject while reacting to economic coercion used by Western states. In the last few years, India, individually as well as a part of multilateral forums such as BRICS (Brazil, Russia, Iran, China, and South Africa), has taken a strong stand against unilateral economic sanctions imposed on Russia and Iran.

Maintaining that it supports sanctions imposed by the UN, New Delhi has emphasised that unilateral sanctions hurt the global economy. Notwithstanding its obvious opposition to the West’s use of economic coercion, several past and recent actions by India seem to fall in the general bracket of economic coercive measures.

Like China, India has not formalised economic coercive measures through legislation or explicit regulations and statements, as the US and European Union have done. Speaking in Delhi last year, US Ambassador Robert D Blackwill recognised the need for “policymakers in both India and the US to strengthen the instruments of economic diplomacy.”

While India acts on the advice, it must exercise caution, given the humanitarian cost and limited success rate of West’s economic coercive measures. While using economic coercion, it is imperative that India thinks strategically and keeps its mind on three factors. First, ensure that while employing economic pressures, collateral damage is minimised.

Second, for effective use, India should understand the complexity of the target state’s international relationships. The apprehensions that New Delhi’s blockade would make Nepal seek China’s support were not baseless. Finally, India should think about the costs involved.

Besides a monetary cost, the state that employs economic coercion can also suffer a loss of reputation in the target country, like in the case of India and Nepal. Shortly after the initiation of the Nepal blockade, Oli invoked anti-India rhetoric, making Indian officials apprehensive. Such reputation loss often cannot be ameliorated through public diplomacy, at least in the short run.

Though Deuba’s previous terms have proved to be largely productive for India-Nepal ties, New Delhi must draft its future Nepal policy prudently. With China’s influence growing in the region, India should think strategically, while flexing its economic muscles in the neighborhood.

The writer is a visiting scholar at the Centre for India Studies in China West Normal University, China. This article is by special arrangement with the Center for the Advanced Study of India, University of Pennsylvania