One Year On
Modi's Regional Foreign Relations

Interview with Shyam Saran
July 14, 2015

May 2015 marked one year since Narendra Modi’s election as India’s prime minister. Modi’s tenure has been significant on a number of levels. He has made a concerted effort to raise India’s international profile, improve the country’s business environment, and forge closer ties with partners such as the United States. Modi’s efforts to recast India as a more active international player are perhaps most evident in his regional diplomacy. Since assuming office, he has paid official visits to nearly all of India’s neighbors, including Nepal, Bangladesh, Sri Lanka, Myanmar, China, and Mauritius. In some cases, the visits served to cement long-time partnerships. In others, the prime minister looked to ease tensions or realize as-yet untapped potential. While Indian observers expected a flurry of initiatives from the Modi government on domestic affairs, his strength in the international domain is worthy of additional attention.

In this Q&A, former Indian foreign secretary Shyam Saran discusses the key issues surrounding Modi’s most important regional diplomatic visits, including to the United States. Ambassador Saran expresses optimism regarding Indian relations with Bangladesh and Nepal before commenting on the Sri Lankan government’s latest shift toward India. He then touches on the strategic importance of Mauritius and the Seychelles for Indian interests and examines relations with China and the United States. In this regard, Ambassador Saran notes the importance of China for India’s economic development but states that the trade imbalance between the two countries leaves the overall picture of the economic relationship mixed. Finally, he acknowledges China as India’s principal security challenge before praising the strengthening of the India-U.S. partnership on both economic and defense fronts.

Prime Minister Narendra Modi’s most recent official visit to Bangladesh in June 2015 highlighted some important developments in improving the two countries’ complex and often tense relationship. Just prior to the visit, for example, the governments reached an agreement on Dhaka’s long-sought Ganges Barrage Project. Perhaps most important, however, was the ratification of the 1974 Land Boundary Agreement, which will settle long-standing border disputes between the two countries. What do you see as driving this improvement in relations?

One, we have political leaders in the two countries who have recognized the benefits that could accrue to both countries through cooperation and, equally, the opportunity cost of not following through on cooperation. They also recognize that for cross-border cooperation to succeed, it was important to address the issue of security. Both countries have suffered due to the activities of terrorist and extremist elements, and there now exists a shared determination not to allow these elements to use each other’s territories for hostile acts against one another. The improved security situation, in turn, has opened up possibilities for expanded economic and trade exchanges.

Two, India responded expeditiously to Bangladesh’s request for the supply of power from the Indian grid, thereby assisting its neighbor in dealing with a chronic power shortage. This, too, improved relations between the two countries.

Three, the two sides settled a long-standing territorial dispute with respect to their maritime boundary, by accepting and implementing an international arbitration award.

Four, India did not join the chorus of criticism against the Sheikh Hasina government, which came back to power in the elections held two years ago that the opposition Bangladesh National Party and its allied parties boycotted.

It is against this background that the two countries have been able to finally conclude the historic Land Boundary Agreement. It is also likely that they soon will conclude the proposed agreement on sharing the Teesta Waters.

Many political segments in Nepal view Indian influence with great caution, and the fact that Modi was the first Indian prime minister to visit Nepal in seventeen years is indicative of the history of strained relations between New Delhi and Kathmandu. Once again, however, signs indicate a positive shift in relations. What new perspectives and strategies has the Modi administration brought to India’s relationship with Nepal?

It should be appreciated that India-Nepal relations go far beyond the narrow confines of government-to-government relations. The people of the two countries have strong religious and cultural affinities; they have kinship and family links across the border, and India has been and remains Nepal’s main trade and investment partner. A large number of Nepali citizens serve in the Indian Army, and virtually every village in Nepal has pensioners from the Indian Army who retain strong bonds with India. There are currently nearly seven to eight million Nepali citizens who live and work in India and whose remittances provide major economic support for their families in Nepal. The closeness of relations between the two countries is reflected in an open border across which citizens of the two countries move freely without restrictions. It is true that in Kathmandu and some other urban areas there are elements who seek to project India as a potential threat to Nepal’s independence. These are in a minority. The success of Prime Minister Modi’s visit to Nepal stands as testimony to this. Modi reached out to the people of Nepal and conveyed a message of friendship and support for Nepal’s economic development. He was respectful of Nepal’s political aspirations and publicly declared that India would not interfere in its internal affairs. He was thus able to bring a new and positive political environment to our relations and has followed up with certain concrete projects. However, it is the dense people-to-people relations that remain the bedrock of India-Nepal relations.

Current Sri Lankan president Maithripala Sirisena seems to have tilted back toward India—signing a civilian nuclear agreement while re-evaluating a number of Chinese-backed projects initiated by his predecessor Mahinda Rajapaksa. Nevertheless, China is likely to continue to play an important role in Sri Lanka given its immense resources and their strong historical relationship. How concerned are Indian policymakers about the prospect of a Chinese foothold so close to their southern border?

India does not oppose friendly relations between Sri Lanka and China. Sri Lanka has the right to pursue mutually beneficial economic and trade relations with any country, including China. India’s concerns were heightened by the activities of Chinese naval forces in and around Sri Lanka, in particular, the use of commercial ports and facilities it has helped to build in that island country for its naval vessels, including submarines. Since a significant proportion of India’s external trade transits through Colombo port, India is right to be concerned over the increased Chinese naval activity in waters close to the Indian peninsula.

President Sirisena has been pursuing a cautious and carefully balanced policy of reducing the salience of Chinese involvement in key infrastructure projects—in particular, the sensitive port development sector—even while maintaining friendly and cooperative relations with that country. It is reported that some of the additional facilities and access that China may have been granted in certain projects in return for reduced loan conditions are being reviewed. It is clear that Sirisena does not wish to see his country become heavily dependent on Chinese assistance that may entail political costs. His election was partly the result of the concern of the people of Sri Lanka over these developments. India, for its part, has moved quickly to respond to Sirisena’s request for both political and economic support.

Modi has refocused attention not just on Sri Lanka but on India’s other neighbors in the Indian Ocean as well, including the Seychelles and Mauritius. As former Indian high commissioner to Mauritius, what do you regard as India’s most important priorities in its relationships with these island nations?

The island nations of Seychelles and Mauritius are located astride the western gateway to the Indian Ocean, and for this reason, India has nurtured long-standing and close political, economic, and security relations with these island nations. Mauritius is also important because over 70% of its population is of Indian origin, and very strong religious, cultural, and kinship ties exist between the two countries. The Indian effort has been to strengthen the security capabilities of the two countries, especially their ability to police the vast exclusive economic zone over which they have jurisdiction. In these days of piracy, international terrorism, and maritime criminal activity, as well as increasingly frequent natural disasters such as tsunamis, it is imperative for India, as an Indian Ocean power, to maintain a strong naval presence in the western as well as eastern reaches of the ocean and cultivate close and friendly relations with all the island states, which are strategically located but may also be vulnerable.

Modi’s 2014 visit to Myanmar was much-heralded as the turning point from which India’s Look East policy shifted to an “act east” policy. As the only member of the Association of Southeast Asian Nations (ASEAN) sharing a border with India, Myanmar could play an important role in realizing this vision. Perhaps the biggest impediments to a more productive relationship between the two countries are poor infrastructure and security. How can the Modi government begin to address these challenges?

India has maintained close links with Myanmar for several years, including during the time the country was under a military regime. Myanmar is a neighbor with which India shares a 1,400 kilometer land border. Four of India’s sensitive northeast states—Arunachal Pradesh, Nagaland, Manipur, and Mizoram—are located along the border. The two countries also share the strategic Bay of Bengal. Therefore, it should come as no surprise that Myanmar has assumed importance in India’s overall security perspective. In addition, Myanmar is India’s gateway to ASEAN and therefore a key link in India’s Act East policy. Prime Minister Modi has recognized the importance of Myanmar to India’s security and as a potential economic partner. In order to improve the cross-border infrastructure, India is committed to building with Thailand a trilateral highway linking the three countries. India has also agreed to extend this highway into Cambodia and Vietnam. In addition, it is upgrading the Sittwe port on Myanmar’s Rakhine coast and building a highway to connect the port to Mizoram. River transport along the Kaladan River, which flows from Mizoram into Rakhine to Sittwe, is also being pursued. There are additional plans to link the two countries through cross-border railway lines. When these projects are up and running, there will be much better connectivity between the two countries.

Modi’s visit to China was noteworthy for the candid way in which he discussed challenges such as the two countries’ border disputes and the current trade imbalance. China is, of course, an important economic partner for India. However, there is also concern about potential conflict as Chinese interests expand in the Indian Ocean. How can India simultaneously benefit from Chinese economic growth and ensure that its own security interests are protected?

India has an interest in expanding its trade and economic relations with China. The Chinese market is now one of the largest in the world, and its range and scope are increasing. It is also a country with surplus capital to invest. Therefore, India can benefit from access to both China’s market and its capital, which is why India has decided to participate in the BRICS Development Bank and the Asian Infrastructure Investment Bank. Some Indian companies have invested in China, while Chinese companies like Huawei have a significant presence in India. However, such cross investment is still quite limited, and there is a substantial and growing imbalance in trade in favor of China. There are issues relating to market access of several Indian products. Conversely, the maximum number of anti-dumping measures by India are against Chinese products. Therefore, the picture on the economic side is mixed, though political leaders on both sides are committed to resolving outstanding issues. There is an expectation that expanded economic relations may have a beneficial impact on political relations.

There is no doubt that the country that impinges most directly on India’s security interests is China. The security dilemma for India is complex because it has to deal with an emerging China even as its own economic and military capabilities are also rising. There is a long-standing and unresolved border dispute between the two countries and the use of Pakistan as a proxy to keep India preoccupied in the subcontinent. As India’s own maritime presence in the Indo-Pacific expands, it will increasingly intersect with China’s expanding footprint. The recent “One Belt, One Road” initiative by China adds to these concerns. India’s response has been to fast-track its own military preparedness with considerable investment in improving border infrastructure and defenses. Externally, India has been strengthening its political, economic, and security partnerships with the United States, Japan, Australia, and Southeast Asian countries so that a robust countervailing coalition is in place to confront any predilection toward unilateralism on China’s part such as we have witnessed in the South China Sea. India believes that we should build a security architecture in what is now called the Indo-Pacific that is open, inclusive, transparent, and balanced. This alone can provide mutual reassurance to all the stakeholders in this region.

Finally, Modi has brought relations with the United States to center stage—hosting President Obama for Republic Day celebrations last January, renewing the Defense Framework Agreement, lowering FDI caps in key industries, and tackling nuclear liability issues, to name just a few developments. What are the most important factors behind this drive toward a renewed “strategic partnership”? What can India and the United States do to ensure that this progress continues?

It is gratifying that there is renewed momentum in Indo-U.S. relations after a brief hiatus in relations during the last two years of the United Progressive Alliance government in India. It was also a period when the United States appeared to be losing interest in India and some commercial disputes took on larger-than-life proportions. Prime Minister Modi’s assumption of office, parliamentary majority, and evident commitment to further economic reforms and liberalization have brought a positive perceptional change in Indo-U.S. relations. India also appears less hesitant to work with the United States and partners such as Japan and Australia to ensure peace and stability in the Indo-Pacific theater.

There are two major drivers bringing India and the United States together. One is economic: the United States sees India as a major market and investment opportunity. India, too, sees the United States not only as a key market but also as an indispensable partner in its quest for obtaining modern technologies for economic advancement. On the security side, the emergence of China and how to respond to its challenge is one factor, while counterterrorism cooperation is another. It helps that the two countries are vibrant, plural, and liberal democracies. As long as India stays on a high-growth path and the United States remains supportive of India’s economic aspirations, and as long as our two countries remain focused on the big picture with respect to the long-term security challenges they confront, I believe that relations will continue to expand and extend to a broader range of sectors.

Shyam Saran is a former Indian Foreign Secretary and has served as the prime minister’s Special Envoy for Nuclear Affairs and Climate Change and as Chairman of the National Security Advisory Board. He is currently Chairman of the Research and Information System for Developing Countries, a Senior Fellow at the Centre for Policy Research, a Trustee of World Wildlife Fund (India), a Member of the National Executive Committee of FICCI, and a Member of the Governing Board of the India Habitat Centre.

This interview was conducted by Louis Ritzinger, a Bridge Award Fellow with the Political and Security Affairs group at NBR.