6 December 2023, NIICE Commentary 8813
Pankaj Saran

Origin and Logic

India has historically always accorded priority to relations with countries of the sub-continent. In the case of Pakistan and Bangladesh, these were constituents of British India and after the partition, a complex web of agreements and understandings were arrived at to regulate not just normal inter-state relations but also issues that related to strictly internal matters of each country such as the treatment to minorities, refugees, religious shrines, properties and border management. These were unique arrangements and required a very degree of understanding. Yet we know the history of India’s wars with Pakistan and the creation of Bangladesh. Over the last more than seven decades, India has made several attempts to build normal neighbourly relations with Pakistan. India’s initiatives have been responded to with acts of cross border terrorism and violence. Any meaningful dialogue with Pakistan can only be held in an atmosphere free from terror, hostility and violence. The onus is on Pakistan to ensure such a conducive atmosphere.  The year 2021 saw a positive development in the form of the renewed Ceasefire Understanding between the Director Generals of Military Operations of India and Pakistan in February. The last SAARC Summit was the one held in Kathmandu in 2014. The SAARC process has not lived up its promise due to Pakistan’s tensions with India.

The precursor to the Neighbourhood First Policy was the famous Gujral Doctrine of the mid-1990s. The Gujral doctrine sought to change India’s approach to its neighbours by acknowledging the asymmetries and pursuing a policy of accommodation and goodwill towards them. The set of policies that came to be regarded as the Gujral Doctrine ushered in a major change in abandoning the ‘big brother’ mindset, and was very much also a reaction to the decades of Congress led neighbourhood policy.

The trend of viewing the neighbours through a fresh lens as equals with mutual respect intensified as India’s own economy began to grow at a more rapid pace after the first wave of reforms in 1991. Yet, India’s decision to go nuclear in 1998 to defend itself  from persistent and growing nuclear threats from Pakistan and China followed by the a sharp deterioration in India-Pakistan relations leading upto the breakdown in the relationship after the 26/11 terror attacks in Mumbai in 2008 had a chilling effect on regional cooperation.

It was around 2008 , which was also the year of the global financial crisis, that India took the decision to move ahead in developing its ties with all neighbours other than Pakistan because it sensed the mood in the sub-continent. Good progress was made with all neighbours, including with Nepal which was going through its own internal upheaval that led to its historic transition from a monarchy to a republic. The lesson which Indian policy makers were taking away from all these developments was that the fate of the sub-continent was closely intertwined, and it was vital for India to give its neighbours its first priority.

The emphatic victory of the BJP in the 2014 elections meant that for the first time in decades India had a single party majority government in Delhi led by Prime Minister Narendra Modi. Despite doubts about his attitude to foreign affairs and to the neighbourhood in particular,  it was his personal decision to invite all SAARC leaders, including Prime Minster Nawaz Sharif, for his swearing-in ceremony in May 2014, despite misgivings in Delhi’s conservative establishment, and they all came. This was a path breaking and unorthodox move which took the region and the world by surprise, and marked the beginning  of what we today term as India’s “Neighbourhood First Policy”. I was privileged to be a part of that history.

Obviously the sub-continent is characterised by asymmetry in size and diversity of geographical features. It is not possible to change borders but the logic that neighbours command the first priority is not unique to South Asia. All large countries  such as the US, China or Russia are surrounded by small neighbours. They all have complicated relationships rooted in history and culture.  And they all pay special attention to each other – the US in North and South America, China in Indo-China and South east Asia and Russia in the post-Soviet space. India is no exception. We realise that unless we develop the right equilibrium with our neighbours we ourselves will not succeed in our national plans. I am the first to concede that our efforts have not always been successful or that we have not made mistakes in the past. The point is that wrong decisions or wrong judgements are part of human nature and are universal in nature.

Features and Objectives

India’s policy of ‘Neighbourhood First’ focuses on creating mutually beneficial, people-oriented, regional frameworks for stability and prosperity. Our engagement with these countries is based on a consultative, non-reciprocal and outcome-oriented approach, which focuses on delivering benefits like greater connectivity, improved infrastructure, stronger development cooperation in various sectors area, security and broader people-to-people contacts.

The principles of engagement in the neighbourhood are based on the principles of Samman (respect), Samvad (dialogue), Shanti (peace), Samriddhi (prosperity) and Sanskriti (culture). The ‘Neighbourhood First’ Policy underlines the renewed primacy that India seeks to attach to its neighbouring countries to comprehensively upgrade and strengthen the current relationship framework and achieve the goal of lasting peace, stability and prosperity in the region. This Policy has evolved into an institutional priority for all the relevant arms of the Government managing relations and policies with our neighbourhood. Policy initiatives taken by India and its neighbours, have implications for each other. Ties with the neighbouring countries have a direct relevance to our States bordering these countries. India also realizes its prosperity and growth are linked to that of its neighbours. We cannot develop unless our neighbours develop. On this basis, all countries in our region work towards developing better partnerships with each other. The overarching philosophy is to ensure that our partners in the region draw benefits and values from the growth, development and rise of India.

The objectives are to allow the networks created by culture, economic and indeed history to flourish in a manner that transcend disparities in size and resource endowments, do not threaten the identity of individual states, create virtuous cycles of security, stability and prosperity, harness comparative advantages, build cross-border value and supply chains, help each other in times of need, promote harmony and peaceful co-existence, meet common threats such as climate change and to make every country a stakeholder in building a peaceful region whose voice can be heard across the world.

India’s relations with its neighbours stand on their own footing and are independent of their relations with third countries. China is also a neighbour to many of India’s neighbours. However, we do not like to describe our neighbourhood as a “periphery” because we do not see them in that light. They are in fact central to India’s own future and an intrinsic part of our vision of the region we all live in. We see our neighbours as they are and not through the prism of any geopolitical contest. Our approaches are therefore different. India and China must pursue their relationships not just with our common neighbours but with other countries in a manner that does not become a source of concern for each other, and is based on mutual respect and sensitivity to each other’s concerns and aspirations.

India has so far extended Lines Of Credit totalling USD 14.37 billion or Nepali Rupee 2 trillion to its neighbours viz., Bangladesh, Nepal, Sri Lanka, Myanmar and Maldives., of which USD 8.19 billion are allocated specifically for connectivity projects.

Results and Outcomes

The main result of the Neighbourhood First Policy has been to provide partner countries an environment to grow in a sustained manner, provide a large market for their goods and services, including tourism, withstand global economic and energy disruptions, assist in times of natural disasters and health emergencies.

Among the significant initiatives in recent years, I would highlight India’s commitment of over US $ 3 billion development assistance to Afghanistan which was one of the largest programmes in the world for education, infrastructure, capacity building, skills and human development, development assistance to the Maldives, Bhutan and Nepal, about which I will talk separately, transformation of our relations with Bangladesh  based on the principle of respect for each other’s’ security concerns, and emergency assistance to Sri Lanka during its economic crisis in 2022. We have moved ahead in promoting sub-regional cooperation mechanisms such as BIMSTEC and BBIN, as well as providing connectivity to countries to trade in energy and goods through India. People to people contacts have flourished. We have expanded our outreach to our maritime neighbours in the Indian Ocean, right upto the East Coast of Africa, as well as on the East towards Indonesia and South East Asia. There have been regular exchanges at the leadership levels including on issues such as global warming, environmental challenges in the Himalayas, terrorism and cross border crime, illegal migration, smuggling and trafficking.

Despite these achievements, a lot still remains to be done. This includes further integration of our economies, including financial and digital, improvement in border infrastructure, easing of trade and investments, port development and transit. We need to have regular dialogue to resolve differences on political, security and all other matters where they exist and address each other’s concerns.

India-Nepal Relations

India Nepal relations are a critical element of India’s neighbourhood first policy. They represent all the achievements as well as challenges in our region and how we shape our collective future together. India is one of Nepal’s largest development partners. India-Nepal Cooperation for developing modern infrastructure in Nepal dates back to more than 70 years ago since 1951 with the construction of Gauchar Airport in Kathmandu in 1954. India has since then provided financial and technical assistance to Nepal for implementation of large development and infrastructure and connectivity projects, as well as small development projects in key areas of education, health, irrigation, rural infrastructure, livelihood development all across the country. A series of cross-border connectivity project like rail links, roads, Integrated Check Posts are also under implementation through  grant assistance.

India has focused in people-centric infrastructure development and increased connectivity in Nepal. Several flagship projects relating to connectivity to humanitarian assistance have been completed such as  South Asia’s first cross border petroleum product pipeline (Motihari to Amlekhgunj, Nepal); establishment of Integrated Check posts at Raxaul-Birgunj and Jogbani-Biratnagar, three cross-border power transmission lines (Muzaffarpur-Dhalkebar; Kataiya-Kusaha; Raxaul-Parwanipur); completion of 50,000 houses under India’s Housing Reconstruction Project and the operationalisation of the first cross border broad gauge passenger train service between Jayanagar and Kurtha in April 2022 by the PMs of both the countries.

Energy Connectivity

There are many examples of cooperation which have and are contributing to the welfare of Nepal but I will highlight only a few. As you all know, the two countries have been discussing hydropower cooperation for years, if not decades. It is most encouraging that finally progress in this area is being made. Nepal is now transforming itself from an importer of power to an exporter of power not only to India but also to Bangladesh and simultaneously, various projects are under implementation. More than 4500MW worth of HEPs in Nepal are under development by Indian companies, including the 900 MW Arun III HEP. PMs of both countries issued a Joint Vision Statement in power sector in April 2022. A Long Term Power Agreement, which strives to export 10000 MW of power from Nepal to India is planned to be signed in January 2024, which would give an assured market for Nepal’s power export. In February 2021, India issued guidelines for power trading with India and in mid-2021, for the first time in its recent history, Nepal became power surplus. During October-November 2021, it exported 39 MW of power to India   As on date this power export approvals has increased to more than 650 MW in Indian power exchange as well as under medium term agreements. Taking this cooperation to the next level, India has announced its approval for export of about 40 MW of power by Nepal to Bangladesh transiting Indian territory, during the visit of Nepali PM to India in June 2023. Transmission lines within Nepal and cross border are also under construction.

The Motihari-Amlekhgunj petroleum products pipeline was completed much ahead of schedule and remotely inaugurated by the two Prime Ministers in September 2019. India and Nepal  are planning for extension of this pipeline to Chitwan in Nepal and implementation of a new cross border pipeline from Siliguri (India) to Jhapa (Nepal).

Financial and Digital Connectivity

An MoU between NPCI International Payments Limited and NCHL (Nepal Clearing House Limited) was exchanged on 1 June 2023 for facilitating cross border digital payments. This agreement is intended to link Unified Payments Interface of India and National Payments Interface of Nepal and is a major step in creating seamless financial connectivity between India and Nepal. This is expected to lay the groundwork for real-time seamless  inter-country settlements, including for remittances. During PM Deuba’s visit to India in April 2022, both PMs launched the RuPay Card in Nepal.

Physical Connectivity

The development partnership took major leap in last decade, when several connectivity projects (such as railways, roads and bridges, waterways and transit)  have been undertaken. The most important landmark is inauguration of train operations on Jaynagar-Kurtha section of Jaynagar-Bardibas rail link in April 2022, which is the first ever cross-border broad-gauge rail project in Nepal.

India is providing financial and technical assistance for construction of two broad gauge cross-border railway links viz., Jaynagar-Bardibas and Jogbani-Biratnagar. India and Nepal signed a Letter of Exchange to the India-Nepal Rail Services Agreement, which enabled all authorized cargo train operators including private container trains operators to carry Nepal’s container and other freight.  India handed over  the  cross-border rail link connecting Jayanagar (Bihar) to Kurtha (Nepal)  and further to Bijalpura to Nepalese government and both countries also signed a MoU for conducting Final Location Survey of the proposed broad gauge line between Raxual and Kathmandu, both during October 2021.

The revised Treaty of Transit signed on 1 June 2023 provides for   inland waterway connectivity between India and Nepal through,  multi-modal routes using inland waterways of India. A motorable bridge across the Mahakali River connecting Dharchula (India) with Darchula (Nepal), under Indian grant assistance, is under construction.

India has also decided to build two bridges across the Mahakali River at Shirsha and Jhulaghat in Nepal connecting to Champawat and Pithoragarh districts in India under grant. These bridges will boost connectivity between the State of Uttarakhand in India and Sudurpaschim Province in Nepal.

Defence and Maritime Security Cooperation

India and Nepal have wide-ranging cooperation in the defence sector. India has been assisting the Nepal Army in its modernisation by supplying equipment and providing training. Assistance during disasters, joint military exercises, adventure activities and bilateral visits are other aspects of India’s defence cooperation with Nepal. A number of defence personnel from Nepal Army attend training courses in various Indian Army training institutions. The ‘Indo-Nepal Battalion-level Joint Military Exercise SURYA KIRAN’ is conducted alternately in India and in Nepal. The last edition of Surya Kiran exercise was held in December 2022 at Saljhandi, Nepal. Since 1950, India and Nepal have been awarding each other’s Army Chief with the honorary rank of General in recognition of the mutual harmonious relationship between the two armies. The Gorkha regiments of the Indian Army are raised partly by recruitment from hill districts of Nepal. Currently, about 32,000 Gorkha Soldiers from Nepal are serving in the Indian Army.

Other Key Areas of Cooperation

Human Resource Development, Education, training and skill development, agriculture, tourism and people to people links are other key areas of cooperation between India and Nepal. Similarly, Nepal’s voice in the region and world is becoming more visible. Nepal is looking more towards the Indian Ocean as the gateway for its trade and connectivity to the outside world. At the COP 28 Summit, the Nepalese Prime Minister made a strong pitch for attention to global warming and the threat to the Himalayas from melting of glaciers and extreme weather events.  Our two countries can and must cooperate in this area to mitigate the effects of climate change as well as avert natural disasters. Nepal has faced major calamities in 2015 as well in November in Western Nepal in which India provided immediate assistance and is also engaged in the post-earthquake reconstruction efforts. Cooperation during floods and health emergencies such COVID-19.

Ambassador Pankaj Saran is Convenor of NatStrat and was Deputy National Security Advisor of India. The article is an edited version of Ambassador Saran’s speech delivered at NatStrat-NIICE Policy Dialogue held in Kathmandu on 6 December 2023.