-By Radhe Tambi
As the competition between India and China for influence in South Asia intensifies, foreign investment becomes more important in shaping regional outcomes. This discussion is particularly relevant as China’s Belt and Road Initiative (BRI) continues to expand, reaching the borders of almost every South Asian country. India will need to leverage foreign aid and investment to achieve its goal of becoming a leading player in South Asia.
South Asia remains one of the least integrated regions of the world. Since its announcement in 2013, the BRI has largely filled this investment void. China has funded the Hambantota Port and Port City Colombo in Sri Lanka, the Trans-Himalayan Corridor and the China-Pakistan Economic Corridor, and signed an oil extraction agreement with Afghanistan and a free trade agreement with Mali.
Beijing has also capitalized on the development gap along the Line of Actual Control – the effective border between India and China – by developing villages and a new highway. China’s BRI has created dependency among South Asian countries by attaching conditionality to its aid. This could potentially serve Beijing’s military interests in the future.
This development has prompted India to accelerate its infrastructure projects in the region. Indian policymakers recognize the need to counter BRI projects to protect regional stability and prevent further erosion of India’s strategic location.
New Delhi enjoys civilizational and historical ties rooted in shared culture, norms and tradition. Any developmental vacuum filled by an external power that disrespects sovereignty will inevitably lead to retaliation. The economic crisis in Pakistan and Sri Lanka, which enthusiastically adopted the BRI, is a vivid example of this. South Asia needs development, but not at the cost of pushing the region into dependency.
To this end, growing rapprochement in India-US relations could boost infrastructure development in the region, especially as Washington is engaging with smaller South Asian states to enhance its Indo-Pacific strategy. During his visit to South Asia, the US Under Secretary of State for Political Affairs announced that the United States will spend more than US$1 billion over the next five years on clean energy, electrification, and small women-owned businesses in Nepal.
On the security front, the United States and Bangladesh have passed a draft agreement on the Common Security of Military Information Agreement. But this requires Washington to accommodate and work with India, especially with respect to China in South Asia. Managing China’s ambitious rise in India’s immediate neighborhood where it is seen as bullying and coercing weaker states under the guise of development should be a priority.
India’s ability to provide approximately US$4 billion in aid to Sri Lanka reflects its economic regional potential. Since India holds a prominent position on the global stage, the world is expecting it to play a bigger economic role.
India will have to combine diplomatic efforts with large-scale development activities to move from a balancing player to a leading player in the region. Yet India’s current approach to regional aid and development faces many challenges – including limited resources that restrict its partnerships with other countries.
Another hurdle is timely delivery of projects, which is essential to build trust and credibility. The political environment in the host country can also affect the implementation of projects. India has faced political opposition in some countries, such as the ‘India Out’ campaign in the Maldives.
Privatization is becoming the new normal in domestic enterprises and infrastructure projects. India needs to leverage the private sector to increase its regional and global influence. It can help overcome project costs by creating a competitive environment and ensuring transparency, strict regulations and timely delivery.
But Indian companies should be wary of potential disputes arising from the quality of the project, lack of understanding of host country policies and geopolitical realities. To minimize such risks they must adhere to high ethical standards. Here the role of government becomes paramount. Before starting projects, companies must disclose adequate information to stakeholders. Governments of India’s neighboring countries should regularly organize discussions with the Indian business communities. This will not only create a positive image of India but will also strengthen bilateral relations.
New Delhi should adopt a more inclusive approach to expand the presence of various private players in its neighborhood rather than limiting itself to a few established players. In line with this, the Government of India extended the concessional financing scheme for five years to support Indian entities bidding for strategically important infrastructure projects abroad.
India can leverage its partnership with the United States to further give impetus to its Neighborhood First policy. New Delhi and Washington have made significant progress in implementing various initiatives – from women’s empowerment in Afghanistan to cross-border power trade to the South Asia Regional Initiative for Energy Integration and promoting capacity building skills in Nepal and Bhutan. Such trilateral initiatives promote economic growth and well-being, and contribute to a positive narrative for India-US relations in the broader Indo-Pacific region, which is essential to countering China’s growing influence.
By working with like-minded countries such as the United States, India can be more active in shaping the regional agenda and promoting greater economic integration, connectivity, and growth.
About the author: Radhe Tambi is a Research Associate at the Center for Air Power Studies, New Delhi.
Source: This article was published by East Asia Forum