A Foreign Economic Policy

For decades, pundits have described India and China as rivals for leadership in Asia. Chinese President Xi Jinping’s recent visit to India suggests that economic cooperation, rather than strategic competition, could be the main driver for the two Asian giants. If Prime Minister Narendra Modi’s forthcoming meeting with US President Barack Obama also gives due weight to economic considerations, India could be on the verge of significantly redefining its global role.

It is good that Modi pays attention to economics, unlike the entrenched establishment in Pakistan, which clings to military strategies even when the cost is the country’s impoverishment. India and the United States could still emerge as strategic partners, but with shared economic interests rather than just shared concerns about the balance of power. And Sino-Indian rivalry could be postponed to a day when both countries have modernised their economies.

India has yet to realise its full potential as a leading global economy. The rapid economic growth that India has witnessed since the mid-1990s was ushered in by much-needed reforms. After being criticised by economists for its low rate of growth, India finally earned a place among the world’s leading emerging markets. Further reform could lead it to greater success among the BRICS, that is, Brazil, Russia, India, China and South Africa, and beyond.

Americans believe that India can achieve rapid economic growth through innovation if it opens up its economy to foreign technologies. As Modi and Obama meet, Indian policymakers must recognise that economic factors are as important to Washington as they are to Beijing. For American FDI, India must strengthen its intellectual property right regulations and protect foreign investors who are exporting new technologies to India. Greater protection for foreign technologies will not only encourage growth and innovation, but also bring in vital FDI.

New Delhi cannot afford to persist with its dated modes of thought on pharmaceuticals or the defence industry either. Spending on healthcare is only about 1 per cent of the GDP in India, making the country one of the lowest spenders in the world. A number of issues plague India’s healthcare sector, ranging from a lack of infrastructure and financing to a dearth of health workers across the country. Hatred of Western pharmaceutical corporations cannot be the core of India’s healthcare strategy.

While India has emerged as a hub for IT outsourcing, it has lagged behind in exporting value-added manufactured goods. It has been unable to increase its share of technology-intensive products. With wages rising and productivity falling in China, India has a great opportunity to attract American FDI in its manufacturing sector. Such investment could go a long way in kickstarting India’s economy.

The country will require over $500 billion just for funding its infrastructure needs in the next five years. This fact makes capital market reforms a critical component of the agenda. Lack of liquidity and transparency as well as an excessive government footprint in capital markets are a few of the problems plaguing this sector. Any positive commitment from Modi in this area would be music to American ears and might help attract dollars for infrastructure.

With India seeking to modernise its armed forces and diversify its arms acquisitions, opportunities for stronger US-India defence ties will arise. The speed with which the two countries collaborate will largely depend on how reforms are introduced in India’s defence sector. Both sides speak of the opportunities for defence cooperation. But success in this arena will require streamlining the licensing processes as well as improving foreign and private participation.

As the economy grows, India’s energy needs continue to expand as well. The energy sector has been dominated by monopolies and the state, resulting in a lack of market-based mechanisms in the sector. This has led to governance issues, inefficiencies and a lack of strong competition from private companies. Americans would like to see market-based reforms in the energy sector.

The first set of reforms, implemented in the early 1990s, marked India’s arrival on the global economic map and made the country a key destination for international investors and companies. It has made significant progress in the last two decades and is now counted among the world’s leading emerging markets.

Economic growth led to a rise in India’s global standing and has radically improved the country’s socio-economic indicators. It has also raised the expectations of people within and outside the Indian economy. The burgeoning middle classes expect more growth from the economy and are keen to see even more improvement in the country. So do the major powers courting India.

The success of Modi’s initiatives with both China and the US depend on his ability to put economics at the centre of India’s new foreign policy. India has a remarkable knack for exploring new ideas and then settling for old ones. For peace and stability in Asia, and in order to create a model for its neighbours, one can only hope that India under Modi will have the economic emphasis that the prime minister’s predecessor failed to sustain.

Pakistan, Obsessed Over India, Risks Anarchy

The elaborate diplomatic dance between India and Pakistan has been interrupted once again. The two sides remain far from a major breakthrough in their troubled relationship. As long as the Pakistani Army continues to view India as an existential threat and maintains its grip over security policy, the twain may never achieve permanent peace.

India has called off the meeting between its Foreign Secretary Sujata Singh and her Pakistani counterpart Aizaz Chaudhry scheduled for August 25 in Islamabad, after Pakistan’s High Commissioner in Delhi met Kashmiri separatist leaders. This has ended the euphoria following Prime Minister Nawaz Sharif’s journey to New Delhi for the inauguration of Prime Minister Narendra Modi last May. Pakistan’s decision to remind Indians of their dispute over Kashmir followed Modi’s comments about Pakistani support for terrorism during a recent visit to Kargil, where the two countries fought a war in 1999.

Both Sharif and Modi spoke of the need to bury the hatchet during their meeting on occasion of Modi’s inauguration. But the expressions of desire for normalization could not contain the more substantive problems in the India-Pakistan relationship. India remains unhappy over Pakistan’s failure to prosecute terrorists involved in the 2008 Mumbai attacks. Sharif, on the other hand, must deal with hardliners in Pakistan’s military who insist on seeing India as their country’s permanent enemy – unwilling to look too closely at the terrorists involved in the attack.

For India, the 26/11 Mumbai attacks were as much a challenge as the 9/11 assault was for Americans. The 12 coordinated shootings and bombings carried out by ten Pakistani terrorists killed 164 people and terrorized India’s commercial capital for almost three days before commandos flushed them out of various buildings, including five-star hotels and a Jewish Community Center. The images of the attacks, telecast live into Indian homes, are seared in the memory of most Indians.

Although Pakistan arrested several individuals involved in planning and executing the Mumbai attacks, prosecution has been repeatedly delayed. Intelligence reports, including some from US sources, have indicated that the detained commanders of Lashkar-e-Taiba, or LeT, enjoy amenities not available to prisoners. Some have been found passing instructions on the phone to operatives. Recently, their trial was once again postponed without recording evidence or other substantive proceedings.

LeT chief Hafiz Muhammad Sayeed remains free, appearing on television spouting venom against India, Israel and the United States from his massive headquarters near Lahore. Indian officials read Pakistan’s refusal to prosecute the 26/11 accused or clamp down on Hafiz Sayeed as a sign of reluctance in shutting down anti-India jihadi groups.

In July Pakistan’s military launched a military operation against terrorist safe havens along its border with Afghanistan, yet the Pakistani state is far from shutting down the jihadi infrastructure built since the 1980s war against the Soviets in Afghanistan and the subsequent militant uprising in Kashmir during the 1990s.

The Pakistani military continues to seek military advantage against India even though the possession of nuclear weapons by both countries should deter the prospect of war. Jihadis offer a sub-conventional deterrent to Pakistan against India’s overwhelming advantage in conventional military capability. Most Pakistani civilian politicians recognize the dangers of reliance on terrorism as an element of Pakistan’s strategic planning, but the military retains tight control over foreign and national security policy despite return to civilian rule in 2008.

Like his civilian predecessor Asif Ali Zardari, Sharif has declared normalization of relations with India as a priority. Zardari’s government tried to open travel and trade and, in 2011, agreed to Most Favored Nation status for India. Despite completion of legal formalities, the status has not yet been granted, demonstrating behind-the-scenes military influence.

After his election last year, Sharif renewed talk of normalizing relations with India, with special emphasis on trade. India and Pakistan have a combined population of 1.4 billion, share a 2,000-mile border and a common history until 1947. Their languages are mutually understandable, and parts of their populations have overlapping ethnicity. There is also significant complementarity in the two neighbors’ economies. Still, trade between them amounted to only $2.6 billion last year, less than 0.5 percent of India’s total commerce. As a businessman, Sharif says he understands the benefit of freer trade between the two countries.

Rhetoric and expressions of desire for more trade notwithstanding, security remains the overarching consideration in India-Pakistan ties.

Sharif’s participation in Modi’s inauguration was billed as the first time a Pakistani prime minister had attended such celebrations in India – an opportunity for laying foundations of a new relationship between India and Pakistan. The prospect of a new beginning, however, was soon undermined by incidents of firing along the Line of Control in Jammu and Kashmir. The two countries have fought for the control of Kashmir since 1947.

According to Indian officials, Pakistan has violated the ceasefire in the disputed territory 54 times this year through July 16 and 19 times since the Modi government took office May 26. Defense Minister Arun Jaitley told parliament recently that Pakistan violated the ceasefire agreement 199 times last year. Pakistan flatly denies reports of these incidents just as it denies support for jihadi groups operating in Kashmir though they operate in full view of Pakistani and international media.
There are many logical reasons for why and how Indian-Pakistan ties can be normalized. Psychological, not logical, factors have held the relationship back so far. Since the country’s birth through India’s partition in 1947, Pakistanis have sought to define their national identity through denial of commonality with India.

Disputes, such as the one over Jammu and Kashmir, have over the years become more symptom than cause of tensions in the subcontinent. At the heart of the problem is Pakistan’s carefully nurtured national narrative and state ideology, diametrically opposed to India’s view of itself as the region’s preeminent power.

Since independence, Pakistanis have been told, and with greater vehemence since 1977 with the rule of military dictator Muhammad Zia ul-Haq, that their country is a “citadel of Islam,” that its destiny is to be an Islamic State and its army is “the sword of Islam.” Advocates of modern, secular values, even pluralism, are denigrated as “enemies of the ideology of Pakistan,” therefore cast as “traitors to Pakistan.” Pakistan’s establishment, led by its military, also seeks parity with India, not only in the legal sense of sovereign equality between nations but in military and political terms.

This ideological milieu has helped religious-political groups exercise greater influence on national discourse than is justified by either the size of their membership or number of votes in Pakistan’s sporadic general elections and led to the outgrowth of jihadi groups, one more extreme than the other.

Pakistan’s state ideology has undermined prospects for peace with India since 1950, when Pakistani Prime Minister Liaquat Ali Khan travelled to Delhi and signed the first major agreement. The optimism about the agreement died within a year with the assassination of its Pakistani signatory. Pakistan has since gone through years of political instability while the army has gained influence in policymaking.

Over the years, Pakistan participated in US-led anti-communist military alliances to secure military hardware that would enable it to deal with a larger, ostensibly hostile neighbor. It has fought four wars with India, including the one in 1971 resulting in the creation of Bangladesh, leaving Pakistan with half its 1947 territory. Although Pakistan has acquired nuclear-weapons capability, its insecurity in relation to India has not diminished.

Soon after independence, Pakistan’s founder Muhammad Ali Jinnah had said that he expected India and Pakistan to live alongside each other like Canada and the United States. But as long as Pakistan’s establishment continues to paint India as an existential threat and a permanent enemy in the minds of its people, no Pakistani leader –civilian or military –can embrace the Canada-US model. For now, the two sides will maintain their well-worn pattern of diplomatic engagement interspersed with periods of intense hostility.

Reworking the Idea of Pakistan

Soon after Partition, Pakistan’s founder Muhammad Ali Jinnah told the American ambassador, Paul Alling, that he wished for India-Pakistan relations to be “An association similar to that between the US and Canada.” Jinnah had no way of predicting the rise of Pakistan’s military-intelligence complex. Nor did he envision that his successors in the Muslim League would join Islamist leaders in basing Pakistan’s nationalism on the idea of perennial conflict with, and permanent threat from, India. Just as the perceived threat from Hindu domination prompted the call for Pakistan’s creation, the new rallying cry for an ethnically diverse populace was the ostensible threat from India to Pakistan.

This required keeping alive the frenzy of Partition and a contrived historic narrative. It also necessitated the glorification of past and present warriors and the building of a militarised state. Indian Prime Minister Jawaharlal Nehru foresaw how a national state of paranoia across the border imperiled India-Pakistan relations. He tried to comfort Pakistan’s leaders that disagreement with the idea of Partition before it took place did not mean India would now use force to undo it.

Nehru chose the Aligarh Muslim University, whose alumni had played an active role in the demand for Pakistan, as the venue for a speech that addressed Pakistani concerns as early as March 1948. He reassured those who accused India of seeking to strangulate Pakistan. “If we had wanted to break up Pakistan, why did we agree to Partition?” he asked. “It was easier to prevent it then than to try to do so now after all that has happened. There is no going back in history. As a matter of fact, it is to India’s advantage that Pakistan should be a secure and prosperous state with which we can develop close and friendly relations.”

“Pakistan has come into being rather unnaturally, I think,” Nehru told his audience. “Nevertheless, it represents the urges of a large number of persons. I believe that this development has been a throwback, but we accepted it in good faith.” According to him, “It is inevitable that India and Pakistan should draw closer to each other, or else they will come into conflict. There is no middle way, for we have known each other too long to be indifferent neighbours.” The first Indian prime minister also laid out a vision for India to “develop a closer union” with Pakistan and other neighbouring countries — a vision that seems to be shared by Narendra Modi. But Nehru made it clear that India had no “desire to strangle or compel Pakistan” because “an attempt to disrupt Pakistan would recoil to India’s disadvantage.”

“If today, by any chance, I were offered the reunion of India and Pakistan, I would decline it for obvious reasons,” Nehru continued. “I do not want to carry the burden of Pakistan’s great problems. I have enough of my own.” Nehru proposed that a “closer association must come out of a normal process and in a friendly way which does not end Pakistan as a state but which makes it an equal part of a larger union in which several countries might be associated” — an early envisioning of Saarc.

Bengali leader Huseyn Shaheed Suhrawardy also cautioned against declaring Pakistan an Islamist ideological state and warned that slogans of permanent war with India would only undermine Pakistan. Addressing Pakistan’s constituent assembly on March 6, 1948, Suhrawardy insisted that Pakistan’s future rested on the “the goodwill of the people” of Pakistan and the “mutual relationship between the Dominion of Pakistan and the sister dominion, [the] Indian Union.”

Suhrawardy briefly served as prime minister in 1956 before being barred from politics under martial law. He died in exile a few years later. But his admonition, within a few months of Pakistan’s creation, still rings true. “Now you are raising the cry of Pakistan in danger for the purpose of arousing Muslim sentiments and binding them together in order to maintain you in power,” Suhrawardy told Pakistan’s rulers. He warned that “a state which will be founded on sentiments, namely that of Islam in danger or of Pakistan in danger” will face perilous circumstances.

Most of Pakistan’s current problems — the rise of the Taliban, the prevalence of conspiracy theories, religious and sectarian strife, the campaign by extremists to deny Pakistani children the benefit of the polio vaccine, the potential for international isolation, the lack of institutional balance and the dominance of the military — can all be traced to the original sin of Pakistan’s post-independence leaders.

Pakistan’s establishment has disregarded Muhammad Ali Jinnah’s call to keep religion out of the business of the state and ignored Suhrawardy’s proposal for collaborative ties with India. As Prime Minister Nawaz Sharif sets about trying to normalise relations with India, he would do well to revise the Pakistani notion of “permanent enemy”, which is inculcated at all levels of schooling and through the Pakistani media. Sharif should recall Suhrawardy’s warnings and embrace Jinnah’s vision of India-Pakistan ties. He should start changing Pakistan’s national discourse, without which forward movement might prove difficult.

What Barriers Prevent Reconciliation Between India and Pakistan?

The meeting between India’s new prime minister, Narendra Modi, and his Pakistani counterpart, Nawaz Sharif, may have opened an opportunity to mend a relationship fraught with violence and territorial dispute. Jeffrey Brown gets two views on the contentious relationship from Husain Haqqani, former Pakistan ambassador to the U.S., and Sumit Ganguly of Indiana University.