1

Aleksandra Jaskólska

Centre for Contemporary India Research and Studies

Institute of International Relations

University of Warsaw, Poland

a.jaskolska@uw.edu.pl

Evolution of India's foreign assistance in developing partnerships in the South Asian

neighborhood as an answer to growing influence of China in South Asia region

India's foreign policy towards South Asia underwent numerous changes in the period between

the recovery of India's independence in 1947, and the year 2015. A number of factors had an

impact on the evolution of this policy, including events such as the formation of the Non-

Aligned Movement, the war with China, China's growing support for Pakistan (particularly

post 1962), and the creation of Bangladesh. The breakthrough for the foreign policy of India,

however, happened in the year 1991, which not only marked the end of the Cold War and the

collapse of the Soviet Union and the necessity to turn to the United States, but also the

beginning of large-scale economic reforms. Thanks to these reforms, India is now one of the

fastest growing economies in the world.

In 2014, the parliamentary elections were won by Bharatiya Janata Party (BJP, Indian

People's Party), which pointed to the need to develop relations with countries in close

geographical proximity, as one of the most important objectives of India’s foreign policy. The

development policy is one of the new regional policy tools used by BJP since 2014, and it

allows for vast political and economic benefits. BJP’s strategy towards Bhutan and Nepal

aims at economic advantages, and is specifically oriented on the purchase of energy produced

by these countries in hydroelectric power plants, the construction of which is financed by

India as part of development aid. On the other hand, the development aid for Afghanistan, Sri

Lanka and Myanmar, is focused on gaining political advantage, such as building a sphere of

influence and balancing the impact of China in the region.

India after 1947, as a natural leader in South Asia

India sees herself as a natural leader in the region of South Asia due to historical factors, its

geographical location, as well as a very large area and population. The only country that did

2

not recognize the sovereignty of India after 1947 years was Pakistan, with which India has an

ongoing and unresolved dispute over Kashmir until today. Other countries in the region:

Nepal, Bhutan, Sri Lanka, Maldives and Bangladesh (which gained independence from

Pakistan in 1971, thanks to India’s support1) have been in the Indian sphere of influence for a

long time.

India did not use its dominant role in order to to integrate the region of South Asia,

and the processes of regionalization were practically invisible in the region until the mid-

1980s. South Asia missed both the first and the second wave of regionalization. India was not

interested in integrating the region, which was under its regional hegemony. The South Asia

Association of Regional Cooperation (SAARC) was founded only in1985, based on

Bangladesh’s initiative2. Despite the fact, that SAARC exists since more than 30 years now,

the organization is not at all well integrated. In fact, South Asia was declared the world’s least

integrated region by the World Bank. This situation is caused, amongst other factors, by the

conflict between India and Pakistan, the lack of trust in the region and the fact that the

countries in the region are opposed to any kind of limitations when it comes to their

sovereignty3. BJP’s policy aims at improving the relationship between the states in the region

through developing relations based on reciprocate benefits. Development aid is in fact one of

the tools, which will help BJP to reach this goal.

Evolution of India's foreign policy towards the countries of South Asia

When analyzing the changes in India’s foreign policy since BJP’s election, it would be

beneficial to see how the Indian foreign policy evolved after 1947. Sumit Ganguly and

Manjeet S. Pardesi in one of their articles4 propose to divide India's foreign policy in three

stages.

The first stage marks the timeframe between India’s independence and the war with

China in 1962. Jawaharlal Nehru, the first Prime Minister of India between the years 1947-

1964, who was the leader of the Indian National Congress (INC), decided that India's foreign

1 R. Sisson, L. R. Rose, War and Secession. Pakistan, India, and the Creation of Bangladesh, CA, Berkeley,

1990 2 P. B. Mehta, Still Under Nehru's Shadow? The Absence of Foreign Policy Frameworks in India, “India

Review”, 2009, 8:3, p. 209-233 3 J. Betz, India: the Interaction of Internal and External Factors in Foreign Policy, [w:] Regional Leadership in

the Global System : Ideas Interests and Strategies of Regional Powers, (red.) D. Flemes, Ashgate Publishing

Group, 2010, p. 237-254 4 S. Ganguly, M. S. Pardesi, Explaining Sixty Years of India's Foreign Policy, “India Review”, 2009, 8:1, p. 4-

19

3

policy will be based on the ideals of non-alignment. Nehru was one of the founders of the

Non-Aligned Movement (NAM), based on the principle of peaceful coexistence. However,

researchers such as Bhanu Mehta5 underline, that the policy of India was not as idealistic

towards South Asia. In this case, India has always carried out a pragmatic policy, which was

aimed at maximum benefit. Mehta defines the policy of India even as hegemonic.

The second stage, from 1962 until the end of the Cold War, marks the period during

which India moved away from Nehru’s idealism and adopted a much more pragmatic

approach, the so called ‘Military Nehruism’. The Indian National Congress dominated this

stage of foreign policy of India as well. Indira Gandhi, Nehru’s daughter, was prime minister

between 1966-1977 and then again in 1980-1984. She was later succeeded by her son, Rajiv

Gandhi,who was prime minster between 1984-1989. In 1971 Indira Gandhi decided to support

the independence movement in East Pakistan, which resulted in a third war with Pakistan,

which in turn led to the creation of Bangladesh. Rajiv Gandhi continued his mother’s policy.

During the 1980s India went on with two military interventions: in Sri Lanka in 1987 and in

the Maldives in 19886. India has become an unquestioned leader in the South Asian region.

The third stage, which spreads since 1991 until today, is characterized by an

economization of foreign policy and pragmatism. The year 1998 marked the end of INC’s

dominance – the elections have been taken by BJP7, which a year later was already able to

create a stable coalition and as a result, govern for the entire five-year term. In 1998, BJP

decided to conduct nuclear weapon tests, which resulted in success8. As China’s influence is

more and more visible in the South Asian region, BJP has sought to improve relations with

the countries in close geographical proximity. INC returned to power for ten years (2004 -

2014) and continued the policy of the BJP in this aspect. The development aid strategy gained

significance for INC during the party’s second term in office, however Congress lost the

election in 2014 and BJP returned to power. On the break of late April and early May 2014,

BJP won the elections to the lower house of the Indian parliament (Lok Sabha). BJP gained

enough seats (282 from the 543 seats available) to form a government alone – a similar

situation last occurred in 1984, when INC won the elections. In addition, 55 mandates

accounted for parties belonging to the coalition led by BJP, the National Democratic Alliance

5 P. B. Mehta, Still Under Nehru's Shadow? (…)

6 A. Vanaik, Indian Foreign Policy and Security Perspectives: Past Practice and Future Possibilities, [w:] The

unfinished Agenda,(red.) Mushirul Hasan, Nariaki Nakazato, Manohar, Delhi, 2001, p. 443-483. 7 O. Heath, Anatomy of BJP’s Rise to Power: Social, Regional and Political Expansion in the 1990s, “Economic

and Political Weekly”, nr 34 , 21-28 August 1999, p. 2511-17 8 G. Perkovich, India’s Nuclear Bomb. The Impact on Global Proliferation, Berkeley, CA: University of

California Press, 1999 p. 46

4

(NDA). The biggest defeated of the 2014 election proved to be INC (obtaining only 44 seats)

and the parties forming the United Progressive Alliance (which attained only 15)9.

Bharatiya Janata Party - main assumptions of foreign policy

Due to the changing balance of power in Asia, caused by the economic development of China

and the end of the Cold War, India was forced to redefine its development policy towards

South Asian states. New Delhi, could no longer act as a regional hegemon, who, under the

banner of development and the fight against poverty, seeks to control internal affairs of the

region’s states, as was the case Indira Gandhi was Prime Minister of India and, to a lesser

extent, during the reign of Rajiv Gandhi.

BJP emphasized in its election program, that developing relations with the countries of

South Asia will be one of the priorities of the party’s foreign policy. Introducing the

development policy towards these countries is one of the mechanisms, which aim to improve

these relations. BJP’s activities are also focused on improving the functioning of SAARC.

The key terms of foreign policy in the election program of 2014 years were as follows:

Neighbourhood first policy (developing relations with countries in close geographical

proximity will be the priority for the Narendra Modi’s policy) and Diplomacy for development

(the government’s foreign policy is to have a direct impact on the economic development of

India)10

. Modi invited the leaders of countries belonging to SAARC to ceremony, during

which he was sworn in as India’s prime minister. The participation of the leaders of the seven

SAARC member states in this event marks the beginning of Modi’s policy, which aims at

intensifying the cooperation with South Asian states11

.

The first two countries visited by Modi after taking office as prime minister of India

were Bhutan and Nepal, which is proof that BJP seeks to intensify relations with the countries

of South Asia. While visiting Thimphu, he stressed, that the partnership of India and Bhutan

is unique. The second state visited by Modi was Nepal – his was the first Prime Minister’s of

India visit in this country in 17 years12

. Modi has repeatedly stressed that for India, Nepal is a

very important partner in the region. Nepal has a high potential for hydropower production,

and therefore Modi during his visit to Kathmandu promised to support the construction of

9 Election Commission of India, http://eci.nic.in/eci_main1/GE2014/ge.html (23 VII 2014)

10 Election Manifesto 2014, http://www.bjp.org/images/pdf_2014/full_manifesto_english_07.04.2014.pdf (25 II

2015) 11

Narendra Modi is India’s new PM, “India Digest” 2nd

issue of May 2014, Vol.12 Issue:10 12

A. Kumar, Indo- Nepal Relations: A New Beginning, ICWA View Point,

http://www.icwa.in/pdfs/VP/2014/IndoNepalRelations.pdf (16 III 2016)

5

hydroelectric power plants. While in Kathmandu, Modi declared: Nepal can help end India's

darkness13

. The next country Modi paid a visit to was Sri Lanka, which was the first visit of

India’s Prime Minister there in 28 years. Afterwards, Modi visited the Maldives, Mauritius,

Seychelles, China and Bangladesh. The first country outside of Asia where Modi went during

his tour was in turn the United States. It was then that Modi invited Barack Obama to

participate in the celebrations of the Republic Day on January 26th

, 2015. For India, another

important partner in Asia is Japan, which Modi also visited during his first year in office.

United States and Japan are one of the most significant donors of development aid to India.

On the other hand, Bangladesh was the first country visited by the minister of foreign affairs,

Sushma Swaraj. This was another symbolic visit, which was to confirm the desire to improve

relations with the countries in close geographical proximity, so strongly declared in the

election program14

.

South Asian Association for Regional Cooperation (South Asia Association of

Regional Cooperation, SAARC) was established only in 1985 on the initiative of Bangladesh.

Despite the fact that SAARC has existed for 30 years, the level of integration in the

organization is small. South Asia has been recognized by the World Bank as the least

integrated region in the world. This is due to, among other things the conflict between India

and Pakistan, the lack of confidence in the region and a very large reluctance of states to any

restrictions on their sovereignty. Policy BJP seeks to improve relations with the countries of

the region by building relationships based on achieving mutual benefits. Development aid is

one of the tools that will help the BJP achieve this goal.

Development aid for India

In the 1980s, India was one of the major recipients of development aid in the world.

Currently, development aid constitutes of only about 0.3% of India's GDP. India received $

3.2 million, $ 2.4 million in 2013, and $ 2.1 million in 2014 (despite this decline, India is still

at amongst the top development aid recipients)15

.

13

R. Lakshmi, Modi’s speech in Nepal shows India is paying attention to its neighbors ,The Washington Post

https://www.washingtonpost.com/blogs/worldviews/wp/2014/08/05/modis-speech-in-nepal-shows-india-is-

paying-attention-to-its-neighbors (10 III 2016) 14

Gateway House, Modi in 2015: the frequent flyer, http://www.gatewayhouse.in/consolidating-foreign-policy/

(15 III 2016) 15

A. P. Valerio, Top donors to India, https://www.devex.com/news/top-donors-to-india-85708 (15 III 2016)

6

Fig. 1. Development Aid for India 2014-2015 (in $ millions)

Source: own elaboration based on data published by the Indian Government; ABD–Asian Development Bank

In 2014, during a visit in India, Jim Yong Kim, President of the World Bank, confirmed the

institution’s financial support for India. India is amongst the major recipient’s of the World

Bank’s aid funds (see Fig.1 for details). Jim Yong Kim has repeatedly stressed, that India is

perceived as a very good investment by the institution, and the World Bank will aim at

expanding and strengthening the relationship. The resources received by India are mainly

used to increase the access to education, health care and other basic services, which should

guarantee a properly functioning state16

. Andrew Mitchell from the British Development Aid

Department called India a development paradox17

. India has one of the highest rates of

economic growth. Since BJP won the elections in May of 2014, India’s the economic growth

sums up to over 7%. According to the Stockholm International Peace Research Institute

(SIPRI), in the years between 2011 and 2015, India was the largest importer of weapons in the

world18

. In addition, the Indian government has decided to develop nuclear weapons (against

the recommendation of the United Nations). The Nuclear Program is being developed at the

expense of education and health care. In India, there are over 160,000 millionaires, and the

government spends increasing amounts on the development of space technologies. In 2014,

India sent a mission to Mars – although it was the cheapest mission so far, its total cost

16

World Bank Group President Jim Yong Kim to visit India, http://www.worldbank.org/en/news/press-

release/2014/07/20/world-bank-group-president-jim-yong-kim-to-visit-india (14 III 2016) 17

Oral statement to Parliament, Andrew Mitchell: our aid programme in India

https://www.gov.uk/government/speeches/andrew-mitchell-our-aid-programme-in-india (14 III 2016) 18

Stockholm International Peace Research Institute,

http://www.sipri.org/googlemaps/2016_of_at_top_20_imp_map.html (10 III 2016)

0 200 400 600 800 1000 1200 1400 1600

World Bank

ADB

Japan

The Global Fund

United Kingdom

United States

Germany

European Union

France

IFAD

7

amounted to $ 74 million19

. In 2011, India supported in certain African states (for example

Nigeria and Ethiopia) with the amount of $ 5 million, which allowed them to carry out the

Millennium Development Goals in a larger extent20

. On the other hand, around 300 million

people in India live below the poverty line, which is more than in sub-Saharan Africa.

Moreover, the percent of GDP spent on health care is one of the lowest in the world. Despite

all of the above, BJP has decided use development aid as a new tool in regional policy,

through which it aims to build, amongst others, a sphere of influence of India and a

diversification of energy sources.

Development assistance provided by India and energy security

India's rapid economic growth has caused an increase in demand for energy resources. India

has many natural resources, such as coal, lignite, iron ore, bauxite and titanium – it has

however very small deposits of oil and natural gas, which is why they must be imported

(mostly from the Middle East and Central Asia).

The Indian government is increasing its investment in the development of renewable

energy, as a part of the policy for diversification of energy resources. The investments in

hydro power plants, wind farms and solar farms are not solely limited to India, but are being

set up in other countries in the South Asian region as well. Development assistance related to

this economic sector is in fact a very important policy – which is why India became one of the

major donors of development assistance in the region of South Asia in the beginning of the

twenty-first century. In the case of Nepal and Bhutan, most of the funds from development

assistance are being provided for the construction of hydroelectric power plants, the energy of

which India is interested in purchasing in the future. However, not only New Delhi is

interested in expanding its influence and buying energy from the states of the region. Due to

the increasing involvement of China in India’s immediate neighborhood, especially through

development assistance and opening credit lines, India had to make significant changes in its

foreign policy towards South Asia. China began threatening India in the region, which has

traditionally been under the influence of New Delhi21

. This means that BJP is in front of a

difficult, which will involve not only strengthening the position of India in the region, but at

the same time increasing cooperation with China.

19

J. Blank, J. D. P. Moroney, A. Rabasa, B. Lin Look East, Cross Black Waters: India's Interest in Southeast

Asia, Rand Corporation, 13.10.2015, s.21 20

India pledges $5bn to help African states meet the MDGs http://www.theguardian.com/global-

development/poverty-matters/2011/may/25/india-pledges-5bn-to-help-african-states-meet-mdgs (14 II 2016) 21

H. Kondoh, T. Kobayashi, H. Shiga and J. Sato, Diversity and Transformation of Aid Patterns in Asia’s

“Emerging Donors”, No 21 October 2010, JICA Research Institute

8

It was only in January 2012 that the Development Partnership Administration (DAP) -

a specialized unit within the Indian Ministry of External Affairs responsible for allocating

development aid – was established in India. According to the information from 2015, another

agency dealing with development aid is to be launched soon. In the next five to seven years,

DAP will have approximately $ 11.3 million available at its disposal22

.

Indian budget spent on development aid is increasing each year. The first budget as

approved by Narendra Mondi’s government for the year 2015/2016 was 26% higher, than the

budget for the previous year, and amounted to $1.6 million. In 2009-2010, the budget

summed up to $ 442 million, in 2010-2011 it grew to $563 million, and in the following year

2011-2012 there was an increase to $646 million. A significant increase did not come until the

2012-2013, when the funds have nearly doubled, reaching $1.02 billion23

. The following year

brought an yet another increase, to $1.29 billion. The major recipients of India’s development

aid are the South Asia states: in years 2015-2016 they held as much as 84% of all funds. 3%

was received by Africa, 3% by Myanmar, and 10% by other countries24

(see Fig. 2 for

details).

Fig. 2. Indian foreign assistance 2015-2016

Source: own elaboration based on the data published by the Indian Government (amounts do not include credit

lines granted by India)

22

Development Partnership Administration http://www.mea.gov.in/development-partnership-administration.htm (13 I

2016) 23

I. Watson, Foreign Aid and Emerging Powers: Asian Perspectives on Official Development Assistance,

Routledge, 2014 24

L. Piccio, India's 2015-16 foreign aid budget: Where the money is going, https://www.devex.com/news/india-

s-2015-16-foreign-aid-budget-where-the-money-is-going-85666 (15 II 2016)

Others 10%

Africa 3%

Myanmar 3%

Bangladesh 3%

Afghanistan 7%

Sri Lanka 5%

Nepal 4%

Maledives 2%

Bhutan 63%

9

Bhutan received $981 million of development aid from India, which means an increase of

26% as compared to the previous year. This was the second highest increase in aid among the

South Asian states (Nepal received as much as 40% more funds). These funds have been used

primarily for the modernization and construction of hydroelectric power plants25

. India signed

an agreement with Bhutan in 2007, confirming the intention to purchase at least 10 000

megawatts of power from Buthan by the year 2020. During his visit in Bhutan, Modi

inaugurated the opening of the Kholongchu Hydroelectric Project - one of 10 power plants to

be constructed in by India in near future. As a part of development aid in Bhutan, India also

finances projects in the public sector to some extent. Other noteworthy power plants in

Bhotan are Chhukha (336MW), Kurichu (60mW), and Tala (1020MW). Another significant

project concerns the construction of the High Voltage Direct Current (HVDC) - the project

applies also to Sri Lanka and Bangladesh26

. With these and similar projects India will manage

to provide herself with a constant supply of energy.

Nepal received $67 million in development aid from India. During his visit in Nepal,

Modi promised to grant a $1 billion loan as well. The help India provides is focused in three

main sectors: transport infrastructure, energy and the development of information and

communication technologies. India is also building the Nepal-Bharat Maitri Emergency and

Trauma Center in Kathmandu (for $16 million). India wants to buy at least 400 MW of energy

from Nepal by 2017. Nepal in turn plans to produce 15,000 MW of power by the year 202727

.

Nepal is a very important partner for India. In the years to come, BJP will seek to increase the

development aid and opening up an even higher line of credit for this country. This will be

due to the need of the large amounts of energy as well as by the balancing of China’s

influence.

Afghanistan is the only country in the region, which has received less support from the

development assistance fund: $108 million, which is 5% less. India has already allocated $ 2

billion in the development of Afghanistan, which makes it one of the largest donors of

development aid28

. Among other things, India allocated funds in a very prestigious project of

the reconstruction of the building of the Afghan parliament. Another flagship project is the

25

A. Sen, India-Bhutan Relations, a Year after Prime Minister Modi’s Historic Visit, “Society for Policy

Studies” (SPS) January2016 26

India to set up HVDC transmission line with Nepal,Bhutan, http://indianexpress.com/article/india/india-

others/india-to-set-up-hvdc-transmission-line-with-nepal-bhutan/ (20 II 2016) 27

S. Srinivasan, Assessing India’s infrastructure aid diplomacy, http://www.gatewayhouse.in/assessing-indias-

infrastructure-aid-diplomacy/ (20 I 2016) 28

Ibidem.

10

construction of the Salam dam in the province of Herat29

, which will soon be completed. The

aim of BJP is not only the acquisition of energy resources from Afghanistan, but also the

construction of a sphere of influence. China is gaining increasing influences in Afghanistan as

well.

Sri Lanka received $80 million. Due to the fact, that Modi is seeking to improve

relations with Sri Lanka, he promised the President Maithripali Sirisena an increased line of

credit during his visit in Colombo30

. In 2010, the Indian Government gave $270 million for

the construction of houses for Tamils in Sri Lanka, which have been destroyed during the

civil war (this has been one of the largest projects in India)31

. The civil war ended in 2009,

mostly thanks to the help of China, which gave considerable support to the Prime Minister

Mahinda Rajapaksa. China has received the approval from Sri Lanka’s Government for the

reconstruction of the port in Hambantotau after 200932

. The Indian government, with the help

of the development aid funds, tends to weaken the Chinese influence in Sri Lanka.

Myanmar received $43 million, so more than double of what it has been granted in

2014- 201533

. The Development Assistance covers several sectors here, such as infrastructure,

the development of health care, and training of officials. In addition, India allocated $5

million for the construction of schools, health centers and road infrastructure until the year

2019. India has also increased the credit line for Myanmar up to $500 million34

. These

activities aim at balancing the significance of China. This will be extremely difficult however,

as China managed to construct a significant sphere of influence in Myanmar over the last few

years .

Has there been a change in the foreign policy of India since BJP assumed office? For sure, we

cannot talk about a radical change, as BJP continues the policy of INC in many aspects. It

would be beneficial, however, to pay attention to the development assistance, as one of the

new tools in regional policy. BJP uses the development assistance carry out the key concept

of its foreign policy stated in the election program, which is the development of relations with

the South Asian states. Moreover, the use of development aid is aimed at financing the

29

G. Price, India’s Policy towards Afghanistan, “Chatham House” , Asia ASP 2013/04 30

S. Srinivasan, Assessing India’s infrastructure (…) 31

W. Nalawatta, S. Weeraratne, Nepal-India and Sri Lanka-India relations in the Regional Context since 1987 ,

Proceedings of 8th International Research Conference, KDU, Published November 2015, p.51-56. 32

P. Wong, Y. J. Cheng, Global China: Internal and External Reaches, World Scientific, 2015, p. 324-326 33

S. Srinivasan, Assessing India’s infrastructure (…) 34

Gateway House, India-Myanmar: A New Impetus, Gateway House Report No. 10, February 2014,

http://www.gatewayhouse.in/wp-content/uploads/2014/02/India-Myanmar-A-New-Impetus.pdf (25 II 2016)

11

renewable energy sector, primarily in Bhutan and Nepal. Such actions will lead to the

diversification of energy sources, which is necessary due to the dynamic economic

development. On the other hand, in the case of Afghanistan, Sri Lanka and Myanmar, the

development assistance aims at building a sphere of influence and balancing the impact of

China in those countries. India, as a natural leader of the region of South Asia, aspires to

obtain the status of a regional hegemon. Since 2014, the development aid became a function

of India’s imperial aspirations.35

However, due to the increasing presence of China, BJP will

have to take additional actions if it wishes to achieve full success. Despite the fact that India is

one of the largest donors of development aid in the region of South Asia, it still requires

assistance, and hence is one of the main recipients of the development aid funds distributed by

the World Bank.

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