India and Its Neighbours:The 1990s and Beyond

Padmaja Murthy, Associate Fellow, IDSA


Former Prime Minister I.K. Gujral, while discussing the Gujral Doctrine identifies the South Asian countries—Nepal, Bhutan, Bangladesh, Sri Lanka, Maldives and Pakistan—as forming the first concentric circle in India’s foreign policy. Bringing out their relevance he states that India’s nature and strength cannot be divorced from the nature of relations it has with these neighbours.1 The present paper primarily focuses the discussion on the politico-economic ties with four of these immediate neighbours—Nepal, Bhutan, Bangladesh and Sri Lanka. Pakistan has not been included in the discussion, for in terms of the nature of the problems and expected solutions it falls in a different category altogether defying possibility of any early meaningful cordial bilateral relations. Maldives has also been left out of the discussion since the nature of bilateral relations are not characterised by any specific bilateral problems like with the other four countries under focus and India’s close involvement is limited in that context.

In the background of the difficult bilateral relations that existed till the beginning of the nineties, the aim of the paper is two fold. First, to examine the broad trends in the bilateral relations between India and the neighbours in the nineties. Secondly, the manner in which they impinge on India’s vital security interests which are shaped by the neighbour’s attitudes and their external and internal policies.

This paper argues that the security concerns to India in the 1990s from the neighbours identified have been far more complex than those which existed prior to it. However, an interesting aspect of this decade (1990s) is that these security challenges are a cause of concern not only for India, but also for the neighbours themselves. Thus there are prospects to build effective response mechanisms together especially when bilateral relations have seen a forward improvement. The paper also spells out that there is a limited impact of the economic mechanisms adopted by India towards these four countries in order to influence their internal and external policies on issues concerning India. As these four countries have a narrow industrial base, there is an absence of powerful interest groups who benefit from these economic linkages and can influence the policies of their respective governments. In such a scenario, the SAARC forum could play a crucial positive role in devising mechanisms to meet these security challenges.


There is asymmetry between India and these four neighbours identified—Nepal, Bhutan, Bangladesh and Sri Lanka—in various aspects like territory, level of economic development, population, size of armed forces etc. However, these factors should not in any way diminish their significance, for vital security concerns of India are linked to these countries. This important aspect therefore brings in interdependence in bilateral relations despite the conspicuous asymmetry.

India shares borders with all these countries which are geo-strategically placed.2 India does not perceive any direct military threat from these countries, but the apprehensions arise from the fear that any third country having inimical interests against India, on gaining a foothold in any of these countries can easily access India and carry out its plans. It is therefore in India’s interests that there is political, social and economic stability within these countries so that they are not vulnerable to any external pressures which occur due to instability. On the other hand, for India’s security interests to be safeguarded; it is also essential that these countries do not adopt such policies externally and internally that overlook India’s concerns. Given the permanency in the geo-strategic importance of these countries and the other concerns flowing from it, these neighbours will always remain important in India’s security calculations.

Taking the period till the beginning of the 1990s, India’s bilateral relations with these countries, with the exception of Bhutan, have primarily been characterised by mistrust and suspicion, with brief periods of convergence which witnessed mutual appreciation of interests. One of the factors which contributed to the mistrust was the fear of democratic India influencing similar elements in Nepal governed by the monarchy and Bangladesh led by the military rulers. In such circumstances regime security was equated with nation’s security and consequently anti-Indianism came to be termed as nationalism. As the leaders themselves felt vulnerable, they adopted anti India policies and developed linkages with external powers to bolster their position within their countries and in the region. Many a time these postures of the neighbours were looked upon by India as being insensitive to her (India’s) vital security concerns. Through much of this phase India and Sri Lanka had different perceptions on the mechanisms to be adopted to resolve the ethnic crisis. India’s views were influenced also by the pressures and perceptions of her own Tamil population. The different perception on nation building also contributed to misunderstandings and mistrust.3

The decade of the eighties clearly brings out the divergence between India and its immediate neighbours. In 1988 Nepal bought arms including anti-craft guns and medium range SSM besides AK-49 assault rifles, medium boots etc, from China worth $20 million through the Chinese built Kathmandu-Kodari road completely rejecting India’s security concerns.4 The resultant clash of interests between the two countries was soon reflected first in differences over the renewal of trade and transit treaties, and later covering the entire gamut of bilateral relations.5 Only in April 1990 after democracy had been restored in Nepal that the bilateral relations normalised and consequently the trade and transit treaties were also renewed to the satisfaction of both the countries.

This decade was also one of the most difficult periods for Indo-Sri Lanka relations. In order to militarily meet the internal ethnic crisis, Sri Lanka took assistance from various countries.6 These linkages, India felt, overlooked her (India’s) security concerns and posed grave danger to her. What started as Indian mediatory efforts in 1983 later led to the despatch of the Indian Peace Keeping Force (IPKF) to Sri Lanka in 1987 on the latter’s invitation. It was only in 1990 after the withdrawal of the IPKF from the island that the process towards normalisation of relations began.

The above events of the 1980s significantly brought out certain conclusions. First, India’s legitimate security interests linked to her immediate neighbourhood were recognised by most of the countries in the world. Second, both Nepal and Sri Lanka realised that they could not stretch their policies beyond a point overlooking India’s concerns and apprehensions. The extent of help that these two countries expected from third parties did not come by and there was a realisation that they could not use these linkages as a pressure point against India disregarding her concerns. Finally, the resolution of the differences highlighted that they would have to address them bilaterally with India.

With regard to Bangladesh, many factors contributed to mutual distrust. Bangladesh’s military ruler’s close political and defence ties with China and Pakistan; the support to Indian insurgents in the northeast; continuous illegal migration from Bangladesh—were issues of concern. Bangladesh on its part expressed concern over the Indian support to the Chakmas, the pro democracy elements and did not accept that any illegal migration was taking place. The differences over the sharing of the Ganges waters only worsened matters.

India’s bilateral relations with these neighbours had thus touched their nadir in the 1980s. The attitudes and policies of the neighbours put pressure on India with regard to safeguarding her security concerns and the result was mutual distrust.

However, all the countries entered the 1990s with some significant positive changes which gave hope that the decades ahead would be more peaceful. First, democratic governments were established in Nepal and Bangladesh. The fear of democratic India, which to a great extent contributed to previous mistrust, therefore no longer remained. Secondly, the withdrawal of IPKF from Sri Lanka paved the way for normalisation of relations between India and Sri Lanka. Thirdly, liberalisation and globalisation gave the economic agenda a primary place in bilateral relations.

Trends in Bilateral Relations

The 1990s have witnessed a definite improvement in bilateral relations between India and the countries under focus. While with each of the countries a different set of problems and different factors have influenced relations, certain broad trends can be identified.

First, there is an emphasis on democracy and multiparty systems as the new linkage, especially with regard to Nepal and Bangladesh. Regular high level meetings between leaders and senior officials are taking place signifying the importance and seriousness attributed to bilateral relations. In some instances such interactions have been institutionalised to give it permanency and continuity. Some of the high level visits included the visit to India by Prime Minister Krishna Prasad Bhattarai in June 1990 as head of the interim government following establishment of democracy in Nepal. The visit resulted in the signing by the Prime Ministers of India and Nepal, a Joint Communique which restored status quo ante in bilateral relations to April 1, 1987, a period before the bilateral tensions emerged Prime Minister Chandrashekar visited Nepal from February 13 to 15, 1991 which was the first such visit by an Indian Prime Minister in 14 years. The significance of the visit further emerges from the fact that it was Prime Minister Chandreshekar’s first bilateral visit abroad after assuming office. Later, other such visits followed, which included Prime Minister Deuba’s visit to India in 1996; Prime Minister I.K. Gujral’s visit to Nepal in 1997; one of the most significant visits was of the King of Nepal to India in 1999 as the Chief Guest at the Republic Day celebrations. High level bilateral visits have always been a significant feature of Indo-Bhutan relations and this was true throughout the decade. With regard to Bangladesh, Prime Minister Khaleda Zia paid a visit in May 1992. Later Prime Minister Sheikh Hasina visited in December 1996 and in January 1997 Indian Prime Minister Deve Gowda visited Bangladesh. More recently, Prime Minister Sheikh Hasina came in January 1999 and the same year in June 1999 the Indian Prime Minister visited Bangladesh to inaugurate the Calcutta-Dhaka bus service. President Chandrika Kumaratunga paid a significant visit to India in 1995 after being elected and laid the base for close relations with India. Later in 1998, President Kumaratunga’s visit to India resulted in the conclusion of the Indo-Sri Lanka Free Trade Agreement.7

These high level visits resulted in upgradation of official interactions. In 1991, an Indo-Nepal High Level Task Force had been set up—chaired by the Cabinet Secretary or equivalent on both sides and including the Foreign Secretary, the Finance Secretary and the Commerce Secretary—which prepared a comprehensive programme for bilateral cooperation. This was the first time such an approach had been adopted between Nepal and India. With regard to Bangladesh, it is observed that in 1991 the meeting of the Indo-Bangladesh Joint Economic Commission was held after a gap of seven years. With the aim of diversifying Indo-Sri Lanka relations an agreement was signed in July 1991 to establish Indo-Sri Lanka Joint Commission. Its Sub-Commissions include those on Trade, Investment and Finance, and Science and Technology. This process was to continue throughout the nineties.8

Secondly, India has focused on resolving major bilateral issues to build an environment of trust and it has been successful on some of these fronts. In 1990 India and Nepal undertook to fully respect each other’s security concerns, not to allow activities in the territory of the one prejudicial to the security of the other, and to have prior consultations, with a view to reaching mutual agreement on such defence related matters which, in view of either country, could pose a threat to its security. Following the difficult period of the 1980s this reassured both the countries. One of the issues on which India and Nepal have had differences resulting in tensions is the trade and transit treaties. Transit is important for Nepal because not only is it landlocked, but for all practical purposes it can access third countries only through India. Further given its low economic development, a favourable trade regime is provided by India to goods from Nepal. Through the 1990s both the countries have gradually moved to a situation whereby the separate transit and trade treaties will be automatically renewed. As per the provisions of the trade treaty India provides on a non reciprocal basis, duty free access without quantitative restrictions, to the Indian market for all Nepalese manufactured articles barring a very short negative list.9 The withdrawal of the Indian Peace Keeping Force (IPKF), in March 1990 brought to an end India’s direct involvement in Sri Lanka and led to a new phase in Indo-Sri Lanka relations. India’s new policy primarily consisted of three elements. First a conscious endeavour to adopt a non-intrusive approach towards the ethnic problem. India stated that it favours a negotiated political solution to the problem. Second, improving and strengthening bilateral relations in all fields of mutual interest, especially economic. Third, in the multilateral context, increased cooperation with the government of Sri Lanka on a positive and pragmatic basis, with a thrust in economic areas.10 With Bangladesh, the Tin Bigha issue was satisfactorily resolved. Later, the landmark Indo-Bangladesh Treaty on Sharing of the Ganges water was signed by the Prime Ministers of India and Bangladesh on December 10-12, 1996. In 1997, following a settlement, 12,000 Chakma refugees from Tripura voluntarily returned to Bangladesh.

Third, is the primacy of the economic agenda in the bilateral relations. India has followed the principle of non reciprocity while giving concessions to these countries on the economic front. This is reflected among other things in the provisions of the trade and transit treaties with Nepal,11 the Indo-Sri Lanka Free Trade Agreement,12 the tariff concessions to Bangladesh on certain goods,13 the assistance given to Bhutan in the development of the hydro power projects and its five year plans.14

Fourth, internal social and economic instabilities within these countries have made them realise that they also have a stake in maintaining friendly and cordial relations with India. For example, Nepal alleges that the Maoist insurgents in Nepal have links with similar groups in India.15 Nepal has been assured by India that it will not allow activities against Nepal to be carried on in its territory. However, Nepal needs cooperation on this count from India. Sri Lanka, fighting a war within its own territory against the LTTE, is aware that India’s concern cannot be overlooked and the policies the latter adopts do have a bearing on its internal situation. Bhutan, is presently facing multiple challenges on various counts, all of which can be influenced by India. While at the bilateral level it has been involved with Nepal over the refugee issue,16 at the national level it faces the twin challenges of democracy and the security concerns posed by the United Liberation Front of Assam (ULFA) camps within its territory.17 The need to devise mechanisms to deal with these camps have become one of the important issues in the bilateral agenda with India for the insurgents frustrate the attempts of Indian security forces to deal with them by crossing over to Bhutan. As far as Bangladesh is concerned, India has emerged as the single largest source of imports.18 In trying to focus on economic development Bangladesh is aware that it has a lot to gain by developing linkages with India, but the internal political factors prevent it from taking decisions. If economics were to dominate then it would result in social stability and the consequent benefits which come with it.

While the trends do indicate an improvement in the relations compared to those which existed in the 80s, there were also a host of issues on which differences persisted. Stress and strain in the relations were witnessed when the Ganges water issue was internationalised and raised at the UN General Assembly by Bangladesh prior to its being amicably settled in 1996.19 The issue of illegal migration has also been an irritant in normalising Indo-Bangladesh relations, with the latter not even recognising that the problem exists at all. Another event which caused misunderstanding was adoption of a resolution by the Parliament of Bangladesh, Jatiya Sangsad, upon demolition of Babri Masjid in India. Government of India categorically stated that this act of Bangladesh constituted an interference in the internal affairs of India.20 With regard to Nepal some of the issues like Kalapani and the need for revision of the 1950 Treaty of Peace and Friendship have been raised time and again. Misunderstandings also arose in December 1999 following hijacking of Indian Airlines flight IC 814 from Kathmandu. With Sri Lanka differences persist on fishing rights of Indians and it has been decided to address the issue amicably.21 Some differences persisted over the provisions of the Indo-Sri Lanka Free Trade Agreement. They have however been amicably settled and it has been in force from March 1, 2000.

With all the countries the need to reduce the trade gap also comes up from time to time. The balance of trade is heavily tilted in favour of India. Given the narrow industrial base in these four countries, India has emphasised that the gap cannot be reduced just through export of products. Thus India has focused on services and gives the example of how the trade gap was completely reduced between India and Bhutan following the export of surplus hydro power to India from the power plants in Bhutan. In fact in the situation as it exists, the balance of trade is in favour of Bhutan. India and Nepal have agreed to work together to exploit the water resources of Nepal for hydro power.22 This would benefit the energy starved northern states of India too apart from the development of Nepal and the revenues which it would earn. Two proposals have been suggested to Bangladesh to reduce the trade gap. Through export of gas from Bangladesh to India and secondly by providing services of transit and transhipment to access the northeastern parts of India. The revenues thereby earned would reduce the trade gap. However both the issues have become highly emotive and politicised and the progress is slow.23 With regard to Sri Lanka, the Indo-Sri Lanka Free Trade Agreement aims to bring about a closer economic interaction between the two countries.

It is therefore observed that while there are significant positive trends, issues of grave concern also exist. Unlike in the eighties where deep mistrust pervaded the broad spectrum of bilateral relations, the nineties have witnessed both positive and negative trends. The aim being not to push the causes for the negative trends behind, but to address them squarely. The countries seem to be adopting a constructive approach whereby differences on one aspect do not colour the entire gamut of relations.

The Security Scenario for India

The four countries identified continue to be important to India’s security calculations. Thus, their external and internal policies and attitudes and perceptions on critical issues do have an important bearing on India’s security. The positive trends witnessed in bilateral relations would lead one to conclude that they are reflective also of the convergence on security issues. That the divergence which was witnessed during the 80s on security issues no longer continues to exist. For, during that period the divergence in security concerns was reflective of the stresses and strains in the bilateral relations indicative of the anti India stand of the neighbour.

Thus, an important question which arises is whether an improvement in the bilateral relations has resulted in the neighbours becoming sensitive to India’s security concerns? Whether, the cordial relations imply that the neighbourhood (under focus in the paper) has become safer for India? Or whether there is any indication that these neighbours are adopting policies which can be construed to be anti India?

The bilateral relations in the 1990s were characterised by multiple features. While they showed a marked improvement compared to what they were in the eighties, bilateral problems have not ceased to exist. While differences do put pressure on ties, they have not been allowed to put on hold the entire gamut of relations. Another important aspect is that while bilateral relations have improved, new issues have also arisen on the security front which are to a certain extent qualitatively different from those of the earlier period. They are a cause of concern not only for India, but for the neighbours too.

The period when bilateral relations have improved has coincided with the rise of new issues of concern while some of the old concerns have assumed a more lethal form. Thus, while concerns which dominated in the past are being addressed, effective mechanisms have yet to be devised to address the new issues. The silver lining is that while earlier India’s rising concerns were reflective of the anti India policies of the governments in the neighbouring countries, the situation presently is not so.

While old concerns remain, new issues have taken centre stage. It is in this sense that a direct co-relation between an improvement in bilateral relations on the one hand and a reduction in security concerns on the other for India cannot be formed. The situation as it exists is much more complicated.

A brief sketch of the security situation as it prevailed in the 1990s in each of the four countries identified brings out these important aspects.


Presently the concerns for India from the security dimensions arise primarily from the ISI activities in Nepal which are reported to have begun in the initial years of the nineties. Pakistan is using Nepal to carry out its anti India activities, taking advantage of the open borders between India and Nepal to have an easy access into India.24 Some reports speak of the nexus between the ISI agents, the bureaucrats, smugglers and politicians of Nepal which enables the ISI to carry out its activities.25 The ISI is taking advantage of three factors to build its linkages in Nepal. These are firstly, very low economic development in Nepal which makes economic inducements an effective mechanism for ISI; the anti India feeling in Nepal which dominated relations till the beginning of the nineties; the Muslim minorities in Nepal.

It is important to note that corruption among those in power is a major issue of concern in Nepal.26 While some of those in power might have linkages with the ISI agents, it is necessary to delink the presence of anti India elements in Nepal with the government of Nepal pursuing anti India policies. Unless this distinction is made and appreciated, there will be a tendency to paint all the anti India elements in Nepal as a reflection of the government’s attitude and such an approach will fail to notice the positive moves being made. At this juncture it needs to be spelt out that the events of the eighties have clearly shown that there is an in-built interdependence between India and Nepal. These are the economic and transit issues from Nepal’s side and the security issues from India’s side. While certain governments in Nepal may use these anti India elements as pressure points and leverages against India at certain moments, pursuing it as a long-term policy is not in their interests. The manner in which bilateral relations are progressing in terms of the regular renewal of trade and transit treaties (in contrast to the difficulty faced in the pre-90s period when the divergence in security issues surely got reflected in the renewal of these treaties), the satisfaction of Nepal with its various provisions and the many other initiatives for effective border management and energy development do indicate that India does not believe that the government in Nepal is following anti India policies. India recognises that the open border is being abused by some anti India elements and that the issue has to be addressed jointly. In this direction the first step has been made by bringing in a restricted regulation at the border. As a result those people of Nepal and India travelling by flight will need to have some proof of identification of their citizenship.27 Soon, some similar measures will have to be devised for identification of those citizens using land borders. The challenge before the two countries lies in devising methods to prevent the misuse of the open border.

Further since 1996, Nepal itself is facing the internal challenge of the Maoist insurgency. It has become one of the most important national issues and political parties and the intelligentsia are discussing ways and means to resolve it. The insurgency has already claimed more than a thousand lives; resulted in loss of property: there has been internal displacement of people from the affected districts; economic activities have been affected as there is strain on limited resources. Most important, the law enforcing agencies have been put under severe pressure and there were even discussions whether the army in Nepal should be called out to meet the challenge. There is a clear realisation that the insurgency problem would have detrimental effects on the social and economic stability within the country.28

This problem in Nepal is further compounded as democratic institutions and traditions have yet to take firm root in Nepal. On completing ten years of democracy, the media and the politicians undertook a major critical introspection of the functioning of democratic rule and in what manner it was better than the Panchayat system that existed prior to it under the monarchy.29 Corruption among the elected leaders was an issue which came out prominently.30

This combination of the ISI activities, the Maoist insurgency, problems of nascent democracy, economic backwardness—together are all a cause of concern for India. If these continue for a long period, the ensuing instabilities could increase Nepal’s vulnerabilities and this would not portend well for India’s security.


India’s security concerns linked with Bangladesh have seen both continuity and change. Illegal migration, like in the pre-90s is an issue of great concern for India. This demographic aggression is having grave consequences for India in the political, social and economic aspects. The possibility of a bilateral solution presently seems implausible as no government in Bangladesh even accepts that illegal migration is taking place. Bangladesh in the 90s has seen the governments of both Khaleda Zia and Sheikh Hasina. During Khaleda Zia’s time itself, economic interaction had been focused on but bitterness persisted over some bilateral issues.

Since the assumption of power by Sheikh Hasina, a marked improvement in bilateral relations has taken place. While many bilateral issues have been addressed, this has not in any way reduced the threat of ISI elements operating in conjunction with the fundamentalist elements in Bangladesh to carry out anti India activities. Again it is necessary to differentiate between these elements having anti India designs and the government of Bangladesh following such anti India policies. For, presently Sheikh Hasina’s government itself is preparing to crack down on these radical elements and her observation on the role of courts in providing bail to such elements thereby hindering the government’s efforts has drawn a lot of flak from a certain section in the judiciary.31 Sheikh Hasina has repeatedly said that the country needs to fight the threat from the anti liberation forces who are hand in hand with the fundamentalist forces.32 In this sense society has within it fissures which enable the anti India elements to carry out their activities.

Though it is ten years since democracy was established, the institutions have not been strengthened. The party in opposition has failed to play a constructive role and for most of the time since democracy was established the proceedings of the parliament have been boycotted for one reason or the other.33 Instead, to put forward its viewpoint, it has called for frequent hartals and strikes. The political intransigence among the two main parties, BNP and Awami League has adversely affected the investment environment in Bangladesh. The business community has highlighted this aspect and called for the two main political parties to resolve their differences. This instability is a cause of concern for it hinders economic activities and development and is a perfect ground for the spread and consolidation of fundamentalist elements. Already reports speak of the Taliban having many supporters in Bangladesh.34 These realities have to be taken note of, for the government in Bangladesh itself is fighting these forces who are either directly or indirectly supporting the anti India elements.

It is in this context that for India while cordial bilateral relations exist so do security concerns linked with the neighbour.


Cordiality has marked Indo-Bhutan relations and Bhutan has been sensitive to India’s security concerns. As stated while the 80s witnessed bilateral differences between India and the other neighbours, Bhutan was an exception. India had played a major role in ending Bhutan’s isolation policy in the international arena and continues to be an important factor in its economic development.35

However, ironically it is the 90s which have brought in important security concerns for India from Bhutan and the two countries have failed to develop effective mechanisms to meet them. Since the mid 90s the ULFA and BODO militants have set up camps in southern Bhutan. While they pose a threat to Bhutan’s internal security, these militants are also able to escape Indian security forces and frustrate their attempts. The issue has come to gain priority in the bilateral agenda but has so far defied any effective solution. On its part Bhutan has held direct talks with the militants and asked them to leave its territory. Presently, Bhutan is training its forces to combat any eventuality.36 But surely this alone would not be enough for the militants themselves are well armed and organised. On the other hand any unilateral action by India would be construed as a violation of the territorial integrity of Bhutan. Concerns for India of possible instability in Bhutan also arise because the latter is going through demands for democracy within the kingdom. Added to this is the unresolved refugee issue.

Thus, Bhutan itself is going through a period of internal strains. Like in other cases the anti India elements operating from Bhutan should not lead one to conclude that the Bhutanese government itself is pursuing any anti India policy. The challenge before the two governments is to devise mechanisms to meet the challenge of these militants.

Sri Lanka

The ethnic crisis in Sri Lanka and the manner in which it will be resolved has important security implications for India’s internal and external security. While in the 80s Sri Lanka took the help of extra regional powers overlooking India’s security interests, this is not so presently. As a policy, India taking the sensitivities of its own Tamil population into consideration, does not export arms to Sri Lanka, so the island nation has to import arms from other sources. However, given the cordial relations between the two countries in the nineties especially since the assumption of power by President Kumaratunga, the two governments are in regular interaction so that the actions of the other are not misunderstood. India supports the devolution package of President Kumaratunga as a good basis for conducting negotiations with the Tamils.

India’s policy towards Sri Lanka was put to test following the recent crisis in the island nation in April this year. The crisis brought to the forefront, the stresses and strains which Indian foreign policy faced from domestic forces, especially the Tamil interests from Tamil Nadu.37 In this context the instability in Sri Lanka, pending a solution to the ethnic crisis, is a cause of concern for India. An additional concern are the activities of LTTE which since the 90s have expanded to trading in narcotics and arms also. Their linkages with the other non state actors in India are an issue of concern for India. Thus, concerns for India have increased in the 90s, which however does not mean that the government of Sri Lanka in anti India.

Looking Ahead

The 1990s have brought with it a new set of security concerns for India. Most of these challenges which India faces are a cause of concern for the neighbours themselves. With cordial bilateral relations in place, the task before India and these four neighbours is to develop effective mechanisms to face these challenges.

In August this year Nepal’s Prime Minister Koirala visited India and a wide range of issues were addressed. It was agreed that the 1950 Treaty will be reviewed by a committee of the two countries. Other issues of agreement included flood control, energy cooperation, border management etc.38 Thus, a wide gamut of issues were addressed and the relations were put on a firm footing.

During the crisis in Sri Lanka in April this year the Indo-Sri Lanka relations were put on test. While India ruled out military intervention, it categorically stated that it was not for a separate Eelam and there was no question of recognising such a state. India reemphasised its commitment to a sovereign, united and multi-ethnic Sri Lanka where all minorities, especially Tamils could live with dignity and without fear. India also pledged an amount of $100 million and supplies of wheat, rice and sugar on counter trade basis.39 Though India ruled out military intervention, it stated that it was ready to render humanitarian assistance if and when sought for. Further it took other important measures to safeguard its own security, which were also intended to indirectly assist the Sri Lankan government. For instance the Indian Navy and Coast Guard intensified their vigil in the coastal areas to prevent possible infiltration of Sri Lankan Tamil militant groups in the guise of refugees; prevent smuggling of petroleum products, medicines and life saving drugs to Sri Lanka which would be of assistance to LTTE. Such steps were aimed to boost the morale of Sri Lankan forces in the peninsula which would reflect in the battlefield in military terms.40

It is clear that India is stressing on holistic relations and not on a single security agenda. Such an approach also becomes important in a scenario where economic measures have their own limited impact. It is seen that one of the instruments which India has used to maintain cordial relations with the countries identified are economic measures like aid, trade and investment. Non reciprocity has always been a major aspect of these measures. This was specifically stressed under the Gujral Doctrine. However, inspite of the economic inducements, mistrust and mutual suspicion had been the rule rather than the exception in these relationships. Studies have shown that economic inducements from the sender to the target, even in an asymmetric situation, will not in itself result in changes in the policy of the target towards the sender.41 Some scholars believe that economic instruments work best when as a result of the sender’s measures, interest groups are created in the target state which are powerful enough to influence the target state’s foreign policy in favour of the sender. Though India has always used economic instruments as part of its foreign policy it has not been successful enough to influence the neighbour’s foreign policy towards its interests.

One of the reasons for this could be that the industrial base of these countries is very narrow. In this sense the size of the elite which has economic power and benefits from India’s measures is limited. The aid given by India goes into projects which do benefit the common man (bridges, hospitals, educational institutions etc.), but then he is also treated to a lot of anti India propaganda. He is therefore not an effective influencing factor in favour of India.

In the absence of an effective economic elite, the manner in which these economic measures can work in favour of India is when those in power (the political elite) in the neighbouring countries are able to use it (the aid, investment, transfer of technology which India gives) effectively and thereby have a vested interest in continuing the interaction with India. In this sense, it is the political class which becomes important and not any economic interest group. The political class in turn has many other domestic interests to look to and cannot be seen to be favouring any one country. Such a policy would be detrimental to its own future and would face criticism from the opposition groups that the government was toeing a particular country’s line. The political class therefore is also ineffective in responding to positive economic measures. Thus, there is a limitation to the Indian government’s policy of influencing through economic measures as no vested interests are created, given the present economic state in the neighbourhood.

With regard to Bhutan, the economic aid given to financing its five year plans and the hydropower projects, do not create any vested economic interest group which would persuade the government to follow a pro-India policy. But the aid given helps the political class to maintain internal stability through economic development, etc. While with Bhutan, given the nature of its polity and the level of economic development, India is able to make effective use of its economic instruments, the same is not the case with the other countries. Economic inducements in such situations, therefore, have a limited effect in influencing the neighbouring countries’ foreign policies. It can only be one of the elements in a broad policy and its role should be critically weighed.

The challenge before India is to create effective mechanisms to meet the new security concerns which have arisen in the 1990s. This can only be done with the cooperation of the neighbours. The positive linkages in the bilateral relations have to be utilised to devise such mechanisms. Commensurate with the importance these countries hold for India, the relations need to be conducted at a high level. Many committees are set up but often meetings are not held relegating the very purpose of their existence. Such committees will play a crucial role in resolving disputes on priority, for a delay in their resolution could lead to a revival of past mistrust. Further, these high level committees will enable decisions to be taken by the two countries jointly so that an impression does not arise that India is forcing itself on them.

The ground situation in all these countries is different from what existed fifty years ago. Democracy, communication, globalisation, technology—have all increased the awareness of the people. Foreign policy has to be sensitive to these changes. The inability of the media to appreciate that the presence of anti India elements does not necessarily mean that the government in the neighbouring countries is anti India is creating great harm to the relations. This subtle nuance makes all the difference between a friend and an enemy. One should not forget that the period of mistrust has been longer than that of trust and while making forward movements is difficult, slipping is very easy.

In all these states the non state actors have become a real threat and they do not respect any national boundaries. They can, however, be tackled only with the cooperation of the neighbours. This cooperation has to be on a continuous basis. This makes it imperative that human resources skills be developed in the neighbouring countries so that they can tackle some of these challenges effectively on a permanent basis. Here the SAARC forum can be effectively used to coordinate such activities. Even if these countries are open about taking India’s assistance or opt for any joint operations it cannot be carried out on a regular basis for, otherwise the governments there would lose credibility to its own people. Moreover, the nature of the problem being such, it cannot be weeded out in a one time operation. Thus border management becomes an essential input into policy formulation. In developing such skilled personnel and sharing intelligence information, either bilateral or regional arrangements can be formed.

Compared to the scenario that existed earlier, the 1990s have definitely seen an improvement in the bilateral relations with the neighbours under study. If the coming decades are to witness much closer cooperation then effective mechanisms will have to be devised to meet the new security challenges. The greatest challenge may lie in devising these mechanisms.



1. I.K. Gujral, A Foreign Policy For India, (External Publicity Division, Ministry of External Affairs, Government of India, 1998).

2. Very briefly, some of the factors contributing to their geo strategic importance are—Nepal has the Tibetan region of China to its north and on all the other three sides is bordered by India. Nepal is an important factor in India’s defence of its (India’s) northern frontiers; Bhutan also has China to its north with India to its South. China again becomes a major factor which makes Bhutan geo strategically important for India. Both Nepal and Bhutan were considered geo strategically important even by British India; India shares with Bangladesh long borders of around 4000 km. They border the sensitive insurgency infested states of northeastern India. Bangladesh also opens into the Bay of Bengal. There are apprehensions that through Bangladesh any third party may try to access the Bay of Bengal. Thus it becomes a major factor in India’s naval security; the island nation of Sri Lanka at the closest point is only 22 miles away from India with the Palk strait separating them and like Bangladesh it becomes an important factor in India’s coastal and oceanic defence policy.

3. For details on security perceptions of the two countries refer, Padmaja Murthy, "Indo-Sri Lanka Security Perceptions: Divergences and Convergences," Strategic Analysis, vol. 24, no. 2, May 2000, pp. 343-360.

4. Sangeeta Thapliyal, Mutual Security: The Case of India-Nepal, (New Delhi: Lancer, 1998), p. 132.

5. For details on the differences between India and Nepal on the renewal of the trade and transit treaties in the pre-90s period, refer Avtar Singh Bhasin (ed.), Nepal’s Relations with India and China, Documents 1947-1992, vol. 2, (Delhi: SIBA EXIM, 1994).

6. Refer for details on the assistance which Sri Lanka took from various countries, S.D. Muni, Pangs of Proximity—India and Sri Lanka’s Ethnic Crisis, (New Delhi: Sage, 1993), p. 16.

7. Refer for details, various issues of the Annual Reports, Ministry of External Affairs, Government of India.

8. Ibid.

9. According to Ministry of External Affairs, GOI note on Nepal, August 1999. The negative list includes three items namely alcoholic liquors/beverages and their concentrates except industrial spirits; perfumes and cosmetics with non-Nepalese/non-India brands; and cigarettes and tobacco.

10. Refer Ministry of External Affairs, Government of India website, <>

11. n. 9

12. For details refer the Indo-Sri Lanka Free Trade Agreement.

13. n. 10. To provide access to Bangladesh products in India tariff concessions on 513 tariff lines were announced under SAPTA effective from March 1, 1997. Concessions range from 25-50 per cent of the applicable MFN rates. Concessions or more than 200 tariff lines have been extended under the third round of SAPTA negotiations. An agreement to extend a credit of Rs.200 crore to Bangladesh was signed in June 1999.

14. n. 7. It is interesting to note that Bhutan gets more than 50 per cent of aid given by India to the third world countries.

15. Refer People’s Review (Internet Edition), February 17-23, 2000.

16. Nepal’s stand is that India should get involved since it is through its territories that the refugees enter India. However, India’s stand is that it is a bilateral issue and should be resolved by Bhutan and Nepal themselves.

17. P.P. Singh, ULFA, BODOS now a threat to the King, The Economic Times, July 10, 2000.

18. The Bangladesh Observer, August 23, 2000.

19. Refer for details, Annual Report, 1993-94, Ministry of External Affairs, GOI.

20. For details of the text of the resolution passed by the Bangladesh Parliament and the subsequent Indian objection to it, refer to Documents 185, 186 and 187 in A.S. Bhasin ed., India-Bangladesh Relations 1971-1994, vol. I (Delhi: SIBA Exim Pvt Ltd, 1996) pp. 321-324.

21. n. 7.

22. Nepal has an estimated potential to generate 83,000 MW electricity. Refer to the Indo-Nepal Joint Statement released after Minister of External Affairs Jaswant Singh’s visit to Nepal in September 8-11, 1999, Strategic Digest, vol. xxix, no. 11, November 1999. Also refer joint statement following Koirala’s visit to India in August 2000, in The Rising Nepal, August 4, 2000.

23. The Bangladesh Observer, May 30, 2000.

24. The open borders exist because according to Article 6 & Article 7 of the 1950 treaty the two countries have decided to give national treatment to each others citizens. Implied in this clause are a series of benefits to the citizens of both the countries. To facilitate effective implementation of these benefits, there is free movement of people across the Indo-Nepal international borders. This means that there are no visas and formalities and other regulations and it is as good as travelling within areas of the same country.

25. For further details refer, India Today, June 12, 2000, pp. 26-29 and also <> For a Nepali viewpoint on the report in India Today about ISI activities refer Prakash Dahal, "Nepal Game Plan—Pathologically Malicious," The Rising Nepal, June 19, 2000. Reacting to the report PM Koirala said that it did not have any authenticity when looking at the names of those implicated. He termed the report as false, baseless and malicious. Nepal officially stated that it is committed to its policy of not allowing Nepal’s territory to be used against any friendly country. For details refer, The Rising Nepal, June 7, 2000.

26. The Rising Nepal, August 12, 2000.

27. The Economic Times, June 14, 2000.

28. For details on the detrimental effects in terms of loss of life and property that terrorism has had in Nepal refer The Rising Nepal, June 12, 2000. The report refers to the statement made by Minister for Home, Govind Raj Joshi to the House of Representatives. According to it, a total 1,366 persons have died and property worth over Rs. 180 million has been looted so far in terrorist activity since Phagun 1,2052 BS. Also refer The Rising Nepal, May 13, 2000, for PM Koirala’s views on mobilising the army to tackle the Maoist problem.

29. The Rising Nepal, August 12, 2000.

30. Speaking at an interaction programme on the role of law makers in the promotion of parliamentary norms and values held under the joint auspices of the Law, Justice & Parliamentary Affairs Committee of the House and the Nepal Law Society in Kathmandu on August 11, 2000, PM Koirala said, "Distortion and anomalies have been growing within Parliament as a result of the entry of the smugglers. They are coming to the Parliament by spending stupendous amount and the only thing they want is to earn money by any ill means, for which they need to become Minister and then PM". The PM suggested that the major political parties should chart out a code of conduct to end the dependency. For details refer The Rising Nepal, August 12, 2000.

31. Refer for some views on this issue, The Bangladesh Observer, August 10-12, 2000.

32. Refer The Bangladesh Observer, August 14-15, 2000 for PM Sheikh Hasina’s statement on Martyrs Day, (death anniversary of Bangabandhu Sheikh Mujib) about fundamentalist forces.

33. Refer for details on the circumstances which surrounded the opposition MP’s to join the Parliament for a brief period on June 20, 2000 breaking a year long boycott to avert the constitutional provision of losing membership. The Bangladesh Observer, June 21, 2000.

34. Haroon Habib, "Hasina declares war on Jamaat," The Hindu, July 25, 2000.

35. For details on the manner in which Indo-Bhutan relations have developed, refer Ravi Verma, India’s Role in the Emergence of Contemporary Bhutan (Delhi: Capital Publishing House, 1988) and Manorama Kohli, From Dependency to Interdependence—A Study of Indo-Bhutan Relations (Delhi: Vikas Publishing House, 1988).

36. P.P. Singh, ULFA, BODOS, now a threat to the King, The Economic Times, July 10, 2000.

37. Padmaja Murthy, "Sri Lanka’s ‘War Within’ and India", Strategic Analysis, vol. 24, no. 4, July 2000, pp. 773-796.

38. Various issues of The Rising Nepal in the last week of July 2000 and the first fortnight of August 2000.

39. The Hindu, June 13, 2000.

40. The Hindu, May 13, 2000.

41. For details on various viewpoints on the relation between economic relations and security concerns, refer Jean Marc F. Blanchard, Edward D. Mansfield and Norrin M. Ripsman ed., Security Studies, vol. 9, no. 1/2, Autumn 1999-Winter 2000.