"India's Unstable Neighbourhood: Strategic and Economic Implications"

Winner Of CSC June 2022 Essay Competition : Gaurav Kumar

Decolonization of South Asia was done in the mid of the 20th century. It led to the emergence of post-colonial states like India, Pakistan, Bangladesh, Sri Lanka, Myanmar, etc. Most of the post-colonial states in South Asia faced instability at home. The trend of instability still continues in the states of Pakistan, Sri Lanka, Myanmar, and Nepal, etc. It is well said that one country can't become great with its dwarf neighbours. Thus, for India to become a major power pole in world politics, its neighbourhood should be healthy.

Recent political instability in Pakistan, the economic crisis in Sri Lanka, the Anti-India campaign in Maldives and Nepal, the hardening of the Taliban in Afghanistan, increasing Chinese footprints in India's neighbours, etc. have posed a serious strategic and economic threat to India. In current scenario, the increasing crisis in neighbourhoods has become India's one of the biggest foreign policy challenges.

Instability in India's Neighbourhood

Instability in India's neighbourhood can be categorized into - Real and Constructive. It means one of them is due to structural imbalances and another one is created by the vested interests. Real instability is largely due to structural problems in the concerned state. For example, Pakistan is unstable due to an imbalance of power structure where the Army enjoys much more power than the civilian government. Probably, that's why the late Stephen Cohen, an expert on South Asia, in his book 'The Idea of Pakistan' says - "All countries have an army but Pakistan's army has a country". Additionally, Pakistan also follows discriminatory provisions in its Constitution that debar non-Muslims to become prime minister and president of Pakistan. Thus, Pakistan misses the significance of inclusivity that has the potential to create stable political affairs.

Similarly, China also suffers from the same issue. In the case of China, we can refresh the statement of Stephen Cohen - 'All countries have political parties that form the government of the day through electrocracy. But, the political party in China, the Communist Party of China has a country'. That's why China functions in an absolute manner. There are no competing political parties that could keep a check on tyranny. Its implications are seen in Doklam, Galwan, and the South China Sea.

However, some of India's neighbours face constructive instability. It means instability is either created by external forces or by internal politics. For example, currently, Sri Lanka is facing an economic crisis along with nepotism in domestic politics where almost all-important offices are occupied by the Rajapaksha family. Similarly, the forex reserve of Nepal is shrinking. Political instability still continues in Nepal over the development of the Constitution amid the influence of China. A footprint of the new Cold War is witnessed in Myanmar where the civilian government was toppled by the Tatmadaw (Myanmar's military). Similarly, an anti-India campaign was started in the island nation to incite hatred against the country.

Strategic Implications of Instability

Stable neighbourhood matters in the process of making a country great from a strategic point of view. India is a rising power in Asia but the biggest challenge is its unstable neighbourhoods. The decline of democracy around the Indian borders poses a serious strategic thrust in realizing India's idea of world order and impedes India's growth in geopolitics.

Apart from this, terrorism is another by-product of unstable neighbourhoods. Instability leads to unemployment and subsequently, it becomes easy to radicalize youth for terrorism as we have seen in the case of Ajmal Kasab in the context of the Mumbai Attack in 2008. Additionally, it created a loop of further deterioration in bilateral relations between the two countries.

On the other hand, when the neighbourhood is stable, it helps in eradicating terrorism through cooperation. For example, Bangladesh under the leadership of Sheikh Hasina and Myanmar helped India in countering terrorism in the north-eastern states of India through mutual cooperation. Similarly, India-Nepal has an open border. It provides an advantage in stability and possibly harms in case of instabilities.

From India's strategic point of view, Sri Lanka's location is very critical for India. The rising instability in Sri Lanka may have an adverse effect on the maritime security of India. Further, China’s “String of Pearls” constitutes India’s neighbours which may provide space for Chinese footprints that can potentially harm India strategically.

Economic Implications of Instability

Along with strategic implications, an unstable neighbourhood also poses an economic threat to India. The World Bank's report, "A Glass Half Full" points out that South Asia is the least integrated region in the world. Due to this, we miss economic opportunities. The World Bank reports that intra-SAARC trade is just 5%. While intra-ASEAN trade is 25% and 40% of EU trade happens within the EU. The liberal principle in international politics says that economic interdependence between the two nations reduces conflicts. Thus, there is a two-way relation between economy and stability in the region - Economic cooperation brings peace and Peace also brings economic cooperation.

Due to the same instability, in spite of having a direct border between India and Pakistan, they trade through third partners. It leads to a high degree of economic depreciation. Trade through third countries usually Dubai and Singapore - is currently estimated to be worth about $5-10 billion which is more than double to the bilateral trade between India and Pakistan. Instabilities in the neighbourhood may further deteriorate bilateral economic relations between the two.

Apart from these, there are chances of an influx of migrants in India. In the 1970s, India had witnessed a huge influx of migrants due to political instability in the then East Pakistan (Now Bangladesh). Similarly, due to instability in Myanmar, Rohingya Muslims came to India for shelter. On the same line, due to the economic crisis in Sri Lanka, large number of people came to the Indian coast. On the one hand, especially in the short run, immigrants can create challenges in local labour markets, potentially affecting wages and displacing some native workers who compete with them. Their arrival may also impose a short-term fiscal cost.

In case of instability in India’s neighbourhood, resources are diverted to non-productive areas like defence and security. An economic survey reports that maximum expenditure is done by India on its defence requirement.

India's Policy for Handling Unstable Neighbourhood

India has been trying to make the neighbourhood stable since its independence. The first PM of India tried to make the neighbourhood peaceful through promises - Panchsheel. This is deemed as the foundation of India's vision to neighbours even today. It asks for mutual respect for each other’s territorial integrity and sovereignty. It promises for non-interference in each other’s internal affairs. It asks to adopt mutual non-aggression and work for equality and mutual benefits. It promises peaceful coexistence so that we could work together for the benefit of mankind.

India advocates the policy of constructive engagement, despite such serious provocations as have been in the past (attack on Parliament, Mumbai terrorist attacks, etc.). It believes that violent retaliation and confrontation can only complicate the matters. This applies in particular to Pakistan- the origin of State-sponsored terrorism targeted at India.

Even the new political order of India has a greater focus on the neighbourhood. The incumbent government adopted the ‘Neighbourhood First’ policy in its first term. Its execution was seen in various events - first, during the Pandemic when India provided Hydroxychloroquine (HCQ) tablets as well as vaccines to its neighbour first. Second, India provided 250 houses to Rohingya Muslims in Myanmar. Third, amid the economic crisis, India announced to extend a $ 1 billion line of credit to Sri Lanka as part of its financial assistance.


India’s relations with its neighbours will depend upon developments in individual countries but also the broader trends which shape the region as a whole. India, being the pre-eminent country, will have to take the lead in forging closer links with its neighbours and forging a sense of South Asian identity.

India will need not only a different policy outlook but also human, diplomatic and financial resources to put in place policies which secure India by forging closer links with her neighbours at different levels. India’s delivery mechanism must be improved significantly if it has to earn the respect of its neighbours.