Economics: Strategic weapon to resolve bilateral issues

Discussion in 'Foreign Relations' started by Yusuf, May 14, 2012.

  1. Yusuf

    Yusuf GUARDIAN Administrator

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    Indias relations with its neighbours has been acrimonious since independence. Leaving aside Pakistan and China for obvious reasons, India has had issues with its smaller neighbors too with Bangladesh, Sri Lanka and to some extent Nepal.

    India was the reason why Bangladesh came into being but we could not have a friendly neighbour on our east. Part of the reason is the sharing of water resources, particularly the Ganga waters. The other reasons are illegal immigrants and terrorist camps which are trained against India especially the HuJI which has been responsible for several terror attacks in India.

    With Sri Lanka, India’s relations have been guided by the Tamil issue. This has been exasperated by the Indian Tamil sensitivity towards the issue.

    Although all these issues cannot be solved easily, one thing India should strive to do is make these countries economically depended on India which will give India a lot of leverage to settle many of the issues.

    India should open credit lines to all these countries including Maldives and Myanmar for their industries. We should help their local industries like jute in Bangladesh, tea in Sri Lanka and also become the largest buyers for such goods. India should start projects in those countries using local vendors and labour which will earn India goodwill by directly connecting with the local population. Compare this with projects undertaken by China in countries like Sri Lanka where they get everything from screws and screwdrivers to heavy machinery and labour which has left a feeling of resentment among local population which has not been able to prosper in spite of some major projects being executed. India should also work out free trade and free movement of people for business purpose.

    India will be then able to develop some leverage with these countries which will be economically depended on India and use it to resolve various issues that have been troubling bilateral relations. India does not much leverage right now especially with Bangladesh and Sri Lanka playing the China card which is a shame considering the size and power of India next to their doorstep. If India economically takes over these countries, we will be able to stop the Chinese from making similar gains and encircling India and using them in a potential future conflict.
    Economics: Strategic weapon to resolve bilateral issues | Sarvatra Vijay
     
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  3. panduranghari

    panduranghari Senior Member Senior Member

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    USA has resolved most bilateral issues by economics. If the countries they are dealing with do not agree, they get in the IMF and WB and try to kill the local economy. If that does not work, then the war machine is always active.

    With India or China or Russia or Canada or Australia, the size of the landmass itself prevents the possibility of being blackmailed by economic warfare. However, its still possible with corrupt politicians.

    With small countries we must make them subservient to our interests by investing heavily there. China is doing it well. Hats off to them
     
  4. ice berg

    ice berg Senior Member Senior Member

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    Two words. Soft power.
     
  5. ajtr

    ajtr Veteran Member Veteran Member

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    India can extend the credit-line to Pakistan too and take up infrastructure /developmental work in pakistan too.Likewise BCCI should include Pakistani city club t20 teams into ipl and play those matches in pakistan. Projecting india's soft-power in pakistan is the key here.
     
  6. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    Pakistanis should stop begging for cricket from India. Nobody wants to play in Terrorist land.
     
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  7. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    Well the article actually mentions to leave Pakistan and China aside.

    I have also held that we should be focusing on countries that we DON't have a problem with rather than Pakistan. Bangladesh, Nepal, Afghanistan and Myanmar are all crucial countries where GoI and corporate India should be incentivised to build strong business linkages.

    The first stage of our aim should be that we should aim to become the biggest export market of each of the SAARC countries where atleast 30-40% of their export earnings come from India. The second stage should be to become the biggest trade partner where the combined import/export trade with India is highest for every SAARC country. Right now, many of these SAARC countries depend on either the US or China for their bigger markets and this has to change.
     
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  8. Yusuf

    Yusuf GUARDIAN Administrator

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    Ejaz, the article has been written by me on my blog.

    I was talking about having acrimonious relations with our neighbors. Pakistan and China have been or enemies. But it's the smaller countries who have acrimonious relations with us that need to be tackled. The thing is, these countries think we will swamp them with our goods whereas we can do the opposite and make them completely dependent on us.
     
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  9. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    Another good article Yusuf, and it takes up the case of our neighborhood objectively.

    Economic integration is a must and it should not just remain limited to trade but also as a mode of investments flowing out from the Indian private and public sectors. Let the big names like Bharti’s, TATA’s look at sourcing bigger opportunities globally but make the medium scale enterprises look at SAARC as an immediate expansion opportunity for their businesses. Employment generation in any country and more so in the Indian sub continent is the key because this region remains one of the poorest and all these countries’ governments are desperate for such solutions, and if we can fill up the space of employment generators, not only the respective governments but the populace will also have a favorable outlook towards India.

    The most important part, for us, as a country, is to realize is, if we are to surge ahead and fulfill our dreams of being the power that we envision, then that can’t happen in a neighborhood which is economically and politically a failure, else we will have a stunted growth. Another aspect, this region as a whole has immense opportunity and that includes Pakistan, and they will grow, if not today but surely sometime in future, so it is in our interest that we are well placed to make the most of the opportunity and if for now it means it will come in trickles, so be it.

    I feel, if we are to make any significant move in region then Pakistan cant be ignored and they have to be a part of the whole deal. While dealing with Pakistan we do need to work on different regions, fact is not every part of Pakistan is hostile to India, just the way there is Punjab and rest of Punjab divide in the hate directed towards India, similarly there is a urban and rural divide, and there remains significant opportunities for us, also if we can penetrate this market, the saner voices there are only going to get louder, which remains beneficial for us, that also doesn’t mean we fall head over heels for them and all they do should be fine or we lower our guard as keeps happening.
     
  10. Yusuf

    Yusuf GUARDIAN Administrator

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    Thanks Ritesh.

    The reason why Pakistan in its current form has to be left out is that any trade liberalization or investment from India will be diverted for use against Inida. Be it terror or even buying war machines. We cannot finance them to fight against us. Its like what the US is doing. Financing Pakistan and in return they are getting screwed in Astan.
    I am more worried about the smaller countries and how we can cultivate economic extensions of India in these countries.
     
  11. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    @Yusuf
    Agree with your views on this Yusuf and a nice blog you have going there. I wasn't aware of that

    And yes I agree as I mentioned that we should become the biggest export markets for SAARC countries as you mentioned. When most of the export earnings for our neighbours come from India, they would automatically be more dependant on India.

    @thakur_ritesh
    I also think that while the baby steps with Pakistan on trade are ok, the real focus should be on SAARC minus Pakistan. Right now Pakistan has the second biggest GDP in SAARC and it feels that it is competition with India. When after a deacade or two, Bangladesh GDP closes in on Pakistan or even surpasses Pakistan and the per capita incomes of all other SAARC countries is more than the Pakistani per capita income, this will inevitably for the Pakistani elite to make hard decisions on why they are taking a hostile stance with India and make them more amenable to decent negotiations.

    When we do trade with Pakistan, to avoid the problems that Yusuf mentioned we should be smart with our trade policies.

    For example, we should make a policy that products manufactured or produced in Balochistan, NWFP/FATA and POK will be imported into India tax free while applying regular duties on products produced in Punjab and Sindh. This will create a closer connection with the people living in these backward areas with India as we become a agent of job creation there. Then as you mentioned, we can give incentives for rural produce in Punjab and Sindh were most of the poor live.
    At the same time we restrict or de-incentivise trade with companies and coporates that have close links with the Pakistani state or the military. For example, GoI should promote private trucking companies mainly owned by Pashtoons rather than the NLC which is an Army run company and has 70-80% of the transportation business in Pakistan.
     
  12. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    Yusuf and Ejaz,

    A question comes to my mind. Can India isolate Pakistan economically? Can we stop the US, the KSA, the EU, the PRC from handing out economic dole outs to them? I think, no. If we have been unsuccessful in getting their military supplies blocked, it looks unlikely we can do much in economic terms.

    Look at it this way. Pakistan will grow irrespective of us wanting or not wanting them to grow or irrespective of our liking or not liking their growth. Even today they are growing at over 3% YoY, which is happening without our direct participation and with the ongoing WoT.

    The point here is, once the WoT is over, they will get the investments, the trade will pick up and all this will happen without our involvement, so will the revenue generation pick up and so will their defence budget, so why not we be in a situation where to an extent we can influence them, where we are the ones investing, trading and our companies making the most of the opportunity than someone else do and walk away with the money. Yes, they will make money off yes, but if we get in, India is bound to make much more off them and then we walk in with an added advantage where we can have a good enough voice through certain sections and their trade bodies would be another one talking on our behalf other than their usual “civil society” of journalists and left leaning liberals.

    Then take this a little further, when official and unofficial trade between the two gets clubbed, we are talking about something in terms of 12-15b usd, with the figures heavily skewed in our favor and this figure dwarfs what they do with china which should be around 10 b usd, the opportunity for India remains huge. The direct impact of trade is employment generation for Indians, and also the revenue generated, and all of it does benefit the indian exchequer and the economy.

    Look at the bigger picture, India needs a peaceful rise, not one where we are at the brink of a war with Pakistan all the time, or we even end up having a war with them, which then affects the business and investment sentiments in the country. If we have a relationship high on rhetoric, no one would be happier than the Chinese, why do we give the Chinese what they want? Through trade, we can do to Pakistan what China has done to us, and Chinese have been very pragmatic on trade with their neighbors, no matter who they are. We do need to take a lesson from them, than play their game, for them and on their terms.

    Think about it, why was the NDA government keen on talks and trade with them even though we had Kandahar, Kargil, the Agra fiasco, the parliament attack all happening during the NDA days.
     
  13. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    ^^^ I actually don't have a problem on trade with Pakistan. As you mentioned, most studies on this have shown that India will make a surplus in any type of trade scenario with Pakistan. What I would like is smarter trade policies as I mentioned in differntiating different aspects and parts of Pakistan. And MORE focus on SAARC countries other than Pakistan

    At present, IMO we spend too much time on Pakistan at the detriment of other SAARC states. For example, look at our ties with Bangladesh and how the media covers it. Any hint of good ties with Pakistan gets huge coverage. Even a food "fight" between India and Pakistan is a big deal. Why don't we invite say Bangladeshi stars or chefs or business delegations and cover these events in the media. Its because Indo-BD good ties are just not "sexy" enough for our media.

    What I would like is our policy makers and private sector spend double the effort in all these other SAARC countries for the next decade or two to visibly show Pakistanis the benefit of good ties with India.

    As of now, the biggest export markets comprising around % for Pakistan is EU, US followed China at 22%, 18% and 8%. India despite its small trade comes in the top 10 trading partners of Pakistan.

    BD on the other hand has export markets for just EU and US at around 70% because of its under-developed status. As this under-developed status is removed in the coming years, India has an excellent oppurtunity to garner a bigger percentage of the export share for BD. The same applies to other countries.

    Our trade share with most of the SAARC countries is in the 2-3% range. This has to increase until atleast 40-50% of the exports of the SAARC countries go to India. These countries are closer to us than EU/US so there should be a definite advantage in transportation cost. Then there is no reason why our share of the trade should be just single digits while countries as far away as US/EU have the massive pie of the export share of these countries.
     
  14. Yusuf

    Yusuf GUARDIAN Administrator

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    Ritesh, if you have seen my blog, I have written why there can be no peace with Pakistan. Even if there is all the trade as CBMs, they will remain scheming against India. It's inherit in them as its not going to change no matter what. It will sound like an old record but then I will say it again, Pakistan in its current form is not good for India.

    Ejaz, having a separate policy like goods from Balochistan being duty free may sound good but it's not implementable for two reasons, one Pakistan will see the obvious reason an not agree and two India will still end up filling the treasuries of Pakistan.

    Understand what I have also written in my article. We help these countries develop industries by giving them credit and also buy the goods made in those factories. Creation of capacity is what I envisage. Brings goodwill from the native population which becomes a direct lobby for us against their government playing any games against us. Same thing is not possible with Pakistan whose entire population, well vast majority is against India and India cannot leverage them at all.
     
  15. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    @Yusuf

    I don't see having seperate policies for sub regions and rural Pakistanis as a problem. This should come as a complete package and be shown as a developmental tool and publicised as much as possible. If the US and EU can give special EPZ access to the FATA region to imrpove the economy there, why can we? Shouldn't Pakistan be happy that we are trying take the people out of Balochistan our of poverty? Even if Pakistan does not allow actual implementation of this policy, it will be a win for us due to the publicity it generates in favour to us.

    Also it is important to realise which part of the Pakistani public is favourable and not rather than say entire Pakistani population is against India. At present almost all surveys have consistenly shown that US is considered the number 1 enemy as of now.

    Also, our impression that the middle class, clean shaven, wisky drinking "moderate" is less anti-Indian than his poorer, slightly more religious or devout counterpart also needs to be revised.
    Christine Fair did an extensive survey on various aspects around this and it is worth a read on what she wrote on this
    Pakistan's Middle Class Extremists | Foreign Affairs
    More details here
    http://www.princeton.edu/~jns/publications/Understanding Support for Islamist Militancy.pdf
    and
    Poverty and Support for Militant Politics: Evidence from Pakistan by Graeme Blair, C. Fair, Neil Malhotra, Jacob N. Shapiro :: SSRN
     
  16. Yusuf

    Yusuf GUARDIAN Administrator

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    Ejaz, I didnt find the relevance of that article you posted with the discussion at hand. I have never said that the well off clean shaved middle class Paki is less anti Indian. In fact they are more so. I mean Partition was itself a result of some of the well offs wanting to protect themselves and their power. And yes though not a good example to take but those on Paki forums are part of those well off elite and we know their thoughts towards India.

    I am not a hawk on Pakistan without a reason. These very elite will benefit from Indian investments and use against us.

    What I want is the masses in Bangladesh, SL to be well inclined towards us. Example is not far. Look at Afghanistan and what India has done there and how well disposed they are towards us.
     
  17. panduranghari

    panduranghari Senior Member Senior Member

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    Only possible by 3 things I mentioned in the second post of this thread. By emulating USA ( and in some extent as China)

    Invest heavily in the other economies
    Have a very strong presence on the global stage and have stakes in the organisations that matter
    Have a very strong military.
     
  18. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    @Yusuf

    What I was trying to show is that trade and economic relations can be used as a wedge to separate or incentivise moderate behavior among the Pakistani public.

    We start by incentivising trade in those areas were there is less anti-India feelings - Baluchistan, KP and rural Pakistan. This way we don't benefit the elite. I understand you saying its difficult to do, but I don't think its impossible.

    Being hawkish on Pakistan is the default position. But with trade we should be looking at smart hawkishness rather than being a hawk for its sake along. The findings by Christine on which areas should be targeted to benefit in India's trade relation was what I was trying to highlight.


    As I mentioned earlier, of course I do agree that more focus should be in benefiting the other SAARC countries. No argument around that
     
  19. SLASH

    SLASH Senior Member Senior Member

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    I dont want to sound like a Paki but we need to find a solution for kashmir before we have any further interaction with Pakistan. We need to work on the Mush Solution again. Get free transit to Afghanistan and CAR via GB, while Pakistan can have secured water. Our current position in Kashmir is of no use. Kashmir valley though beautiful does not have much to offer. We need to get access to CAR. We are not going to win GB in war without the risk of a nuclear attack.
     
  20. Yusuf

    Yusuf GUARDIAN Administrator

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    1) Right. Thats what i suggested.
    2) We do have our say in IMF and WB but we really dont need them in our bilateral relations with the countries i have mentioned apart from voting for some loans they may need. Point number 1 takes care of our interests
    3) We have decent enough for the region in question.
     
  21. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    Ejaz,

    Yes, and absolutely no disputing the point.

    The stress has to be on other neighboring countries more and there does seem to be a concerted effort on part of UPA II on the same, though our effective progress gets hampered by too much bureaucracy, as a result delay in implementation in what has been committed, which in turn has an effect on the trust on which these relations get build on.

    Ideally we should be looking at FTA with all of them or move to the next level where we are ready to accommodate their exports to much greater levels, and we in turn create space for our goods and services. Factually something like this should be happening at a much faster pace than has been. And to make this much more meaningful we need to push manufacturing much more in India so that we can create an alternative to the Chinese imports for these countries. And as you have highlighted, we do need to become the center of their economic activity and the same needs to be extended to ASEAN through the NE.

    Yusuf,

    Fair enough, we might never have peace with them and it is perfectly fine, but there is still room between no peace and no war and much can be done and much can be achieved in between. It is this in between space that I see can be effectively filled up and we can in turn be the real beneficiaries.

    If China can do a Taiwan with all the hostilities, we too can repeat the same, may be not to the same scale but certainly to the scale where we are the net gainers and where Pakistan doesn’t get the room to act as a mad dog, where checks get built within Pakistan and we make use of those leverages to whatever extent, whatever those might be.
     

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