Most South Asian countries have had  substantial change internally due to political and/or economic reasons. With China also trying to persistently expand its arc of influence in South Asia, India will have to take the initiative so that it can retain its position of primacy in the Region as also countervail threats that turmoil in the neighbourhood brings

For much of the past few months attention has been focused on an imploding Pakistan. Imran’s arrest, the protests, his release, counter protests against the Chief Justice, his imminent rearrest have provided a drama that borders on the ludicrous. All this, while the country melts down economically and the Tehrik-e-Taliban Pakistan creeps inwards. But while Pakistan and neighboring Afghanistan are in turmoil as always, other nations in the region are going through their own economic and political travails. India has somehow weathered the storm. But while we can help provide some measure of calm, the instability of the neighborhood is bound to impact our long term economic and strategic interests.

The Eerie similarities of Afghanistan and Pakistan

Af-Pak has been clubbed together for over two decades now, and both Pakistan and Afghanistan are beginning to show the same characteristic. Pakistan is going the Afghanistan way very rapidly and its economic, political and social crisis has acquired dangerous proportions.

The gloves are off now with Imran Khan taking on both the Army and Shahbaaz Sharif’s government in a full-blown confrontation. The latest bout of arson by Imran’s supporters in the wake of his arrest has escalated the stakes. Neither the Army, Imran or Shahbaaz Sharif would be willing to back off now. In the general elections to be held in October, and assembly elections in Punjab and Khyber Pakhtunkhwa provinces-earlier scheduled in May, now postponed by the government – it is quite likely that Imran Khan’s Tehreek-e-Insaf party will have a landslide win, provided he is allowed to contest. But with 145 cases against him, the Army and the ruling dispensation will try to have him arrested and debarred from elections. That will enable the Army to bring in a pliant ‘selected’ government and maintain the same state of affairs.

And in all this political turmoil, the economy is in the doldrums Its GDP of $374 billion is growing at an abysmal 0.5 %; forex reserves will cater for just three weeks of imports, and inflation is galloping at an unprecedented 45%. Thousands are slipping into poverty every day, and this socio-economic churn is fertile ground for the Tehreek-e-Taliban Pakistan and their brand of radical Islam. While the Army trains its guns at Imran, the TTP has made deep inroads in Khyber Pukhtunkhwa and Waziristan, with an attack virtually every day. The fears of the TTP sweeping into the chaos of Pakistan – like the Taliban did in the turmoil of Afghanistan in the late 90s – is the greatest danger for Pakistan and the world.

Even the Taliban have expressed concerns that “the instability of Pakistan threatens the region” – a very telling statement coming from the very epicenter of terrorism. In Afghanistan, ever since the Taliban came back to power two years ago, they have gone back to their old ways of public floggings, executions, curbing women from education and jobs, and persecuting minorities. In spite of the medievalism, the law and order situation is under control (maybe because the Taliban itself had created the problem earlier). But the economy, cut off from foreign aid and its own impounded reserves of over $9 billion, is in shambles. The Taliban regime has still not been recognized by any nation in the world, and that vacuum is being filled by China and Russia. China has moved into Afghanistan and agreed to extend the BRI from Pakistan to Afghanistan. This could bring in some sort of infrastructure development into the ravaged country, though Afghanistan could pay the price later –as Sri Lanka and Pakistan did. They have also signed an agreement for oil and mineral exploration for the $ 1Trillion or so of minerals and rare earths that lie beneath its rugged mountains. China is creeping into Afghanistan the same way it crept into Pakistan, and ironically Pakistan is going down the same road as Afghanistan.

Sri Lanka – Peering at the Abyss

Much has happened in Sri Lanka, but little has changed. The economic crisis caused by years of political mishandling, unleashed an aragalaya – a people’s protest that forced President Gotabaya Rajapaksa to flee and brought in Ranil Wickremesinghe with a promise of change. But Sri Lanka remains the same. Rajapaksa is back from a brief exile, his close aides are in power, and the root cause of the crisis remains unaddressed.

The IMF has provided a temporary balm with a $3 billion aid package and India has chipped in with a $500 million line of credit and shipments of much-needed fuel and food. But the economy still remains battered. The IMF loan came with conditionalities that pushed inflation up to 35% and added to the unrest. Though tourists have started trickling in and exports have picked up marginally, no structural changes have been put in place to revive the economy. As Wickremesinghe himself admitted, the country would remain bankrupt till 2026, at least.

Sri Lanka’s problem lies with the massive external debt that it has accumulated to fund unviable projects like the Humbantota port and airport, which still attracts no ships or aircraft. It owes $7.8 billion to China, and though it has been offered a temporary debt moratorium, China will soon come calling to collect its debt – perhaps taking over a port or an airfield, or some measure of sovereignty. And the strangle hold that China has over Sri Lanka’s tottering economy enables it to enter closer to our own waters.

Bangladesh – The Economic Success Story Fades

Bangladesh had long been considered a haven of stability and progress, and its impressive growth rate of 7.25% in 2022 surpassed even India. Yet, if the protests that erupt across the cities are any indicator, that stability is being shaken. And the fact that it had to turn to the IMF for a $ 4.7 billion bailout, shows how close the economy has come to breaking point.

Bangladesh’s political and economic problems are interlinked. Sheikh Hasina’s fifteen-year- long rule, provided much stability, kept fundamentalists at bay, got the economy ticking and maintained a delicate balance between India and China. But the autocratic rule had its share of opponents – the most notable being Khaleda Zia of the BNP. With elections to be held in Jan 24, the opposition is out on the streets, protesting against favoritism and corruption in government. They are also pressing the demand that the government should resign, and give way to a caretaker government so that elections could be held in a neutral non-partisan manner.

The opposition is using the growing unrest in the wake of its slowing economy to rouse protests. Unfortunately, Bangladesh’s golden run seems to be slowing as its GDP dropped and foreign reserves fell to just $30 billion, its lowest in seven years. It received the first tranche of $476 million from IMF and like all IMF loans the conditionalities have added to fuel and food prices leading to rampant inflation. This unrest has been exploited by Islamic fundamentalists who are joining ranks with the opposition and slowly resurfacing.

And then, there is the growing China-Bangladesh closeness. China recently developed a submarine base, named BNS Sheikh Hasina, at Cox’s Bazaar. Bangladesh is emerging as China’s second largest defense customer and is getting increasingly reliant on Chinese hardware for its forces. Bangladesh has also received over $940 million of BRI investments – second only to Pakistan. But Chinese loans often have long term costs – as Sri Lanka and Pakistan have seen. Although India has offered $9.5 billion in concessional loans, we must do more to integrate them in the regional economy under the broad contours of the Indian Ocean Rim Association and BIMSTEC. Also, it is in our interest that Sheikh Hasina remains in power. A BNP government headed by Khaleda Zia can be quite antagonistic to India, as past events have shown, and can swing it out of our orbit.

Myanmar – The Uncivil War Continues

In adjoining Myanmar, the crisis that engulfed it ever since the Army coup of Feb 21, remains unabated. Two years down the line, Army Chief Min Aung Hlaing is firmly in power, there are no signs of the promised “free and fair elections.” The military continues it harsh clampdown using artillery and air power indiscriminately against protesters. Meanwhile a range of disparate groups have come together under the loose banner of National Unity Government and have waged a running fight against army rule for over two years now. In the civil war, that now rages across the nation, over 20000 have been killed, over 2 million refugees have been created, and the economy has tanked to a minus 18% rate of growth. And the use of force by the Tatmadaw is only increasing as it tries to suppress the unrest.

The Hermit Kingdom was just opening up and reintegrating itself with the world, when the military coup sent it back into isolation. Yet, Myanmar forms the land corridor from South Asia to the ASEAN nations and is essential to South East Asian connectivity. Its protracted civil war is acquiring dangerous ethnic lines with over one million Rohingyas fleeing the country. The military clampdown has restarted the insurgency in the border states of Kachin, Karen, Karenni and Shan and broken down the ceasefire between the ethnic Arakan Army and the military – adding to the state of internal war. India has good relations with their military – which has helped us against Northeastern insurgents. We could use our good equations to get some kind of pullback and hold them to their promise of holding elections and restoring democracy. Else, Myanmar could well go the way of North Korea.

Nepal and Bhutan

While most of the neighborhood is in churn, one major cause of concern is the setback in relations with Nepal and Bhutan. Nepal has been going through its perpetual political churn ever since it tried to rewrite its constitution in 2015. Since then, there has been a succession of governments led by the two major communist parties and the Nepali Congress. The latest general elections of Nov 22, brought in the Maoist leader Pushpa Kamal Dahal – or Prachanda – as the head of an uneasy coalition. His government was rocked when a major ally withdrew support and now holds on by a thread. This political uncertainty compounds the problems of the economy which has not really recovered from the COVID shock.

For India, the return of the communist government under Prachanda is not very encouraging. Under the previous regime of the Nepali Congress under Sher Bahadur Deuba, Nepal was more aligned towards India – as it has been traditionally – and relations were slowly coming back on an even keel. The China tilt is now returning.

China is fast making inroads into Nepal ever since it signed the Trade and Transit Agreement of 2016.  Since then, Chinese investments have continued to grow. The construction of the Pokhara airport, and the proposed Nepal-China trans Himalayan multi-dimensional connectivity system has boosted Chinese influence at the expense of India’s. Nepal-India ties have never really recovered from the blockade India imposed upon it in 2015-16, which made it turn to China for alternate means of connectivity. Besides that, the irritants of the disputed areas of Lipulekh, Kalapani, Limyadhura and Susta have never been satisfactorily addressed. India’s outreach has been made difficult by the game of musical chairs in Nepali politics. But we have to tap on to our historical and cultural ties to wean Nepal over – and Nepal must show an understanding of India’s security concerns. Projects like the Indian built Raxaul- Kathmandu railway line will help connect Nepal to Indian ports of Vishakhapatnam and Kolkata (which are just one third the distance of Chinese ports) and enable easy movement of Nepal’s imports and exports. The development of hydro-electric projects and the purchase of surplus electricity from Nepal, along with enhanced connectivity and people-to-people contact will also help significantly. Prime Minister Prachanda is to visit New Delhi in June, and that may help reduce some of the irritants.

Similarly, we have to work at maintaining the traditionally warm Indo-Bhutan relations, which were reaffirmed by the recent visit of King Jigme Wangchuk to New Delhi. India’s support to Bhutan’s infrastructure development – especially hydropower which forms the ‘cornerstone of Indo-Bhutan ties’ has been reinforced by the development of the Sonkosh and Panatsangchhu hydroelectric projects. ‘Transform Initiatives’ such as skilling, start-ups and education and the provision of a new Internet gateway will help put India back in the public eye for Bhutan.

But what is of concern is the China-Bhutan boundary settlement which proposes a demarcation of their border dispute by offering Doklam to China as part of a package deal, in return for concessions elsewhere. Given Doklam’s location at the strategic tri-junction with India and its proximity to the vital Siliguri corridor, it poses a grave situation. India’s security concerns have to be taken into consideration for any such deal, else China could present a fait accompli at India’s expense.

India and the Region

The common thread in the neighborhood has been China’s slow creep into the region. It is visible in Af-Pak, Sri Lanka, Bangladesh, Nepal and Bhutan. And all this while, the tensions along the LAC, which have been going on for three years now, remain unresolved.

Fortunately for India, the economy is holding up well and there is political stability. In spite of occasional eruptions, relative peace remains. We are in a position to provide much needed stability and connectivity to the region. But as China comes closer, the struggle for supremacy will only increase, and the entire region will be caught in a ‘us-or them’ contest.

India cannot match China’s cheque book, but its cheques come with hidden costs, as many nations have realized. But we can use our own prowess in technology and infrastructure, coupled with soft financing, to provide a reliable alternative. Most of the nations in the neighborhood should be out of the economic morass by 2025-26 or so. Pakistan, of course, will tumble along its own disastrous course. But honestly, their internal battles suit us, since it precludes mischief elsewhere. For the rest of the region, we can help provide long-term stability and common economic growth through BBIN, BIMSTEC and other regional initiatives. Free and open connectivity through roads and open borders will bind the region together. The very successful Unified Payment Initiative of digital financial transactions could also be extended to neighboring countries. That itself will increase mutual trade by a huge margin. If we could be the engine of growth for South Asia, it would be the true mark of regional leadership and the best way to mark its influence in the region.