Crossroads of Power: Strategic Aspects of India’s Economic Relations with Neighbours to the North & East

Abstract

India’s two-way trade and investment volumes with China overwhelm the corresponding numbers with each of its other neighbouring countries to the North and the East, namely Bangladesh, Myanmar, Nepal, and Bhutan. As with any other grouping of neighbouring nations, the security and territorial claims of individual countries have consequences for economic exchanges. The physically and economically larger, militarily more powerful nations within any group of such countries with shared borders tend to dominate, overtly or at times not so openly. This is to be expected, given the smaller geographical size, population, and lower technological-economic development of the other four countries compared to China and India. At the same time, surface transportation routes between India and these four smaller countries are much shorter. These relatively inefficient overland transportation routes between India and its smaller neighbours mean that additional transportation routes over land and water could result in a multiplier effect on trade and investment volumes.

This study reviews the strategic aspects and related ramifications of existing and potential surface trading routes between India and the three South Asian Association for Regional Cooperation (SAARC) countries: Nepal, Bangladesh, and Bhutan, and the Association of South East Asian Nations (ASEAN) member country Myanmar. If the current military or some future leadership in Myanmar were to become less apprehensive about political liberalisation within the country, it could become a key land transportation route for India to higher per capita ASEAN countries such as Thailand, Malaysia, and Vietnam. Given that this is unlikely to happen soon, the alternative for India is to augment existing sea routes to ASEAN nations. The currently strained relations between India and China due to the military confrontation in the Galwan area in Eastern Ladakh, in April-May 2020, have complicated the raising of trade and investment ties between the two most populous countries in the world and within India’s immediate neighbourhood (Kaura, 2020). In overall terms, the differences in strategic interests between India and its friends in the West and China are likely to stand in the way of significant growth in economic-technological exchanges. China has the ability and intention to forge closer economic and overall links with India’s neighbours to the north and east, including Bangladesh. If India does not pay sufficient attention, it could find itself incrementally crowded out of its immediate neighbourhood, with which it has had centuries of close economic, social, linguistic, and religious ties. India needs to include coordination with Japan and South-Korea in working to enhance economic and transportation linkages with its smaller neighbours to the north and east.