Neighbourhood Policy

CIVIL SERVICES MAIN EXAMINATION – 2022
GS PAPER – II
INTERNATIONAL RELATIONS
TOPIC
NEIGHBORHOOD POLICY
#C-40, 2nd Avenue, Anna Nagar West, Chennai – 600 040 Page 1
+91 8939696868/69 info@aramiasacademy.com www.aramiasacademy.com
TABLE OF CONTENTS
S.NO TOPIC PAGE NO
1 NEIGHBORHOOD FIRST POLICY 03 – 07
INDIA'S RELATIONSHIP WITH ITS NEIGHBOURS:

2 CONFLICT AND COOPERATION 08 – 12
3 BIMSTEC 13 – 23
4 SAARC 24 – 29
1. NEIGHBORHOOD FIRST POLICY
 India shares its geographical boundary with Afghanistan, Bhutan, Bangladesh,
Maldives, Pakistan, Nepal and Sri Lanka. India’s policy towards its immediate
neighbourhood is based on efforts to build peace and cooperation in South Asia. Its
neighbourhood first policy, accords primacy to nations in periphery with focus on
encouraging trade, connectivity and people-to-people contact.
 India’s neighbourhood first policy focuses on cooperation and peaceful coexistence.

It is part of India’s foreign policy that actively focuses on improving ties with India’s
immediate neighbours which is termed as Neighbourhood first policy.
 Considering the relations and outlook of neighbouring countries, India today needs
more pragmatic and peaceful policy to control the disturbance and aggression along
the border side. Like NAM, today it is the need of the hour to have peaceful with
strategic policy which have deal the challenges of globalisation, depressions of India
and aggressive neighbours.
Salient features of India’s Neighbourhood First policy:
1. Immediate priority to neighbours: Priority is to improve the relations with immediate

neighbours as peace and tranquillity in South Asia is essential for realizing
development agenda. The neighbourhood first policy of actively focuses on
improving ties with India’s immediate neighbours.
2. Dialogue: It focuses on vigorous regional diplomacy by engaging with neighbouring

nations and building political connectivity through dialogue. First initiative in this
direction was extending an invitation to all heads of government of SAARC countries
for the oath taking ceremony of the Prime minister in 2014.
3. Resolving bilateral issues: Focus is on resolving bilateral issues through mutual

agreement. For instance, India and Bangladesh have signed a pact to operationalise
the historic Land Boundary Agreement (LBA).
4. Connectivity: India has entered into MoU with members of the South Asian
Association for Regional Cooperation (SAARC). These agreements ensures a free
flow of resources, energy, goods, labour, and information across borders.
5. Economic Cooperation: It focuses on enhancing trade ties with neighbours. India has
participated and invested in SAARC as a vehicle for development in the region. One
such example is the Bangladesh-Bhutan-India-Nepal (BBIN) grouping for energy
development i.e., motor vehicles, waterpower management and inter-grid
connectivity.
6. Technical Cooperation: The policy put emphasis on technical cooperation. Recently a

dedicated SAARC satellite was developed to share the fruits of the technology like
tele-medicine, e-learning etc. with the people across South Asia.
7. Disaster management: India’s offer cooperation on disaster response, resource

management, weather forecasting and communication and also capabilities and
expertise in disaster management for all South Asian citizens. For example, India
provided immense assistance to its neighbour Nepal in the aftermath of the 2016
earthquake.
8. Military and defence cooperation: India is also focusing on deepening security in the
region through military cooperation. Various exercises like Surya Kiran with Nepal,
Sampriti with Bangladesh aim to strengthen defence relations. Also, India has
committed to play a greater role in capacity building of the Afghan National Army by
providing training to them.
Challenges for India:-
1. Covid-19 challenge: The covid-19 pandemic that originated in China has led to one of
the biggest health challenges, causing heavy economic damage to South Asia.
2. Pakistan relation: relation with Pakistan, remains India’s biggest diplomatic and
security challenge. India’s challenge is to manage relationships with a state which
openly, uses terror as an instrument of state policy and has fractured, multiple power
centres.
3. Unstable Afghanistan: Afghanistan remains a challenge too. Fragile within and facing
state-sponsored external threat from Pakistan, a possible state collapse would spawn
jihadist terrorism in all directions for which India is unlikely to remain immune. Indian
diplomacy is active in international efforts to stabilise the country.
4. China factor: China is another big challenge that is increasing its presence around
India. The relationship is marked with suspicion over China’s policy towards Pakistan,
including the construction of the Gwadar port. Also, China-Pakistan economic
corridor running through POK. China claimed Bhutan’s Sakteng natural reserves and
pushed along the boundaries lines with Nepal, all of which changed India’s strategic
calculations along its Himalayan frontiers.
5. Anti-Indian sentiment: anti-Indian sentiment are getting rooted in the minds of the
people of region due to perceived notion of India’s big brother attitude and its
economic dependence to India. For instance, the recent step of demonetisation
impacted many countries like Nepal, Bangladesh, Bhutan, Sri Lanka and Myanmar
which use the Indian currency as a parallel currency within their borders.
Successful points of India:-
1. Greater Male Connectivity Project:-
 India has decided to support the implementation of Greater Male Connectivity

Project (GMCP) through a financial package consisting of a grant of $100 million
and a new line of credit of $400 million.
 This will be the largest civilian infrastructure project in Maldives, connecting Male
(the capital) with three neighbouring islands — Villingili, Gulhifalhu (where a port
is being built) and Thilafushi (new industrial zone).
 Once completed, this project will improve connectivity between the four islands,
boost economic activity, generate employment and promote holistic urban
development in the Male region.
2. India contributes 3000 vials of Remdesivir to Myanmar:-
 On October 5, 2020, the Government of India contributed 3,000 vials to Myanmar

under the framework of India-Myanmar Foreign Office Consultation.
 Highlights the 3,000 vials of Remdesivir drug was provided by Army Chief
Naravane to the Myanmar State counsellor. The vials were provided to Myanmar
to strengthen the Neighbourhood First Policy of India
3. Recently, India and the ASEAN commemorated 25 years of their partnership, 15 years
of summit-level interaction, five years of strategic partnership. ASEAN- India
commemorative summit was held on the theme Shared values, Common destiny with
a focus on counter-terrorism, security and connectivity.
4. Recently, PM Modi dedicated SAARC satellite to share the fruits of the technology
like tele-medicine, e-learning etc with the people across South Asia to complement
the currently operating Indian Technical and Economic Cooperation Programme in
the region.
5. India has participated and invested in SAARC as a vehicle for development in the
region. Example BBIN grouping for energy development. i.e., motor vehicles,
waterpower management and inter-grid connectivity. India’s neighbourhood policy is
predicated on his“Sabka saath, sabka vikas” vision for exclusive growth.
6. India’s military ran a series of missions to SAARC countries and Indian ocean
region(IOR) with supplies of food and medicines, India’s “Vande Bharat” mission
flew home nationals from neighbouring countries. India has also upped its game on
infrastructure delivery, particularly for regional connectivity in the past year,
including completing railway lines to Bangladesh and Nepal, riverine projects, ferry
service to the Maldives, identifying other services to Sri Lanka and IOR islands.
7. QUAD will collaborate on security and infrastructure initiatives in the neighbourhood,

along with promoting forays by other partners like U.K, France and Germany in the
region.
Way forward:-
 An Indian connectivity strategy must be informed by new research, knowledge, and

data on neighbouring countries and specific sectors. This will require investment in
regional and cross-border studies.
 The strategy will have to be implemented in coordination with new stakeholders,

including sectoral ministries (e.g. power or shipping), state governments, and
political parties (e.g. in Uttar Pradesh for Nepal, or Mizoram for Myanmar), private
sector interests (infrastructure companies and industrial lobbies), civil society
representatives (e.g. universities or environmental activists), and also multilateral
organisations (e.g. the Asian Infrastructure Investment Bank [AIIB] or ADB).
 India will have to focus on specific areas and projects that enhance its comparative
advantage.
 Rather than blind competition with China on financing hard infrastructure projects,
for example, Delhi should invest relatively more on the soft dimensions of
connectivity, including capacity building.
 India will also require economic openness, beyond all the investment in cross-border
infrastructure. Ports, roads, railways, and airports will be useless barriers to trade and
other forms of mobility persist.
 An Indian connectivity strategy will have to deliver rather than deny. Delhi will have
to stay focused, and be prepared to commit more, better and faster on connectivity
initiatives that are sustainable.
 India will have to consider the political, economic and cultural sensitivities of
neighbouring countries.
 Regional connectivity may seem like a consensual and logical proposition to Delhi,
but this desirability is not always shared in other capitals that are worried about
relying on India and thus keener to connect beyond the region, especially with China.
 Finally, India’s approach should refrain from excessive emphasis on cultural unity or
alikeness in the region. In the cautionary observation of I. P. Khosla, a senior Indian
diplomat who served across South Asia, “India’s neighbours find it difficult to
endorse proposals that could in any sense hint at the recreation of past unity.”
2. INDIA'S RELATIONSHIP WITH ITS NEIGHBOURS: CONFLICT AND
COOPERATION
 India’s neighbourhood which the member-countries of the South Asian Association
for Regional Cooperation (SAARC) namely Afghanistan, Bangladesh, Bhutan, Nepal,
Maldives, Pakistan and Sri Lanka comprise, is a fairly complex geographical entity.
 This is to say the least. In fact India can be said to be living in a dangerous
neighbourhood.
 The constituent countries-individually as well as collectively-represent a world of

historical links, shared legacies, commonalities as well as diversities which are so
elaborately reflected in their ethnic, linguistic, religious and political fabric.
 The South Asian region is also full of contradictions, disparities and paradoxes.
 In the post-colonial period, the South Asia has been a theatre of bloody inter-state as
well as civil wars; it has witnessed liberation movements, nuclear rivalry, military
dictatorships and continues to suffer from insurgencies, religious fundamentalism
and terrorism, besides serious problems associated with drugs and human
trafficking.
 The region also has the dubious distinction of having over 540mn people who earn
less than $ 1.25 a day and account for 44% of developing world’s poor.
 The region has produced several powerful female leaders and yet in the overall much
remains to be done for the empowerment of women.
 On the barometer of religious tolerance, the constituent countries range anywhere

between flexible secular minded and rigidly fundamentalist.
The South Asian Association for Regional Cooperation (SAARC) has remained in
existence for over 27 years; yet South Asia is considered as the least integrated of the
global regions; this is despite the stipulation in its Charter that "bilateral and
contentious issues shall be excluded” from its deliberations, thus making it possible
to put the contentious issues on the back burner and focus on areas of possible
cooperation.
On the positive side, the region has been registering a healthy growth (average 6%
per annum) during the past several years.
 Also democratic forms of governance (howsoever flawed and feeble) are beginning
to gain some ground in most parts of the region.
Where does India stand in this rather volatile region?
 India’s position is unique in more than one sense.
 As a matter of an interesting geographic factor, India shares borders with all other
South Asian nations whereas no other South Asian nation (except Afghanistan and
Pakistan) shares borders with any other South Asian nation.
 Notwithstanding some shortcomings, democracy and rule of law as instruments of

political governance are well entrenched in India.
 Transfer of power has been more or less peaceful and transparent.
 In relative terms India can be arguably considered as the most stable country in the
region, moving ahead on the fast tracks of development, even though the growth
has of late slowed down.
 Further in terms of its population, territory, GDP, its image as an emerging world
economy and a responsible de-facto nuclear State, and as a country which is destined
to play a larger role on international arena, and also for several other reasons, India
stands apart amongst the bunch of other South Asian countries.
 In fact India can be said to dwarf others in the South Asian region which in turn has
created misperceptions about India and its intention.
 India thus has reasons to be proud of its achievements. However, in the regional
context, "India’s pride”, unfortunately is also "neighbours’ envy”.
 There are unjustified and erroneous perceptions about India floating around in the
region: "Big Brother bullying the smaller neighbour”; "India treats its neighbours as
a neglected backyard” etc. etc.
 There is no justified explanation for the "trust deficit”. On top of it there are vested
interests and lobbies for whom being anti-Indian is synonymous with being patriot
and nationalist.
 And then there are strong institutions within the framework of a more or less failed
and rogue State in the neighbourhood (Pakistan) which would like to see relations
with India in a state of perpetual suspension.
 India’s motives are suspected even in cases of innocent proposals for economic
cooperation which would lead to win-win situations.
 At times the domestic compulsions in India arising out of regional and coalition
politics complicate matters further.
 It is against the above backdrop of various challenges one has to look at the options
which India’s foreign policy makers have at their disposal for this region.
 In a scenario where we have incorrigible Pakistan at one end and genuinely friendly
Bhutan at the other end of the spectrum, and everyone else somewhere in between,
it is perhaps difficult to write one single foreign policy prescription for the entire
region.
 Nevertheless, there are some basic approaches which India has consistently
endeavoured to adopt and apply; these include for instance:
 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.
 The policy of engagement is not be allowed, however, to be misunderstood as

weakness.
 Strong and loud messages must emanate from India each and every time our
patience is tested.
 India adheres to its benign and noble policy of non-interference into internal affairs
of other countries in the region.
 However, if an act - innocent or deliberate - by any country has the potential of

impinging upon India’s national interests, India does not hesitate in quick and timely
intervention.
 Mind it: intervention is qualitatively different from interference, particularly when

the intervention is made at the request of the country concerned.
 Foreign policy in India by and large enjoys national consensus.

 At times, however, there are instances when it appears that the foreign policy is
being held hostage to domestic regional politics. Bangladesh and Sri Lanka are the
most glaring examples.
 Domestic sentiments and genuine concerns of the segments of the society must be
taken into consideration but not allowed to determine country’s foreign policy
which must be guided solely by the overriding national interests and must be made
in New Delhi.
 India has endeavoured to deal with the government-of-the-day, be it a democracy,

monarchy or military dictatorship, insisting that the choice of the form of
government is best left to the people of the country concerned.
 India does not believe in exporting democracy but does not hesitate in promoting
democracy wherever potential exists; this is done by proactively providing
assistance in capacity building and strengthening the institutions of democracy;
 In contemporary globalised world, the foreign policy and the foreign economic policy
objectives stand integrated and cannot be addressed divorced from each other.
 Creation of an external environment which is conducive to all inclusive growth in the

country is one of the integral component of India’s foreign policy.
 All diplomatic skills and political leverages are being put to use to impress upon the
partners in the region that joint exploration of natural resources can lead to win-
win situations.
 India’s cooperation with Bhutan in hydropower generation is an example to be cited

and followed.
 In contrast, as a result of its reluctance to collaborate with India in this field, Nepal
remains a net importer of electricity despite its enormous hydro resources.
 India has skilfully used its policy of non-prescriptive development assistance as its
soft power since early 1950s. In return India has sought "good will” and "friends of
India”.
 In a slight departure India is gradually switching over from pure charity to a judicious
mix of outright grants and soft loans linked to project/commodity exports.
 Also India is judiciously working to ensure that the "goodwill’’ thus earned must get
translated into concrete political and economic dividends.
 Finally, India is ready to go an extra mile in seeking the integration of the region.
 As often cautioned by the International Financial Institutes, only through regional

cooperation can the South Asia be a part of Asian century.
3. BIMSTEC
 BIMSTEC came into being on June 6, 1997.
 In the years since it has evolved in several ways.Its name has changed, reflecting its
changing membership.
 Originally the grouping envisaged economic cooperation among four countries:

Bangladesh, India, Sri Lanka, and Thailand and therefore went by the acronym BIST-
EC. When Myanmar joined the grouping in December that year, the grouping was
called BIMST-EC (Bangladesh, India, Myanmar, Sri Lanka, and Thailand Economic
Cooperation).
 With Nepal and Bhutan joining in it underwent another name change and has been
known since as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation (BIMSTEC).
 As its name indicates, BIMSTEC envisages multi-sectoral technical and economic

cooperation. Its main purpose is to enhance economic sustainability, and cooperation
and collaboration in the region through joint initiatives.
 To this end BIMSTEC has come up with 15 priority areas for collaboration and
cooperation, including trade and investment, energy, tourism, transport and
communication, public health, counter-terrorism and transnational crime,
environment and disaster management, technology, fisheries, agriculture, poverty
alleviation, cultural cooperation, people-to-people contacts, and climate change.
 The platform is indispensable for India’s efforts to promote regional cooperation and
integration in the neighbourhood in the following ways:
Closer economic cooperation:
 It will provide a platform for closer cooperation to foment new regional supply chains
in a post COVID world where narrow regionalism and fragmentation of global
production and supply chains will be the new norm.
 Huge untapped potential: A study by Asian Development Bank has identified 167
projects within the BIMSTEC region that can boost connectivity. However, the
grouping has to date only focused on 66 of them. The remaining have not yet
received enough attention.
 The BIMSTEC FTA, when finalised, will fulfill the heavy dependence of members on
intraregional trade and offer much greater complementarities than RCEP.
 It offers a natural platform that would help India to integrate with ASEAN Master
Plan of Connectivity 2025.
 With a combined GDP of $2.7 trillion and fast growing economies, it provides India an
opportunity to diversify its export markets in the era of protectionism.
 Further, massive mineral resources, forests and river basins provide a huge capital
base, cheap availability of human capital with a large consumer base provide multiple
areas of cooperation.
 Alternative to SAARC: With SAARC proving to be a “dysfunctional” grouping due to

the bilateral dispute between India and Pakistan, BIMSTEC provides an opportunity
for India to integrate the region without Pakistan.
Connecting South Asia and Southeast Asia:
 BIMSTEC is a bridge between South Asia and Southeast Asia.
 Leveraging BIMSTEC, India focuses on connectivity projects in and around the Bay of
Bengal region.
 The North-East region of India can play an important role in this regard.
 The draft BIMSTEC Motor Vehicle Agreement seeks to integrate existing bilateral,
trilateral and multilateral connectivity projects such as Kaladan Project and the
Trilateral Highway.
 This along with Coastal Shipping agreement will facilitate seamless movement of
cargo via roads and seas and facilitate cross border trade.
People to people contact:
 The Ministry of Tourism has taken steps with BIMSTEC and ASEAN countries to devise
packages to increase tourist inflow in India’s northeast.
 It would help in strengthening people to people relationships by providing avenues
for rediscovering shared roots, understanding common and different histories, and
learning each other’s cultures.
Convergence with domestic policies:
 BIMSTEC is an important pillar for various domestic policies of India such as

“Neighbourhood first”, “SAGAR”, and “Act East” etc. which aims at boosting road,
rail and maritime linkages and people-to-people interaction.
 It provides a ray of hope for Myanmar and Sri Lanka.
 Myanmar’s junta faces of crisis of legitimacy and is under tremendous pressure from
Western countries for its violation of human rights. BIMSTEC could provide Myanmar
temporary respite from the legitimacy crisis.
 SAARC was the brainchild of Maj. Gen. Ziaur Rahman, the husband of current
opposition leader Khaleda Zia and founder of the Bangladesh Nationalist Party.
 Moving away from SAARC and staying with BIMSTEC serves the politics of
Bangladesh’s Prime Minister Sheikh Hasina. Sheikh Hasina and Khaleda Zia are bitter
rivals.
Strengthening maritime cooperation:
 It will facilitate cooperation in boosting the potential of Blue economy and resolving
maritime security issues like securing sea lane of communication, preventing illegal
fishing, drug and weapon trafficking; Climate change and associated risks like human
security, loss of livelihoods, food security, water supply also offer fresh areas of
cooperation in the neighbourhood.
 However, the lack of human and financial resources, absence of effective and
sustained political will among members, poor road and rail connectivity, insufficient
last-mile links, cumbersome customs and clearance procedures hampering trade
etc. have created bottlenecks in realising the potential of the platform to foster
regional cooperation and integration.
 Irregularity in working: The summits are not held at regular intervals. A slow pace is
observed in working. For instance, it took almost 17 years to establish a permanent
secretariat.
 Thereby, effective adoption of the Kathmandu Declaration by adoption of the

BIMSTEC charter, establishment of a BIMSTEC Permanent Working Committee and
a Development Fund, improving the visibility of BIMSTEC and expediting
completion of existing projects can help revive BIMSTEC as an active platform for
regional cooperation.
 The group has to move forward by doing ‘institutional hedging’. This means focusing
on developing collective soft and hard power for the group. Thereby, it will protect
individual interests and shape up a regional order.
 India should project itself as a compatriot and an equal partner to other BIMSTEC
member-countries. This will reduce the trust deficit and ensure better integration in
the region.
5th BIMSTEC Summit
 The Summit’s theme "Towards a Resilient Region, Prosperous Economies, Healthy

People”
 The main outcome of the Summit was the adoption and signing of the BIMSTEC
Charter, which formalizes the grouping into an organization made up of member
states that are littoral to, and dependent upon, the Bay of Bengal.
 The Summit also saw considerable progress being achieved in the BIMSTEC
connectivity agenda with the adoption of the ‘Master Plan for Transport
Connectivity’ by Leaders which lays out a guidance framework for connectivity
related activities in the region in the future.
 Prime Minister Modi along with other leaders also witnessed the signing of three
BIMSTEC agreements which represent progress being achieved in ongoing
cooperation activities: (i) BIMSTEC Convention on Mutual Legal Assistance in
Criminal Matters; (ii) BIMSTEC Memorandum of Understanding on Mutual
Cooperation in the field of Diplomatic Training and (iii) Memorandum of
Association on Establishment of BIMSTEC Technology Transfer Facility.
 Describing the adoption of the charter as a significant step towards a formal

institutional architecture for BIMSTEC, India’s Prime Minister Narendra Modi called
on other members to make its “architecture stronger.”
Sri Lankan economic crisis
 Anger against Sri Lankan President Gotabaya Rajapaksa’s handling of a deepening

economic crisis in the island nation of 22 million people spiralled into violence late on
Thursday,(april) as hundreds of protesters clashed with police for several hours.
 A severe shortage of foreign currency has left Rajapaksa’s government unable to pay
for essential imports, including fuel, leading to debilitating power cuts lasting up to
13 hours.
 Ordinary Sri Lankans are also dealing with shortages and soaring inflation, after the
country steeply devalued its currency last month ahead of talks with the
International Monetary Fund (IMF) for a loan programme.
How did Sri Lanka get here?
 Critics say the roots of the crisis, the worst in several decades, lie in economic
mismanagement by successive governments that created and sustained a twin
deficit – a budget shortfall alongside a current account deficit.
 “Sri Lanka is a classic twin deficits economy,” said a 2019 Asian Development Bank
working paper. “Twin deficits signal that a country’s national expenditure exceeds its
national income, and that its production of tradable goods and services is
inadequate.”
 But the current crisis was accelerated by deep tax cuts promised by Rajapaksa during
a 2019 election campaign that were enacted months before the COVID-19 pandemic,
which wiped out parts of Sri Lanka’s economy.
 Value-added tax rates (akin to some nations’ goods and services taxes) were cut
from 15% to 8%.
 Other indirect taxes such as the nation building tax, the pay-as-you-earn tax and
economic service charges were abolished.
 Corporate tax rates were reduced from 28% to 24%. About 2% of the gross domestic
product was lost in revenues because of these tax cuts.
 With the country’s lucrative tourism industry and foreign workers’ remittances
sapped by the pandemic, credit ratings agencies moved to downgrade Sri Lanka and
effectively locked it out of international capital markets.
 In turn, Sri Lanka’s debt management programme, which depended on accessing

those markets, derailed and foreign exchange reserves plummeted by almost 70 per
cent in two years.
 The Rajapaksa government’s decision to ban all chemical fertilisers in 2021, a move
that was later reversed, also hit the country’s farm sector and triggered a drop in the
critical rice crop.
What happens with Sri Lanka’s foreign debt?
 As of February, the country was left with only $2.31 billion in its reserves but faces
debt repayments of around $4 billion in 2022, including a $1 billion international
sovereign bond (ISB) maturing in July.
 ISBs make up the largest share of Sri Lanka’s foreign debt at $12.55 billion, with the
Asian Development Bank, Japan and China among the other major lenders.
 In a review of the country’s economy released last month, the IMF said that public
debt had risen to “unsustainable levels” and foreign exchange reserves were
insufficient for near-term debt payments.
 In a note late last month, Citi Research said that the IMF report’s conclusion and the
government’s recent measures were insufficient to restore debt sustainability,
strongly indicating the need for debt restructuring”.
Why are some people blaming China?
 Many believe Sri Lanka’s economic relations with China are a main driver behind the
crisis. The United States has called this phenomenon “debt-trap diplomacy”.
 This is where a creditor country or institution extends debt to a borrowing nation to
increase the lender’s political leverage – if the borrower extends itself and cannot
pay the money back, they are at the creditor’s mercy.
 However, loans from China accounted for only about 10% of Sri Lanka’s total foreign
debt in 2020.
 The largest portion – about 30% – can be attributed to international sovereign bonds.
Japan actually accounts for a higher proportion of their foreign debt, at 11%.
 Defaults over China’s infrastructure-related loans to Sri Lanka, especially the

financing of the Hambantota port, are being cited as factors contributing to the
crisis.
 But these facts don’t add up. The construction of the Hambantota port was financed
by the Chinese Exim Bank.
 The port was running losses, so Sri Lanka leased out the port for 99 years to the
Chinese Merchant’s Group, which paid Sri Lanka US$1.12 billion.
 So the Hambantota port fiasco did not lead to a balance of payments crisis (where
more money or exports are going out than coming in), it actually bolstered Sri
Lanka’s foreign exchange reserves by US$1.12 billion.
Who is helping Sri Lanka?
 For months, Rajapaksa’s administration and the Central Bank of Sri Lanka (CBSL)
resisted calls by experts and opposition leaders to seek help from the IMF despite
rising risks.
 But after oil prices soared in the wake of Russia’s invasion of Ukraine in late February,
the government eventually drew up a plan to approach the IMF in April.
 The IMF will initiate discussions with Sri Lankan authorities on a possible loan
program in “coming days”, an IMF spokesman said on Thursday.
 Before heading to the IMF, Sri Lanka steeply devalued its currency, further stoking
inflation and adding to the pain of the public, many of whom are enduring hardship
and long queues.
 In the interim, Rajapaksa has also sought help from China and India, particularly
assistance on fuel from the latter.
 A diesel shipment under a $500 million credit line signed with India in February is
expected to arrive on Saturday.
 Sri Lanka and India have signed a $1 billion credit line for importing essentials,
including food and medicine, and the Rajapaksa government has sought at
least another $1 billion from New Delhi.
 After providing the CBSL with a $1.5 billion swap and a $1.3 billion syndicated loan to
the government, China is considering offering the island nation a $1.5 billion credit
facility and a separate loan of up to $1 billion
4. SAARC
 The Idea of SAARC came into existence in 1980 at the initiation of former Bangladesh
President Zia ur-Rahman, highlighted to cater to many problems that are facing the
South Asian countries.
 The region of South Asia consists of eight countries: Afghanistan, Bangladesh,

Pakistan, Nepal, Bhutan, Sri Lanka, Maldives, and India.
 The basic objective is to support the economic, social and cultural change of the
South Asian states through cooperation in positively valued areas.
 This shows why groups of people from South Asia join territorially, to collaborate on
outcomes on issues in one entity of collaboration, similar to other regional
organizations in the world.
 SAARC has also set up an "institutional framework" at various regular summits to

discuss the modalities and opportunities for cooperation between its members.
 To date, there have been more than a dozen summit meetings that have rigorously
pursued the fundamental goals.
 However, in order to improve SAARC's effectiveness, efforts must be made at all

levels to address various bilateral and trilateral issues that delay regional cooperation
processes in a number of areas
The need for revival of SAARC
 SAARC, as an organisation, reflects the South Asian identity of the countries,

historically and contemporarily. It has geographical identity.
 Equally, there is a cultural, linguistic, religious and culinary affinity that defines South
Asia.
 South Asian countries are closely tied in their socio-political state as they face similar
traditional as well as emerging issues like terrorism, energy shortage, hydro-politics,
Climate change among many others.
 SAARC can be a platform for starting dialogue for timely addressable of these issues.
 SAARC constitutes for 21% of the world’s population and most of its population is
young. Thus, cooperation with each other is important to reap demographic dividend
and thus economic prosperity of the region.
 BIMSTEC can complement but not replace SAARCas there is a huge difference in
both.
 SAARC has had 18 summits in the 32 years of its existence and it has an extensive
network of mechanisms, regional centers and conventions as well as a permanent
Secretariat.
 On the other hand, the BIMSTEC has recently got momentum and yet to find its role.
Attraction towards other groupings:
 If SAARC becomes redundant there may be possibility that other neighbouring

countries may join SCO.
 If India loses its clout in this region, then it will be a critical setback to its aspirations
for a global role.
Economic integration:
 As per World Bank report, with intra-regional trade at less than 5% of total trade,
South Asia is the least integrated region in the world, dwarfed by East Asia's 35% and
Europe's 60%. SAARC is critical for economic integration of the region.
Neighbourhood first policy
 For India to play global role, its regional role is the key pillar.
 To make the 21st century as the Asian century, South Asia shouldn’t remain
fragmented.
 The European and ASEAN experienceis testimony to the contribution of regional
cooperation in the economic growth of the countries.
SAARC Achievements
SAFTA
SAARC introduced SAFTA to boost trade between the Member States and in December
1995, emphasizing that there was a need to understand the “South Asian Free Zone
Exchange” (SAFTA)
South Asian Identity
 The most important achievements of SAARC are to bring the members of the states
close and think about regional issues and identity.
 That is based on the positive aspect of the individual state which should be attractive
for the people of the SAARC countries to emulate. It is important not to think as a
South Asian but feel proud of a South Asian identity within the region.
 There is also the serious need to cooperate and contact among the people, to
improve cultural identities and break the barriers among the people of South Asia
The SAARC Food Bank
 The SAARC Food Bank”, was recognized originally to facilitate as an emergency

source for facing a crisis in shortage or a natural disaster, floods, earthquakes, and
such other issues.
 In the 14th summit at Islamabad, signed the channel to accept a mutual attitude to
unite “food security” for the people of South Asia and then the formal development
and procedure for strategies must plan ahead to provide a functional character
SAARC Development Fund
 SAARC Development Fund was recognized by the eight SAARC Members in 2010.
 SDF was objective“ to promote the welfare for the people of the South Asian region;
to improve their quality of life, economic growth, social progress and poverty”.
 It is also one of the achievements of the Regional Association for the safety, progress
and prosperity for the people of South Asia.
South Asian University
 The South Asian University is another achievement by the members’ state. It is an

international university established in 2010 by the SAARC desk.
 At this time University is offering postgraduate and doctoral programs in several

disciplines
Failures and challenges of SAARC
 South Asia Free Trade Agreement (SAFTA) that came into force in 2006 is often
highlighted as a prominent outcome of SAARC, but given the presence of sensitive
lists, it is yet to be implemented in spirit.
 South Asian countries share some common features like cheap labour, low incomes,
low value added commodities and comparative advantage in the same commodities
like tea and garments etc.
 The intraregional trade cannot be successful in such conditions where the trade and
economic structure and industrial infrastructure is similar.
 The member countries of SAARC are not complementing each other but they are
competing in fact
 Pakistan’s non-cooperationhas stalled some major initiatives under SAARC. For

example: SAARC– Motor Vehicles Agreement (MVA) and SAARC satellite project
(replaced with BBIN-MVA and South Asia satellite respectively).
 SAARC does not have any arrangement for resolving disputes or mediating
conflicts. Security cooperation:
 There is a lack of consensus on threat perceptions. For instance, while cross border
terrorism emanating from Pakistan is a major concern for India, Pakistan has failed to
address these concerns.
 Asymmetry between India and other member countries:
 They perceive India as “Big Brother” and have been reluctant to implement various
agreements under SAARC.
Way Forward
 To make SAARC more effective, the organisation must be reformed and member
countries must reach a consensus regarding the changes required.
 Setup a mechanism for informal discussions, formal mediation andresolution

mechanisms tailored to the region’s specific needs and problems
 Sri Lanka’s former Prime Minister proposed ‘Economic Integration Road Map
(EIRM)’:
 A “sub-region”, consisting of the five southern States of India and Sri Lanka, to tap
the total population of 300 million people and a combined GDP of over $500 billion.
 Addressing para-tariffs and non-tariff barriers for successful regional integration,

tapping ecommerce and enhancing tourism were crucial to such a road map.
 Expediting subregional cooperation projects like BBIN Motor Vehicles Agreement
(MVA) would help in continuing cooperation, boosting trust among members.
 Formation of Conflict Conciliation Groups: The CCGs can be formed for resolving the
bilateral disputes when all parties to a particular dispute agree to seek SAARC help
either to investigate the problem or conduct a fact finding study. Such groups can
take up studies of problems relating to exploitation of women and children and other
issues on which countries from within the region agree to take steps for.

Neighbourhood Policy

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Neighbourhood Policy

Uploaded by

Copyright:

Available Formats

CIVIL SERVICES MAIN EXAMINATION – 2022

1 NEIGHBORHOOD FIRST POLICY 03 – 07

INDIA'S RELATIONSHIP WITH ITS NEIGHBOURS:

 India’s neighbourhood first policy focuses on cooperation and peaceful coexistence.

Salient features of India’s Neighbourhood First policy:

1. Immediate priority to neighbours: Priority is to improve the relations with immediate

2. Dialogue: It focuses on vigorous regional diplomacy by engaging with neighbouring

3. Resolving bilateral issues: Focus is on resolving bilateral issues through mutual

6. Technical Cooperation: The policy put emphasis on technical cooperation. Recently a

7. Disaster management: India’s offer cooperation on disaster response, resource

Challenges for India:-

Successful points of India:-

1. Greater Male Connectivity Project:-

 India has decided to support the implementation of Greater Male Connectivity

2. India contributes 3000 vials of Remdesivir to Myanmar:-

 On October 5, 2020, the Government of India contributed 3,000 vials to Myanmar

7. QUAD will collaborate on security and infrastructure initiatives in the neighbourhood,

 An Indian connectivity strategy must be informed by new research, knowledge, and

 The strategy will have to be implemented in coordination with new stakeholders,

 The constituent countries-individually as well as collectively-represent a world of

 On the barometer of religious tolerance, the constituent countries range anywhere

Where does India stand in this rather volatile region?

 India’s position is unique in more than one sense.

 Notwithstanding some shortcomings, democracy and rule of law as instruments of

 Transfer of power has been more or less peaceful and transparent.

 India advocates the policy of constructive engagement, despite such serious

 This applies in particular to Pakistan- the origin of State-sponsored terrorism targeted

 The policy of engagement is not be allowed, however, to be misunderstood as

 However, if an act - innocent or deliberate - by any country has the potential of

 Mind it: intervention is qualitatively different from interference, particularly when

 Foreign policy in India by and large enjoys national consensus.

 India has endeavoured to deal with the government-of-the-day, be it a democracy,

 Creation of an external environment which is conducive to all inclusive growth in the

 India’s cooperation with Bhutan in hydropower generation is an example to be cited

 As often cautioned by the International Financial Institutes, only through regional

 BIMSTEC came into being on June 6, 1997.

 Originally the grouping envisaged economic cooperation among four countries:

 As its name indicates, BIMSTEC envisages multi-sectoral technical and economic

 Alternative to SAARC: With SAARC proving to be a “dysfunctional” grouping due to

 BIMSTEC is a bridge between South Asia and Southeast Asia.

People to people contact:

Convergence with domestic policies:

 BIMSTEC is an important pillar for various domestic policies of India such as

 It provides a ray of hope for Myanmar and Sri Lanka.

 Thereby, effective adoption of the Kathmandu Declaration by adoption of the

5th BIMSTEC Summit

 The Summit’s theme "Towards a Resilient Region, Prosperous Economies, Healthy

 Describing the adoption of the charter as a significant step towards a formal

Sri Lankan economic crisis

 Anger against Sri Lankan President Gotabaya Rajapaksa’s handling of a deepening

How did Sri Lanka get here?

 In turn, Sri Lanka’s debt management programme, which depended on accessing

Why are some people blaming China?

 Defaults over China’s infrastructure-related loans to Sri Lanka, especially the

Who is helping Sri Lanka?

 The region of South Asia consists of eight countries: Afghanistan, Bangladesh,

 SAARC has also set up an "institutional framework" at various regular summits to

 However, in order to improve SAARC's effectiveness, efforts must be made at all

The need for revival of SAARC

 SAARC, as an organisation, reflects the South Asian identity of the countries,

Attraction towards other groupings:

 If SAARC becomes redundant there may be possibility that other neighbouring