By accepting an invitation to join the Japan-proposed, U.S.-endorsed plan for a “Quadrilateral” grouping including Australia to provide alternative debt financing for countries in the Indo-Pacific, India has taken a significant turn in its policy for the subcontinent.
The Quad pivot?
- As Prime Minister of India heads to the East Asia summit in the Philippines next week, where the first ‘Quad’ meeting is likely to be held, it is necessary that India analyse the impact of this admission on all our relations.
- It would also serve as a useful exercise to understand why India has conceded it requires “other parties” in the neighbourhood, even as it seeks to counter the influence of China and its Belt and Road Initiative.
- One reason is that as a growing economy with ambitious domestic targets, India’s own needs often clash with those of its neighbours.
- More connectivity will eventually mean more competition, whether it is for trade, water resources, or energy.
- Take, for example, the case of Bhutan, which is working, with India’s assistance, on its own goal of producing 10,000 MW of hydropower by 2020.
- The first indicator came on May 8, when in his budget speech at the National Assembly, the Bhutanese Finance Minister warned that the external debt is about 110% of GDP, of which a staggering 80.1% of GDP (or 155 billion Nu, or $2.34 billion) is made up by hydropower debt mainly to India.
- In April, the International Monetary Fund’s world economic outlook had already put Bhutan at the top of South Asia in terms of the highest debt per capita, second only to Japan in all of Asia for indebtedness.
- The budget figures attracted much criticism for the Bhutanese government, and opposition taunts that Bhutan could become the “Greece of South Asia” forced Prime Minister Tshering Tobgay to appoint a three-member committee.
India and Bhutan:
- Among the committee’s findings were that Bhutan’s external hydropower debt financed by India at 9-10% rates was piling up, with the first interest and principal payments expected in 2018, and construction delays, mainly due to Indian construction issues, were taking the debt up higher.
- Above all, despite several pleas to the Ministries of External Affairs and Power, the Cross Border Trade of Electricity (CBTE) guidelines issued by India had not been revised, which put severe restrictions on Bhutanese companies selling power, and on allowing them access to the power exchange with Bangladesh.
- In the Power Ministry’s reckoning, relations with Bhutan took a backseat to the fact that India already has a power surplus, and its new renewable energy targets come from solar and wind energy, not hydropower. Moreover, given falling prices for energy all around, India could not sustain the Bhutanese demand that power tariffs be revised upwards.
- Another problem is what one diplomat in the region calls ‘India’s big game hunting attitude’: “India chases its neighbours to cooperate on various projects and courts us assiduously, but once they have ‘bagged the game’, it forgets about us.
- As a result, crises grow until they can no longer be ignored, and the hunt begins again.” Over the past decade, since the defeat of the LTTE, India passed up offers to build the port in Hambantota, Colombo, and Kankesanthurai, despite Sri Lanka’s pressing need for infrastructure.
- New Delhi has changed its position on Hambantota several times, going from initial apathy, to disapproval of the Chinese interest, to scoffing at the viability of the project, to open alarm at the possibility of any Chinese PLA-Navy installation in Sri Lanka’s southern tip.
- India has also been ambivalent on tackling political issues in its region, often trapped between the more interventionist approach of the U.S., which has openly championed concerns over ‘democratic values’ and human rights in Sri Lanka, Maldives and Bangladesh, and the approach of China, which is to turn a blind eye to all but business and strategic interests.
- It is important to note that while the government’s new plan to involve the U.S. and Japan in development projects in South Asia will yield the necessary finances, it will come at the cost of India’s leverage in its own backyard.
- India’s counter to China’s persistent demand for a diplomatic mission in Thimphu, for example, could be to help the U.S. set up a parallel mission there — but once those floodgates open, they will be hard to shut.
- In Sri Lanka, the U.S. and Japan will now partner in India’s efforts to counter China’s influence, but whereas India objected to Chinese naval presence in the Indian Ocean, it will not be able to object to an increase in U.S. naval warships and Japanese presence there.
- Japan has proposed a “Quadrilateral” grouping consisting of India, Australia, USA and Japan.
- The grouping aims to be a grouping of countries all looking to balance China, using an international rules-based order to counter China’s aggressive power play.
- The purpose is to provide alternative debt financing for countries in the Indo-Pacific.
- India has accepted an invitation to join the grouping.