Saturday, November 17, 2007


Prime Minister Manmohan Singh called it an ‘historic accomplishment’, President Bush termed it as ‘necessary’, President Chirac welcomed it, Prime Minister Blair ‘warmly welcome(d)’ it, Japanese foreign ministry spokesperson called it an ‘important step forward’. All of them were referring to the deal on nuclear separation agreed to between Prime Minister Manmohan Singh and President Bush on 02 Mar. Every one of these actors was happy at the ‘successful completion’ of the talks, though for different reasons. Reasons ranging from large market; economics; development; energy security; environment; gains for the non proliferation regime; intellectual property rights and strategic concerns of India. Why was it so important for the Indian Prime Minister to have this ‘enlightened national interest’ deal, despite strong opposition from his alliance partners in government? What have we achieved with this deal and how is it in India’s interest? The aim of this paper is to look at our national priorities and how this deal impinges on them, both positively and negatively, without bothering about how other states and actors have benefited. In keeping with this broad thrust, this paper will firstly examine the Indian compulsions that led to this deal, then go onto listing what exactly is the deal, and finally examine the effect of this deal on Indian strategic and economic interests. Let us start with the Indian compulsions, as viewed through a snapshot of the present day India.

A snapshot of India at this juncture would highlight the following – not a party to the NPT regime; a nuclear power without international recognition; living with nuclear isolation, with no international nuclear support & co-operation; Indian scientific community working hard to grow India’s civilian and strategic nuclear capability without any international support and co-operation; non supply of unguarded nuclear fuel from international sources; neighbours with nuclear weapons; sustained economic growth of 8% and aiming for double digit growth; much larger collection of taxes by the government despite lowering of taxes over the years; a nation of about 1.1 billion people with a fast growing - middle class, aspirations of its people, and economy; growing confidence of Indian businesses leading to their horizontal and vertical expansion, nationally and internationally; growing trend towards globalization; troubles with terrorism exported from across the border; acute shortage of power which is hindering growth, and would severely do so in the future; Finance Minister’s thrust on growth in the manufacturing sector in the Budget for 2006-07; refusal of India to seek international assistance after the Tsunami; crying need for - urban renewal, rural up gradation, heavy investments in the infrastructure sectors and a severe resource crunch to undertake all this; rising prices of crude coupled with finite supplies and also environmental concerns with usage of fossil fuels. This snapshot captures the essence of India today, and is in effect a short list of India’s compulsions that probably led the PM to undertake this deal, despite government threatening opposition from the partners in governance. The natural question that comes to mind is ‘how did we manage to reach here?’

As far as the nuclear issue is concerned, it started with the NPT – a treaty that came into effect in 1968, and which divided the world into nuclear weapon states (NWS) - totaling five and the rest of the states as non nuclear weapon states (NNWS). India refused to sign the NPT on the basis of its discriminatory nature, and is still not a party to the NPT regime. Non membership of the NPT regime gave India the flexibility to grow its nuclear weapons programme without reneging on any of its international obligations to which it was a party. India’s strategic compulsions forced India to conduct a nuclear test in 1974, and again in 1998. These actions/ events prompted the US in changing their laws and in ensuring the international isolation of India, as far as nuclear support and co-operation were concerned, through the Nuclear Suppliers Group and other international fora. This strengthened India’s resolve to build its own indigenous three step process aiming towards self reliance in the civilian & military applications of nuclear technology. Here it may be mentioned that India is the only state with nuclear capability that started with civilian use of nuclear technology and then went onto developing it for weapon purposes, unlike all other nuclear states. The isolation and this unique starting point for India are the major reasons for the mixed use of most available Indian nuclear facilities and resources. What then prompted President Bush of the US to strike this deal which would help India come out of nuclear isolation?

Although there were many reasons for the US to have signed this deal, this paper will only look at the ones most relevant to the broad thrust of this paper. These reasons included the growing significance of India in the international economic, political, knowledge and strategic arena; realisation that China and India were the future growth engines; as also the growing energy needs of India and China coupled with the finite supply and burgeoning demand of fossil fuels and its detrimental effects on the environment and the world economy. Also, India though not a signatory to the NPT had been a responsible state and has at no stage been seen to be a proliferator of nuclear technology. All this led to the change in US strategy towards India. This was aptly summed up in President Bush’s statement that ‘things change, times change’. These changing times led to the movement to bring India into a strategic partnership with the US. It was also realized that the strategic partnership would be of interest to India only if, firstly, it provided help with India’s growing power needs to fuel its development and growth; secondly, it was de-facto recognized as a nuclear power; and finally, it was not forced to give up on its strategic nuclear programme and the in-house intellectual capital generated by it. These factors required the US to effectively end India’s nuclear isolation and to provide all possible co-operation and support as far as civilian nuclear technology was concerned. This was only possible by de-facto recognising India as a nuclear power. In order that the civilian co-operation could be restarted, it was important to separate the civilian portion of India’s nuclear programme from its military linkage and then go onto applying international safeguards to the purely civilian programme. By doing this, the US would neither be helping nor hindering the Indian strategic nuclear programme. Thus, separation of the civilian and military programmes had to be the first step in this direction. The nuclear question being cleared, let’s examine the economic aspects.

The economic part started when India was forced to liberalise in 1991, as it did not have enough foreign exchange reserves to meet more than a week’s needs. PM Narsimha Rao and FM Manmohan Singh started the process in 1991, which was further accelerated under PM A B Vajpayee. This economic liberalisation led to growth well above the ‘Hindu’ rate of growth of 3%. Successive governments could then start experimenting with lower taxes, which in turn promoted entrepreneurship. This fact, coupled with the information explosion, led to growing aspirations and demands of the people, starting initially with the urban areas and eventually reaching rural India. The benefits of this growth started reaching all sections of society through direct or indirect ways through the trickle down effect. The number of people living below the poverty line started to reduce, and there was a noticeable increase in the middle class of India. For once instead of empty political slogans like ‘Garibi Hatao’, India had started to generate more wealth; the government had started to collect more taxes and could thus distribute more through formal/ informal channels. This growth rate and liberalization prompted foreign direct investment into India from the mature economies, fuelling further growth. More growth demanded more resources, which were not available. No business or country, like individuals, would provide anything unless there is some benefit in it for them. Thus there was a need to further liberalise to attract foreign resources. This liberalisation led to a booming stock market led by strong foreign institutional investment. Government policies, and the fact that Indian industry was now sitting on surplus resources made them confident to grow horizontally and vertically, nationally and internationally. India was on an ever increasing cycle of growth.

Thus the cycle of growth, need for resources, liberalisation, further growth was now set in motion. When the tsunami struck in Dec 2004, India had reached a stage where it could confidently state that it could look after its own needs. It asked donor nations to focus on providing aid to the other needy affected nations. In addition, India was also in a position to provide aid to the other affected countries. Today, India is at a stage where it has a sustained growth rate of 8%, and is finding that double digit growth is within reach. This growth has spurned a new and confident middle class that in addition to saving has surplus disposable income that it is willing to spend. Consumerism is now alive and growing in India. This is music to the ears of any business, especially if this consumer group comprises of people larger than the population of most countries. Businesses want to grow and do business in, and with India. The major stumbling blocks are poor infrastructure, shortage of resources in general and energy resources in particular, spiraling energy bills that can stall the growth, cross border terrorism that is hindering growth in some parts of the country and lastly the concerns about environmentally sustainable growth. All these factors, besides others, have been India’s compulsions to go in for this deal. What exactly has been achieved in this deal?

This deal is Phase II of the process of strategic partnership advancement, started by Bush and Manmohan on 18 Jul 05. In the words of the PM this deal ‘will permit our countries to move forward towards our common objective of full civil nuclear energy co-operation between India and the United States and between India and the international community as a whole’. This deal rested on India identifying a separation plan between civil and military nuclear establishments. This has been done. The separation plan is based on the 27 February statement of the PM to Indian parliament, and his subsequent tabling of the deal in the Parliament. This suggests that about 65% of India’s nuclear capacity or about 14 nuclear sites would be deemed as civilian and would thus come under International Atomic Energy Agency (IAEA) safeguards in perpetuity. The balance 35%, as also the Fast Breeder Reactors would be deemed military and would be outside the scope of safeguards. India would also be assured of fuel supply for its civilian programme in perpetuity. In addition, this deal also de-facto recognizes that India could build more nuclear plants, and has the sovereign right to classify them as civilian or military. The civilian plants would have to be under international safeguards and would be assured of fuel supply, both, in perpetuity, through suitable international mechanisms that would be worked out by the US with the NSG. The fruits of the research and hard work put in by our nuclear science community would also be protected. All this was achieved by very hard bargaining by the Indian side. Our scientific and strategic community was against the deal initially and went to the media voicing their concerns. They felt that the deal would not be in the interest of India, as it would give away the fruits of many years of hard work put in by them towards developing the indigenous nuclear technology. What was it that the scientific community and strategic thinkers could ‘live with’ and what they absolutely could not, in case the deal was signed?

This is always a question that needs to be answered, and there is no one who better understands the nuances of this subject than the scientific and strategic communities. The scientific community did not want the FBR to go under safeguards, nor did they want any third party to have access to our intellectual capital with regards to our nuclear programme, that was so painstakingly built in international nuclear isolation. This has been taken care of in the deal. In addition, India still retains the right to develop more reactors and classify them as civilian or military, as per needs. The civilian portion would be under safeguards and would receive nuclear fuel, in perpetuity. Thus, in effect, India has got all that it positively wanted so as to grow and develop viz., access to ‘clean’ energy. It has got access to nuclear fuel in perpetuity for its civilian nuclear plants and can thus expect to have the energy resources to meets its ever growing energy demands. This will contribute in great measure to accelerate the economy to double digit growth in the foreseeable future. Growth will ensure that the benefits of development reach the lowest strata of society. Of course, growth will also lead to increasing disparity between the rich and the poor but what is more important in India’s case is that it will also lead to a noticeable drop in people below the poverty line. Greater wealth generation will increase the government’s share that would in turn give the government greater flexibility to manage social programmes for the benefit of the underprivileged sections of society.

India will have to fend for itself as far as the military sites are concerned. This was the case all along, so nothing has changed out here. India has until 2014 to complete the process of civilian military site separation. This would be a difficult process but is achievable taking into account the experience, expertise and the time frame. It will cost us economically too but that appears to be a small price to pay to ensure that the present growth trajectory is not flattened due to paucity of energy resources. The Indian nuclear policy had changed from a policy of ‘ambiguity’ to a policy of ‘credible minimum deterrence’ over the years. Also, India has a declared ‘no first use’ and ‘no use against non nuclear weapon states’ policy. China too has a similar declared policy. These policy declarations guide the working of the strategic and scientific community. Representatives of the scientific community, after the deal, have stated that they could ‘live with’ this deal. This implies that India has all the resources needed to meet its nuclear policy obligations. This has also been clarified and stated by the Indian government. The deal also de-facto gives India a unique status in that India is recognized neither as a NWS with all the privileges of the same and nor as a NNWS with all its attendant obligations and regulatory controls on all its nuclear facilities. India has to approach the IAEA for devising an India specific safeguards protocol. What have we lost? We have to ensure that our civil and military programmes are separate, the former being under international safeguards. This fact is going to raise the cost of ‘maintaining and extending’ India’s strategic nuclear capabilities. This is the price that India can definitely pay for ensuring unhindered growth and development through energy security in the future.

This deal also gave a signal to the international community that India was now ready for business and was willing to negotiate and be flexible to accommodate divergent views from the international arena. India had finally left the high-pedestal and had moved onto working with other nations based on the principle of ‘enlightened national interest’. No country in the world grudges that. Every country is entitled to work towards its own national interest. At this juncture it is most important for India to actually work towards ‘Garibi Hatao’ through wealth generation, wealth distribution and growth leading to greater wealth generation. Energy security would help us to achieve these. There are a large number of tracks being pursued by the government to this end but this paper will only focus on the nuclear aspects. It may be interesting to note that Russia has agreed to supply fuel for the safeguarded Tarapur 1 & Tarapur 2 nuclear reactors, even before the US Congress had an opportunity to debate on the passing of the deal agreed to between the US and India. Russia has already notified the NSG by evoking the exception clause. France is also ready and waiting, for the deal to be cleared by the US. Larger the number of nations willing to supply, larger would be the choice of offered incentives for India to go through with a particular country, in addition to ensuring the cheapest and uninterrupted availability of nuclear fuel for India. This deal is thus a win-win deal.

Strategic partnership with the US has brought India into the international limelight and this will have a definite plus side in the days to come. Business and political leaders from all across the globe are now making exploratory and consolidatory moves towards how they could benefit from an enhanced relationship with India. Foreign governments and businesses are eager to expand ties with India and this would help India overcome its resource crunch. Greater resources available to infrastructure development and manufacturing would help increase employment for people with marginal or no skills and thus help move people out of the agricultural sector – a sector that can only provide subsistence living to the vast majority of the unskilled or semi-skilled landless employees, in the Indian scenario. Thus, people at the lowest end of the economic spectrum would have an opportunity to better their lives. The exposure would also lead to increasing number of international tourists, visitors and businesses coming into India contributing to growth in the service industry. This would help provide employment to the literate unskilled or semi-skilled manpower, besides others. This augurs well for the future of India and its ‘tryst with destiny’.

The strategic partnership also envisages partnership in the following other areas viz., ‘Economic prosperity and trade’; ‘Energy security and a clean environment’; ‘Innovation and the knowledge economy’; ‘Global safety and security’; and ‘Deepening democracy and meeting international challenges’. From the text of the joint statement issued on 02 Mar 06, none of these areas has anything that could be called detrimental to Indian sovereignty, as made out by some political parties. In effect, the portion of the text on ‘enhanced counter-terrorism cooperation between the two countries’ works to India’s benefit. The positive affect of this could be immediately seen in the joint press conference given by President Bush and General Musharraf at Islamabad on 04 Mar 06, during President Bush’s visit to Pakistan. In the long run, this will only go in India’s favour as it would help rid it of terrorism that is affecting some peripheral parts of the country.

It is also said that the US would pressurize India into taking position’s that would go against India’s strategic interests or principles, by invoking the strategic partnership. This is wholly misleading, as nothing in the joint statement text dictates such interpretation. Also, it must be remembered that this is a world of ‘duality’. Every desirable aspect comes with the undesirable too. It is left to the individual or country to make the right choices. It may also be of interest to mention that Canada, with a population of about 32 million and which enjoys a unique relationship with the US, due to geographical and strategic reasons, said ‘No’, when asked by President Bush to support the US invasion of Iraq. India, with a population of 1.1 billion and located on the opposite side of the globe from the US, definitely cannot be pushed around on this account. The Indian government can be trusted to say ‘No’ when asked to go against its principles or its ‘enlightened national interest’. In case of doubt, the opposition would also have a vital role to play to ensure this very effectively in our vibrant parliamentary democracy.

In the end, it can be categorically stated that, here and now, this ‘historic’ deal is considered vital for our economic interests and for improving the living conditions of the people of India, while having a nil to minimal impact on our strategic interests.

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