Failure of SAARC: Does Delhi want promotion of sub-regional grouping?

Apart from India-Pakistan friction which practically derailed late last month's Kathmandu SAARC Summit, it has also brought forth in the open New Delhi's efforts to make South Asia a viable counterweight to China and limit Beijing's role in the region.
The 29-year-old eight-nation South Asian Association for Regional Cooperation (SAARC) consisting of Afghanistan, Bangladesh, Bhutan, India, Nepal, The Maldives, Pakistan and Sri Lanka has, over the years, become known as a debating club rather than anything else. New Delhi, with its big brother attitude, is known to make attempts to shove its will down the smaller nations' throats while its dealing with them bilaterally does not help either.
However, unlike the previous Congress-led government, the Narendra Modi-led rightwing Hindu nationalist government after winning a landslide victory in May this year, made it very clear that its key strategic priority would be to boost India's influence in the immediate neghbourhood. Critics say that the Congress-led government, during its long uninterrupted rule for decades, actually took its good relations with the neighbours for granted. In fact, the absence of a well-thought-out neighbourhood policy allowed China, its economic giant rival, which shares border with four of India's neighbours, to step into the breach.
CHANGING A LACKADAISICAL APPROACH: Apparently to signal a change in such a lackadaisical attitude, Modi in his first speech in Kathmandu declared that India, South Asia's largest economy, would fund regional infrastructure, health facilities and even a communication satellite and also promised to open its markets to the smaller countries in the region.  
But Modi seems to have realised, during the summit, that it is easier said than done. For example, the failure of the two-day summit to make any significant headway must have made him aware of the scale of the challenge that his country has to face.
The significance of this reality lies in the fact that the summit just could sign one agreement on energy cooperation in the face of India-Pakistan rivalries. The host, Nepal's Prime Minister Sushil Koirala said: "The SAARC has fallen short of expectations."
Another manifestation of this failure is that cross-border trade among the 8-nation grouping still accounts for less than 5.0 per cent of its total foreign trade. This is simply pathetic if one reflects that the SAARC signed a free trade pact in 2006 for promoting trade among the member countries.
It's worth mentioning that Mexico's experience from the North American Free Trade Agreement (NAFTA), signed in 1993-94, is just the opposite. A recent study said that Mexico has emerged as the big winner from NAFTA and demonstrated how a smaller country can benefit from regional groupings. Mexico's exports are now a whopping $1.0 billion a day, more than 10 times the 1994 level. US imports rose by 500 per cent over 1993-2012, more than twice as fast as imports from rest of the world. Besides, after NAFTA came into being, Mexico has seen a surge in FDI (foreign direct investment) from the US, and has seen a major expansion of its auto industry, among others.    
THE LOOMING DANGER: It is interesting to note that Nepal, long under the political influence of India, has tremendously benefited from China's affluence over the last decade, getting much needed new roads and other infrastructure. The venue where the SAARC Summit was held was built by China some years ago.
Bhutan, next to Nepal in the Himalayas, has long been influenced by India which also controls its foreign policy. Although top level political exchanges have been taking place between Bhutan and China for years and Bhutan too is a beneficiary of China's largesse, they don't have formal diplomatic ties because of Delhi's opposition. For example, after his election, Modi advised Bhutan against setting up embassy in Beijing.
A report from Kathmandu summit stated: "It is among several SAARC nations including Pakistan and Sri Lanka that reportedly support full membership for China." China currently enjoys observer status in the regional grouping. India strongly resisted China's promotion to full membership status because it would empower China to veto agreements.
As opposed to Beijing's deeper pockets to shower generosity, New Delhi suffers from a reputation of exerting unwarranted interference in the domestic affairs of some of its neighbours. China has already built ports and other infrastructures and sold weapons across South Asia. Its new Asian Investment and Infrastructure Bank (AIIB) has attracted wide attention, including from India.
In this backdrop, Narendra Modi's efforts to make South Asia a viable economic counterweight to China and limit Beijing's role in the region appear to face some danger. Modi has apparently taken note of this. He announced that visa rules would be relaxed and announced new energy ties with Bangladesh and Nepal and promised to cut India's trade surplus with neighbours. He said progress has been too slow because "we are stuck behind walls of our differences and hesitant to move out of the shadows of the past."  
In this context the Washington-based Brookings Institution's analyst Tanvi Madan said recently that it was natural for the smaller SAARC states to cozy up to China.
CAPITAL-EXPORTING CHINA: China's strategy in investing big money in any country involves long planning and strategy which may be difficult to understand by most outsiders. What others may consider a very high risk investment and stay away, China may think it is strategically necessary and may ultimately prove to be prudential. And it happened sometimes.  
China is emerging as a top capital-exporting country of the world and by now its total foreign investment has reached $625 billion.  In 2013, China's overseas direct investment (ODI) reached $90.2 billion while in return it received a total of $117billion in foreign direct investment (FDI) in the same year. The French news agency AFP quoted China's assistant commerce minister Zhang Xiangchen in Beijing as saying: "It is a matter of time before China's oversees investment exceeds the foreign investment it receives…. Even if it is not realised this year, it will in the near future. China is soon to become a net capital exporter."   
China's ODI was strictly controlled until 2000 when the Communist Party listed overseas investment as a new growth strategy. China's investment has since been receiving a lot of interest outside and a Chinese expert at the Institute of World Development at the Development of Research Centre of the State Council Ding Yifan has explained the Chinese policy in a statement. He said: "It is business people that haggle over the returns of every investment deal while strategists always eye the ultimate strategic gains. China can only stay stable with stability in Russia ensured. In this case, giving a hand to Russia is also helping China itself."
"He pointed out that when some eurozone countries were disturbed by sovereign debt crisis, it was China that acquired their bonds to help stabilise their markets. However, in the aftermath of the crisis when these bonds appreciated dramatically, even some western investors came to China in hope of buying back the bonds that they had tried hard to avoid. Didn't they know that things always change?"
Analysts believe that if any large investment in South Asia fits China's long-term strategy and needs, Beijing would fall for it. Unlike in other countries, bureaucratic wrangling would not prevent Beijing to take decisive action.   
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