2.3. 1991 and After: Era of “Pragmatic” Foreign Policy

The disintegration of Soviet Union and the transformation of the international order with the end of cold war made it imperative for India to chart a new course in foreign policy. At the beginning of the post cold war era in international relations, the ascendance of US raised multiple questions on relevance of ideology in foreign policy as well as the option of nonalignment. On the economic front the country was also confronted with an unprecedented balance of payment crisis partly as a consequence of the first Gulf War of 1991. This situation led to the choices that dramatically altered India’s domestic and international economic policies. This involved the adherence to Washington Consensus backed by the IMF and the World Bank. Concretely, this meant structural reforms that increased the role of market forces in exchange for immediate financial help. This also meant a greater quest for foreign Direct Investment (FDI) to transform India’s economy. In order to make it an attractive destination for FDI India, in this phase pursued multiple changes, such as:

♤ Giving up the commitment to import-substituting industrialization,

♤ Restructuring its vast public sector

♤ Dismantling the previous regime of regulations, licenses, permits and quotas.

At the same time India turned towards Southeast Asia in search for avenues that can be explored for engagement in economic and strategic arena. Previously, in the duration of the cold war India had been largely oblivious to the states of Southeast Asia. With the opening of its markets to foreign investment and an eye on development of a viable export sector, the country embarked upon a “Look East policy” after 1991. While these changes were afoot, the P.V. Narasimha Rao Government in 1992, in the context of the Oslo Accord between Israel and the Palestinians, upgraded its diplomatic relations with Israel to the ambassadorial level.

With China the Narasimha Rao government continued a process that had been initiated during the Rajiv Gandhi government. During the Prime Minister Narsimha Rao’s visit to China in September 1993 a land mark agreement on the Maintenance of Peace and Tranquillity along the Line of Actual Control (LAC) in the India - China Border Area was signed. This was followed up by the visit of Chinese President Jiang Zemin in 1996 when another agreement on Confidence-Building Measures (CBM) in the Military Field was signed.

In the neighbourhood India reassessed its tactics to bring about transformation in relations with its neighbours. The neighbourhood was identified as the first concentric circle of India’s foreign policy and in policy terms this was reflected in the Gujral Doctrine of 1996, named so after the then Foreign Minister Inder Kumar Gujral .