India needs to withdraw its army from the border quickly. This will reduce the economic costs of war tensions, and consolidate the gains of its spectacular diplomatic success in getting the US to arm-twist President Musharraf into formally renouncing terrorism.
At the height of the war rhetoric earlier this month, I was asked on a TV programme whether hostilities were imminent. I replied that chances of full-scale war were close to zero. If so, I was asked, why was war rhetoric so loud? For two reasons, I answered. The minor reason was that war rhetoric enabled the government to temporarily rally the nation and divert attention from the ghastly events in Gujarat. The major reason, however, was to panic the US into exerting pressure on President Musharraf.
This tactic succeeded. The US already had many other major issues on its plate: a possible fresh Al-Qaeda attack, suicide bombings in Israel, and plans to oust Saddam Hussein in Iraq. So the US was not focused on the subcontinent. Taking advantage of this, Musharraf had released many militants arrested in January. Infiltration into Kashmir had risen, culminating in the attack on Kaluchak.
India by itself could not have checked this. Military adventures like bombing training camps in Pakistan would risk escalation into major war, yet would not have reduced cross-border infiltration. So, bombing would have been a helpless flailing of arms, not a solution.
The only solution lay in diplomacy, in getting the US to intervene. This tactic had already been used successfully last December. After the attack on Parliament, India mobilized its armed forces along the border. This sent alarm bells ringing all over Washington DC. To avoid a possible nuclear war, the US told Musharraf he absolutely must crack down on jehadis. Musharraf responded with his historic speech of January 18, changing Pakistan’s policy decisively and putting his own life in danger. What looked like a military offensive by India was actually a diplomatic offensive that succeeded.
This June, India repeated the tactic, again successfully. It told Washington categorically that it would take overt action against Pakistan unless militant infiltration was stopped or reduced. This concentrated minds in Washington, which leaned on Musharraf to explicitly disavow cross-border terrorism. Cynics will say that Musharraf is not totally serious, and in any case does not control all militant groups. So, India’s diplomatic success is only partial. It remains a historic success for all that.
However, it has two attendant problems. First, it involves substantial economic costs. Second, the tactic of threatening war cannot be repeated endlessly: it suffers from diminishing returns.
Consider the economic cost. By convincing the US State Department that the risk of war was high, India inevitably convinced the world business community too that the risk is high. And that community responded by diverting trade, investment and jobs to countries other than India. The computer software industry, which was all set to cash in on the global economic revival, now says many visits by many potential customers have been put off. Before the war rhetoric, several international firms were considering shifting their back-office operations to India. Some of them have decided to shift instead to the Philippines, where costs are slightly higher but war risk is lower. Those shifting to the Philippines will not easily shift again to India. Especially not if we keep beating war drums.
The economic cost so far has probably been modest. Companies familiar with India have not left, or even stopped expanding. Only newcomers have steered clear of us. Tourists, of course, have steered clear too. Some importers of goods are cautious about placing fresh orders on either India or Pakistan. Why place orders in countries with war risk when competitive suppliers are available elsewhere in Asia?
To date, this adds up to only a modest cost. But the cost will keep rising with every month that the war risk continues. If we keep our Army full mobilized, if we keep beating war drums, many more international companies will get nervous and look for options in other Asian countries. India is not the only supplier of merchandise, software or back-office operations. Just a modest worsening of India’s comparative advantage can translate into major economic losses if this continues.
Even in foreign policy terms, keeping the Army fully mobilized on the border is tactically unsound. The aim of Army mobilization is not to scare Musharraf (who is scare-proof) but to scare the USA into action. So far, this tactic has worked brilliantly. But if we keep threatening covert action against Pakistan every time there is a new militant attack, we will either escalate into war (with huge economic costs) or else lose credibility, and so suffer serious diplomatic costs.
A far better policy would be to withdraw the Army from the border. This will serve three purposes. First, it will reduce tensions and hence economic costs. Second, it will induce greater US diplomatic interest by showing that India is willing to reward American arm-twisting of Musharraf. Third, additional militant attacks are inevitable and unstoppable, especially with militants determined to sabotage the coming Kashmir election in October. When this happens, it is advantageous for India to threaten escalation from a lower rather than higher base. If the Army is withdrawn from the border, escalation can mean returning to the border. But if the Army is already fully mobilized on the border, escalation will mean bombing Pakistan, with much higher economic and political risks.
So, the way ahead is clear. Let us withdraw from the border. It will not end militancy: nothing will. But it will yield higher diplomatic and economic returns at lower cost and lesser risk.