4
These external changes could not have come at a worst time. The end
of the Cold War coincided with the domestic economic crisis. Despite
being the second most populous country after China, the Indian economy
remained small, heavily indebted and with a slower growth rate. Its mixed
economy model came to symbolize the inefficiency of the socialism and
exploitative nature of capitalism. The Kuwait crisis was a further burden as
it forced India to evacuate over 150,000 of its citizens from the emirate
and the additional financial loss in the form of stoppage of remittances.
These cut into India’s ability to import essential items.
Under such circumstances, the government headed by Prime Minister
P. V. Narasimha Rao decided to adopt a policy of gradual economic open-
ing and its integration with the global economy. The path chosen was to
allow privatization and reduce government control over economy and
trade. Along with the economic reform measures, Rao also recognized the
need to reorient the foreign policy both to ensure the success of the
economic reforms and to reclaim India’s position in the global politics.
The sudden disintegration of the Soviet Union also exposed the fallacy of
military might without a firm economic basis. Hence, the economic
reforms and political reorientation had to go hand in hand and their
successes were inter-dependent and closely linked. Indeed, the weakening
of India’s international influence, especially after the Sino-Indian conflict
of 1962, was due to its weak economic power.
At the foreign policy level, the post–Cold War Indian approach changed
and shed its ideological hesitation and sought friendly relations with all
major powers of the world. It strove for better relations with the US,
Western Europe, Australia, Japan and other First World countries without
abandoning its traditional constituencies in the Third World. It felt the
need to befriend not only Russia but also the newly independent former
republics of the USSR. The economic ascendance of China meant India
would have to find ways of benefitting from the former’s economic prog-
ress without undermining its interest.
This approach was more palpable in the Middle East. Both to recognize
the Arab willingness to pursue a political settlement to the Arab-Israeli
conflict and to signal a break from the past, in January 1992 India normal-
ized relations with Israel. Ending the four-decade-old recognition-
without- relations indicated New Delhi’s willingness to come to terms with
the end of the Cold War.
The shift also became necessary vis-à-vis Iran as well as oil-rich Gulf
Cooperation Council (GCC) states. The economic reforms grew the
P. R. KUMARASWAMY AND MD. M. QUAMAR