Britain, Australia, Canada, Western Europe, and Japan

India Table of Contents

From the late 1940s to the mid-1960s, independent India's most important relationship was
with Britain. New Delhi and London had special relations because of common historical
ties, political institutions, interest in economic development, high levels of trade between
India and Britain, and British investment in India. Despite this special relationship, Nehru's
policy of nonalignment was designed, in part, to prevent India from becoming too
dependent on Britain and other former colonial powers. In spite of cooperation with
Australia, Britain, and Canada in the Commonwealth of Nations--which was established by
Britain in 1931--India's nonaligned stance frequently put India at odds with Britain, the
United States, and other Western countries on Cold War and anticolonial issues (see
Commonwealth of Nations, this ch.). Nevertheless, common democratic principles and the
willingness of the developed countries to provide economic assistance prompted India to
build modest but constructive relations with these countries.
India's relations with Britain remain important. India has so successfully diversified its
economic ties that London's domination is no longer a consideration for New Delhi; British
trade, investment, and aid, however, are still significant. A substantial community of people
of Indian origin live in Britain, contributing to the business and intellectual life of the
country. Economic relations were improving in the early and mid-1990s with the
implementation of India's economic reforms. Political differences stemming from India's
nonaligned stance tended to dissipate with the end of the Cold War and the collapse of the
apartheid system in South Africa.
From the mid-1960s until the early 1980s, the difficulties encountered in conducting trade
and investing in India caused countries such as Japan and the Federal Republic of Germany
(West Germany) to seek more fruitful commercial opportunities elsewhere in the
developing world. In the sphere of international politics, the intricacies of balancing ties
with India and Pakistan, India's tilt toward the Soviet Union beginning in 1971, divergent
views on nuclear proliferation issues, and the situations in Afghanistan and Cambodia left
little room for improvement of relations with Japan and Western Europe. Modest moves
taken to liberalize the Indian economy in the early and mid-1980s and increased
availability of private investment and official developmental assistance from developed
countries, however, provided India with the opportunity to increase trade and obtain aid
and investment from Japan and Europe. Indian trade with countries of the European
Economic Community rose dramatically, and Japan became India's largest aid donor. By
the late 1980s, Indian, West European, and Japanese leaders exchanged regular visits.
In the early 1990s, expanding Indian exports and attracting investment from developed
countries became a major priority in India's bilateral relations. India developed closer ties
with Berlin--now the capital of a united Germany--Tokyo, and the European Economic
Community (later the European Union) to promote Indian economic interests and enhance
its diplomatic maneuverability. Japan remained India's major source of bilateral assistance,

and Berlin was New Delhi's largest trading partner in the European Economic Community.
Nevertheless, India and the developed countries had differences over security and nuclear
issues and the attachment of political criteria to developmental assistance.
Relations with Australia suffered in 1990 and 1991 as India expressed its displeasure with
Australia's sale of Mirage fighters to Pakistan. In 1991 the German government announced
it was cutting official aid to India because of "excessive armament," while the British,
Canadian, and Japanese governments warned India that future assistance would be cut back
if India did not curtail its high levels of military spending, which the developed countries
contend suppressed economic development. In addition, Britain, France, and Germany also
increased pressure on India to sign the nonproliferation treaty, and France cautioned India
that any future agreements to supply India with nuclear material and technology must
adhere to "full-scope safeguards" to prevent diversion to nuclear weapons production.
Finally, India remained concerned that developed countries would impose human rights
conditions as criteria for economic aid.