In many ways the story of Punjab is anomalous to the stylized facts of civil war literature. Empirical literature on civil wars points to a negative correlation between income and likelihood of conflict. There is also cross-country evidence to suggest that rough terrain contributes to greater possibility of violence. Both these facts did not hold in the case of Punjab. However, recent research on terrorism supports the view that terrorism is not correlated with poverty and lower education levels. This is consistent with terrorism in Punjab, where terrorists on average were moderately educated and came from families owning small and medium sized farms.

Having a rural base in Punjab was essential to the terrorist movement as this helped them remain hidden from the police forces. This was despite not having forest cover or rugged terrain. The key to inducing the local population not to denounce the rebels is local knowledge or information about who is doing what at the village level. Local knowledge allows the rebels to credibly threaten retribution for informing the police. Evidence from Algeria by Kalyvas (1999) suggests that ethnic insurgents use this informational advantage to a great extent, often threatening and inflicting harsh sanctions on their own people. In Punjab, kidnapping was an efficient technology used by terrorists to extract their rents and terrorism was informationally extremely localized, especially in villages. This suggests that farmers were deeply affected by terrorism and were acutely aware of the attacks due to a high degree of social capital locally.

The year 1984 saw the Indian Army being deployed in the state because of several incidents of terrorism. A separatist group, Khalistan Commando Force proclaimed the independence of Punjab (calling it "Khalistan") and they along with Bhindranwale took refuge in the Golden Temple, the holy shrine for the Sikhs. In April, extremists simultaneously attacked thirty nine local railway stations located in twelve different districts. On 2nd June, the army sealed off Punjab from the rest of India and seven tanks rolled into the Golden Temple. As has been observed elsewhere, specific events suddenly mobilize large numbers through grievance and coordination and this seems to have been the case after Operation Bluestar. A couple of months later, Indira Gandhi was shot dead by two of her Sikh bodyguards.

In 1985, President’s rule was lifted with the Rajiv Gandhi-Longowal Peace Accord, which referred all contentious issues to several commissions. But the accord was never fully implemented by the central government. In May 1987, due to political instability, President’s rule was imposed again. It has been shown through a theoretical argument that a peace pact may increase conflict in later years because the extremist faction of the separatists would want to grab power from the moderates who signed the accord. This appears to have happened in Punjab.

The death toll due to terrorist violence rose from 1,333 in 1987 to 5,265 in 1991 and tapered to 871 in 1993. By 1994, the police under the leadership of K.P.S. Gill declared that terrorism had been defeated and that normalcy had returned. Along with an increase in police personnel, changes in foreign support due to sealing of borders with Pakistan and the curtailing of ISI funding by Benazir Bhutto contributed to usher in peace. This eventually resulted in both internally generated terrorism and external abetment being wiped out.

In the rationalist strand of explanations for civil conflict, the theory of commitment problems seems to fit the scenario of Punjab. Despite a series of negotiations, there was no breakthrough between the Centre and the separatists. This may have been because of two reasons. First, there were commitment problems, i.e. no credible commitment mechanism for the separatists to believe in the centre’s offers. This would mean that once the extremists handed over their weapons, there would be an incentive for the government to renege on its promises. This commitment problem is prevalent in many civil conflicts and usually can be solved through a credible third-party commitment agency or if the movement is crushed completely as was done in Punjab. Second, issue indivisibilities namely, river water sharing and Chandigarh being made capital of Punjab were issues that did not seem to have a bargaining equilibrium as there may have not been enough alternatives for the groups to choose from. This problem was accentuated by the divisions among the militant groups themselves despite trying to forge alliances through committees. Which of these reasons was more important is an open question, but I think that issue indivisibilities could have been resolved using monetary transfers, but trustworthiness of the government would have always been suspect (which is rational for the terrorists).

During 1987 to 1992, the agricultural growth rate plummeted from 6% to 2%. To analyze how terrorism impacted Punjab’s economy, it is critical to understand how violence affected investment decisions of firms and farmers. A likely mechanism through which terrorism affects investment is through firms facing the threat of extortion of their employees (human capital losses) or loss of property (physical capital losses). The threat of extortion may increase especially if the investment is visible to outsiders, for instance if the farmer has a tractor or a firm has a huge plant. Another mechanism could be through the risk of migration. Due to deterioration of such property rights, investment is likely to decrease. Also, as conflict increases, land would be more difficult to collateralize (and interest rates set higher). This would lead to a reduction in land investment. Terrorism may increase the risk of a regime change and the accompanying redistribution of land would make long-term investment unprofitable. An increase in the probability of dying would also make investment less attractive. Finally, an increased risk of migration would negatively impact investment.

Which of these factors was responsible for a decline in agricultural investment and shutting down of several factories can only be found out by ruling out the others. As of now, because of data availability issues, it is difficult to say which channel was the most important. However, regression analysis shows that violence leading to an increase in the probability of kidnapping (proxying for threat of extortion) turns out to be a significant channel. Such a channel has been ignored earlier in the empirical literature on conflict. It reinforces the anthropological stylized fact that individuals were well informed about terrorist activities. And this knowledge helped them better predict future kidnappings and reduce their investment accordingly.

Prakarsh Singh is a Researcher at the London School of Economics and currently a visiting scholar at the Institute for Defence Studies and Analyses, New Delhi. This comment is based on his LSE mimeo “Impact of Terrorism on Investment.”

Now that the IAEA Draft Agreement is on the World Wide Web and the Communists have withdrawn their support to the UPA, it is reasonable to assume that the next few steps will also follow in good time. The alacrity with which the Americans have drafted their letter to the 45 members of the Nuclear Suppliers Group is remarkable and shows that the Bush administration is indeed very keen to see the deal through before its term ends at the end of the year. What we are not so sure of, however, is the future of the UPA and the Congress. But given the overwhelming support for the deal from quarters such as the SP, it seems that many doubters will finally come around to accept the deal as something that is in India’s interest.

Fears of restrictions on India’s freedom to test in the future are also somewhat unfounded and exaggerated. India is a reluctant nuclear weapons power and would like to continue to work for elimination of all nuclear weapons. India would, therefore, be more than happy with a ‘minimum’ deterrent and is unlikely to be interested in a huge weapon stockpile. As North Korea has recently proved, deterrence does not require too many nukes.

How we develop our relationship with the United States in particular and the NSG members in general will depend largely on our diplomatic acumen. “Winning Friends and Influencing People” should be India’s mantra, without being shy of befriending the Western Bloc simply because it is seen as belonging to the imperialist camp by the Indian Communists. It must be remembered that during the halcyon days of the Sino-US honeymoon in the 1970s and 1980s, the US bent over backwards to meet almost all Chinese demands. It was during this momentous period that the People’s Republic milked the US and its European friends for modern technology including super computers, access to many universities for its students and above all assistance to build a strong strategic industrial base. The then US under Secretary for Defence Bill Perry specialising in smart weapons technology led many delegations to the PRC and gave it valuable support to develop its arms industry. The famous ‘Peace Pearl’ programme was designed to specifically help the PRC build a modern fighter aircraft. It is a different matter that the Tiananmen Square incident put paid to the programme in late 1989 when the PRC came under arms embargo. Despite this, the Chinese managed to keep alive their links with Israel and extracted much benefit from the Lavi design of which the Chinese J-10 fighter is a modernised copy. Let it also not be forgotten that recently the Russians allowed the Chinese to export the JF-17 ‘Thunder’ fighter aircraft with a Russian engine to Pakistan.

As a result of their association and their fast improving economy, the Chinese were soon able to stand on their own in the all important area of armament development with numerous arms enterprises of the Soviet era design being transformed into state-of-the-art industry of the third/fourth generation. Would they have achieved even a fraction of this capability without befriending the US and the West?

There is every chance that with improved Indo-US relations, India too can look forward to American assistance in many cutting-edge hi-tech fields such as aero-engines, electronics, radar, UAV and UCAV, civilian/commercial aircraft manufacture and a host of other weapons, missiles and air defence platforms, and not just outright purchase of aircraft.

It is also important to remember that even with an overwhelming proportion of its weapon systems being of Soviet/Russian design, the Indian Armed Forces never once followed Russian war fighting doctrine, strategy or tactics and thus remained up to date with Western thinking unlike the Chinese who took a long time to absorb Western technology and methods of employment of advanced weapon systems. India’s armed forces are therefore eminently suited and ready to derive immediate benefits from this relationship. Whether we like it or not, the US still has considerable clout and participation in the European arms market and can easily facilitate or stop arms exports and technology transfer to India as it has done in the past. It may be recalled that following the sanctions in the wake of the 1998 tests, the Indian Navy’s Sea King helicopters were grounded for want of spares as these spares had come from the US although the helicopter was of British make.

There are many other areas where India can benefit from US assistance. Alternative/renewable energy technology such as fuel cell, solar, ethanol, biomass, coal based methane, gas, oil refining, mining, agriculture and in a variety of other related fields India can collaborate with the US and the West for technology transfer. The ‘offset agreements’ in future arms purchases may also be more meaningful and beneficial as it is hoped that no Indian entities would be barred from doing business with their US counterparts. India’s quest for self-reliance and rapid all round development in the armament industry may also fructify sooner than later.

The US is, however, not used to dealing with just ‘friends’, it likes to deal with Allies whether most favored or somewhat distant. It may sometime appear as if the US embrace is too restrictive and cramps the Indian style. But Indians proved quite adept at dealing even with an antagonistic United States at the height of the Cold War and still extracting food aid and assistance for the Green Revolution. The fact of the matter is that the two democracies have learnt along the way and are today better placed to appreciate each other’s needs and sensitivities. The nonproliferation Ayatollahs in the United States must learn to view India in a different light and the Indians must be more pragmatic and stop conjuring up a post-American world. The US will continue to wield considerable influence for many years to come even if it sometimes appears that it is helpless in dealing with some of its implacable adversaries. The benefits of the Nuclear Deal are thus not restricted only to US assistance for India’s civilian nuclear programme.

On the face of it, India and NATO are poles apart. NATO is a military alliance. India is a non-aligned country with an independent foreign policy. Any engagement between India and NATO is, therefore, problematic.

However, whether India likes it or not, NATO is on its doorsteps. It is conducting a UN-mandated mission in Afghanistan as the leader of ISAF. No one has called for NATO’s withdrawal from Afghanistan. Russia, China, Iran and India may all be uncomfortable with NATO’s presence in Afghanistan, but they have no alternative strategy to stabilise Afghanistan. So, they have to tolerate NATO in Afghanistan for the moment at least.

NATO made an appearance in Pakistan after the 2005 earthquake in the Kashmir region. NATO engineers, paramedics and other support teams landed in the earthquake affected region within no time. Although NATO has wound up its relief mission in Pakistan, the two sides have expressed a desire for cooperation. NATO Secretary-General welcomed the appointment of the new Pakistani Prime Minister Gilani and expressed the hope that contacts consultations and dialogue between the two sides will continue. NATO regards Pakistan as a valuable ally in the war on terrorism. Pakistan will encash this dependence of the western world.

NATO is in search of missions “anywhere, any time”. Protecting Europe against an attack from Russia is no longer its only mission. It is taking in its stride new threats to its members. These threats arise from far away like in Pakistan and Africa. Therefore, it is developing capabilities to tackle these new threats – terrorism, WMD proliferation, drug trafficking, threat to energy infrastructure, and so on. It has currently several missions spread all over the globe and has devised a variety of instruments to engage with various countries.

New Delhi cannot prevent NATO from expanding its footprint into areas which are of strategic interest to India. NATO has developed partnerships with the Central Asian Republics and with countries in the Mediterranean region, and has active dialogue with Japan, Australia, Singapore, etc. Under an initiative taken in Istanbul, NATO has approached Persian Gulf countries for cooperation.

Interestingly, China, which should be worried about the NATO presence in Asia, has not shunned it altogether. China and NATO have a dialogue with each other since 2002 although it has yet to be formalised. Judging by articles in Chinese journals, NATO and China may formalise their informal relationship. After all, NATO has a highly structured relationship with Russia, which harbours deep apprehensions about NATO’s eastward expansion. A formal relationship between China and NATO, and between Pakistan and NATO, is not unthinkable.

India has to consider this situation: what if NATO offers “partnership for peace” or a similar cooperation programme for countries in India’s neighbourhood like Bangladesh, Sri Lanka or Nepal? How would it react?

No doubt, there is genuine apprehension in India about NATO’s expansion outside its traditional area of operation. NATO is recasting itself as a global actor with military and technical capabilities to reach any part of the world. Recently, ships from NATO countries came to the Indian Ocean for the first time. India will have to take these developments into account. But can India stop NATO from expanding? No. That is the reality.

NATO has taken a positive view of India and has launched a charm offensive. It has realised that India is a rising power with powerful military capabilities. In NATO’s perception, India is a democracy that shares many common values with many NATO members. NATO and India have many shared security concerns like the fight against terrorism, WMD proliferation, drug trafficking, and disaster management. That is why in recent years NATO has made overtures to engage India. Deputy Secretary General of NATO Ambassador Rizzo visited India in 2006, met officials in the Ministry of External Affairs and had public engagements. External Affairs Minister Pranab Mukherjee held discussions with NATO Secretary-General Jaap De Hoop Schaeffer at the United Nations in 2007. Schaeffer’s message was that India and NATO have shared values and common security concerns and that they can cooperate with each other. Understandably, the Indian response has been mute.

Success in Afghanistan is vital for NATO. It knows that India is playing a commendable role in Afghan reconstruction despite not being a part of ISAF. NATO also recognises India’s role in regional security issues – counter terrorism, non-proliferation, maritime security, etc. It therefore seeks to engage India.

There is understandable apprehension in India towards NATO. NATO is a military alliance led by the United States. Its recent actions smack of it wanting to play the role of global policeman. It hobnobs with Pakistan which is a part of the terrorism problem. It is coming into areas which are of strategic concern for India. India cannot take NATO’s rhetoric at face value. It cannot agree with many of NATO’s actions like expansion up to Russia’s borders.

It is crucial for India to understand NATO’s true motives. This is best done by opening a channel of dialogue with NATO. The dialogue needs to be low key without fanfare. India should not close the option of co-operating with NATO on a case by case basis, particularly on terrorism and WMD related issues. India should also apprise NATO of its perceptions on regional and international security issues.

A dialogue with NATO does not mean agreeing with it on all issues. It only means that India will have a channel of communication open with an organisation that is fast increasing its presence in various regions. It also means making NATO receptive to India’s own concerns.

The UN has sanctioned many of NATO’s missions. If Russia, China, the Arab countries and other friends of India can talk to NATO, why not India?

On May 27, 2008, participants from 91 countries assembled in Washington to commemorate the fifth anniversary of the Proliferation Security Initiative (PSI) – a controversial counterproliferation initiative launched by President George W. Bush in Krakow, Poland on May 31, 2003, with a view to improve global coordination to intercept shipments of weapons of mass destruction (WMD) and related materials by ‘rogue’ states and terrorist groups.

Five years after its launch, the milieu has transformed, though not drastically. Proponents of PSI argue that instances of proliferation have come down. There is heightened surveillance over countries of proliferation concern as well as non-state groups that are likely to engage in WMD proliferation. However, one cannot credit this trend as a total success because the Initiative has been mired in controversies and systemic issues that have hampered its proactive propagation. Moreover, security planners have been pondering over its legal validity and political feasibility given its promotion of military interdiction to tackle WMD proliferation.

Since its launch in 2003, there have been just a handful of declared cases of successful PSI interdictions. Instead, what has been seen in the past five years are numerous plenary meetings with platitudinous declarations and an umpteen number of military interdiction exercises among PSI participants. The once-effusive proponents of the Initiative in the Bush administration are now guarded in their reference to the PSI.

On the sidelines of the fifth anniversary, Under Secretary of State for Arms Control and International Security John Rood outlined “a number of successes” for the Initiative, including international exercises and the increasing numbers of signatories. But he refused to go into detail about how many actual interdictions have happened so far. “We have released some examples of successes but there are intelligence and other issues involved. There are reasons why, when information has been clandestinely acquired, are protected from public disclosure. Depending on the circumstances of the interdiction, various people will know, or may not know," he said.

Interestingly, unlike the secrecy maintained now, the initial years of the Initiative were witness to intense campaigning and projection of interdiction successes so much so that the first purported PSI interdiction – the BBC China, which was allegedly carrying centrifuge parts to Libya in December 2003 – was stated as a “seizure that had a major role in Libya’s decision to give up the pursuit of WMD.” However, PSI managers immediately retracted this claim after John Wolf, a former undersecretary of state for non-proliferation, remarked that this interdiction was not a PSI operation. After this controversy, the Bush administration continued asserting the successes of PSI, but has abstained from divulging details for “fear of disclosing and damaging sensitive operations and intelligence sources.”

In a May 2005 PSI event, Secretary of State Condoleezza Rice claimed that “in the last 9 months, PSI partners have cooperated on 11 successful efforts.” Under Secretary Robert Joseph went further by claiming that there were over 30 successful PSI operations. Joseph had also claimed that PSI partners have worked to prevent Iran from procuring goods to support its nuclear programme, and also prevented a ballistic missile programme in another region from receiving equipment to produce propellants.

During the fifth anniversary, National Security Advisor Stephen Hadley shared with participants an example of a successful PSI operation in February 2007, “when four nations worked together to interdict (missile-related) equipment bound for Syria.” Hadley’s assertion has been typical of PSI managers claiming success for the Initiative without substantiation with hard data. It was therefore not surprising when Hadley claimed that PSI interdictions have been successful all over the world, and have stopped “many shipments of sensitive materials destined for Iran, North Korea, and Syria.”

While ambiguity on its success rate continues to diminish the Initiative’s glaze, other issues add to its diminishing glory. Foremost among them is the nature of membership and lack of clarity on who constitutes its actual participants. During the fifth anniversary celebrations, PSI managers had declared that the number of participants had risen from 86 in 2007 to over 91 countries this year. The ‘Washington Declaration’ adopted at this meeting noted that “91 PSI participating states have endorsed the Statement of Interdiction Principles.” John Rood also referred to this figure saying that “the metric (of success) number one: we have over 90 countries participating in just five years.”

Critics of the Initiative contest these figures for many reasons. Though participants have downplayed the concept of membership by explaining it as an ‘activity’, actual participation is currently done through two interlacing methods. The first is to publicly endorse the Principles through a diplomatic note accompanied by a public statement of support; and second to sign Ship Boarding Agreements. The first group of around 20 members including the erstwhile core group and later entrants (like Argentina, Singapore, Canada, Denmark, Turkey, Norway and Georgia) have publicly supported the Initiative and endorsed its Principles. But only a handful of countries are known to have signed Ship Boarding Agreements with the United States. Eight countries, which are not prominent actors in global anti-proliferation, but are Flag of Convenience (FoC) states with a major share in global shipping (Malta, Liberia, Belize, Cyprus, Croatia, Mongolia, Marshall Islands, and Panama), have signed Ship Boarding Agreements with the US, presumably bringing under the PSI’s ambit nearly 70 per cent of the world’s commercial fleet.

A vast majority of other declared participants are said to have stated their support, but their status on endorsing the Principles and signing Boarding Agreements are still unknown. Though the Washington Declaration claims that 91 countries have endorsed the Interdiction Principles, the State Department website provides data of only a handful of states declaring their endorsement, while it is still unclear what level of support a majority of other declared participants like Russia have given to this Initiative.

Such structural issues apart, the PSI is seriously restrained by its weak legal basis for military interdiction even while its managers suggest participants would perform such actions within the ambit of their individual national legal authorities and international legal frameworks. As a matter of fact, the Bush administration could barely make progress in tackling the legal impediments on military interdiction. When the Initiative was launched, its managers cited provisions in various legal entities and UN Resolutions including the United Nations Convention on the Law of the Sea (UNCLOS), the United Nations Security Council Resolution 1540, the 2005 Protocol Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation (SUA Convention), and Right of Self Defence enshrined in the UN Charter as imparting legal sanction for interdiction of ‘illicit’ WMD material.

However, none of these could legitimise a maritime or aerial interdiction without the consent of the flag state or unless the targeted cargo is within the territorial jurisdiction of the participant state or any other state leading the interdiction operation. A breakthrough came with the 2005 Protocol to the SUA Convention, which, for the first time, gave legal sanction for military interdiction though subject to conditions that include consent of the flag state. Attempts by the Bush administration to justify interdiction in international waters or airspace by citing the right of self defence under the UN Charter (Articles 51, 52 and 53) also proved futile as these Articles sanction self defensive actions only in the event of an armed attack. PSI managers now argue that the Charter has to be reinterpreted in the post 9/11 context with every act of proliferation being deemed an armed attack. With such serious legal bottlenecks derailing a global momentum in favour of the PSI, its managers now place major emphasis on UN Security Council Resolution 1718, which prohibits the transfer to and from North Korea of WMD (and related materials), and Resolution 1737 sanctioning Iran for its uranium enrichment activities.

On the other hand, the Initiative is gradually moving forward by getting more nations to extend in-principle support. In fact, PSI managers are now focusing their energies on roping in the two Asian giants – India and China – into the Initiative. Their absence has heavily impeded the Initiative’s cause in the Asian region. China is averse to any external policing in its neighbourhood and littoral, and is apprehensive about a US-led counterproliferation initiative monitoring its nuclear activities in its backyard, especially given its history of supporting proliferation involving Pakistan and North Korea. India, for its part, has refused to join the Initiative, but participates as an observer in its meetings and exercises. While prospective political repercussions at home is a natural deterrent, the primary obstacle for India’s involvement is the reference in the 2005 Protocol to the SUA Convention, which allows nuclear trade only by non-weapon states that have the IAEA’s Comprehensive Safeguards Agreement (CSA) in place. India has item-specific safeguards for some of its facilities and does not accept the CSA given its de facto nuclear weapon state status.

Despite such shortcomings, over 90 countries seem to have theoretically agreed to cooperate on interdiction of illicit WMD and related materials. These countries would ultimately end up forming a ‘web of partnerships’, as envisioned by President Bush, to lead a global momentum against WMD proliferation. The Initiative has also served as a platform for greater cooperation in intelligence sharing and enforcement. Besides, the increasing monitoring and surveillance over international maritime and air traffic after the 9/11 attacks has considerably put the brakes on proliferators. The fifth anniversary meeting notably discussed measures to strengthen monitoring of the international financial system. Efforts are also afoot to criminalise proliferation-related trafficking by air. In fact, this is likely to provide a new impetus as till now the PSI campaign was mostly confined to creating maritime surveillance against WMD proliferation. PSI managers are also now focussing on attracting more active participants and strengthening their national legal authorities which could be supportive of anti-proliferation actions within their territorial jurisdictions.

In the event, the Bush administration believes that a truly global web of participants would help the Initiative transform into a global norm to be followed in practice by most nations. Such optimism notwithstanding, managers of the Initiative have to contend with the fact that US-promoted counterproliferation initiatives are losing their sheen as a domino effect of the declining fortunes of the Bush administration. Moreover, though the Initiative was envisaged as a complement to the NPT-oriented non-proliferation regime, it has ended up promoting a new anti-proliferation order. States concerned about the United States’ unilateralist tendencies are concerned about the likelihood of these mechanisms being used as a tool to further political agendas like regime change and democratisation. The prospective new dispensation in Washington can, however, give a fresh impetus to the PSI by delinking counterproliferation from other political game plans.