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.

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Source: U.S. Library of Congress