South Asia, now open to Business

Context: 

Recent visits by the heads of states of various countries in the South Asian region provides a ground on discussion of growth of the region and role of India’s growth in the integration of the region.
India is emerging as the third-largest economy and a major tech hub.

• Examples: 
  • The recent visits to India by Nepal’s Prime Minister and Sri Lankan President highlight the shifting currents in South Asian regionalism. 
  • The new external push to the Subcontinent’s economic integration:
    • The Japanese Foreign Minister’s recent travels to India, Colombo, and Male.
    • A surprising visit to Sri Lanka by the French President. 

South Asian Region:

• Comprises: It is the southern region of Asia that consists of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
• Demography: South Asia’s people are its biggest asset but remain wastefully underutilized.
  • Half its population is under the age of 24 and over one million young people are set to enter the labor force every month until 2030.
  • If the quantity and quality of South Asia’s human capital were to improve, regional GDP per worker could double.

Earlier Pessimistic Discourse on the South Asian Regionalism:

• Least Interaction & Insufficient Connection: South Asia is the least integrated region and insufficiently connected to the world. 
• SAARC is the ultimate way for Integration: The road to regional integration in the Subcontinent must necessarily run through the South Asian Association for Regional Cooperation (SAARC).
  • However, experience clears out that a successful SAARC is not a precondition for thriving economic regionalism. 

An Era of 1990s & Beyond:

• The liberalization and globalization of the South Asian economies began in the 1990s.
• Growth in the Region by Trade & Connectivity: It marked the growth of regionalism in the Subcontinent and a new interest in trade and connectivity. 
• Concerns: 
  • Uneven Economic Reforms: Economic reform was uneven across the region.
  • Security Challenges: Less support for cross-border connectivity projects amidst multiple political disputes among the region resulted in the region’s security challenges.

Growth in the 21st century:

• A Phase of Improvement: The 21st century has seen considerable improvement within the Subcontinent and in the connections between South Asia and the world. 
• Growth in Trade: The share of intra-regional trade in the Subcontinent’s trade with the world has grown from about 2 percent in 1990 to about 6 percent.
• Challenge: 
  • The trade share is nowhere near the potential or the achievements of other parts of Asia. 
    • But the direction is clearly positive.

Factors Accelerating Regional Economic Integration:

• Economic Reforms: The renewed pressure to undertake economic reform. 
• India’s Growth: India’s relative economic weight in the world has grown and also its commercial ties with neighbors have increased. 
  • Connectivity: Major initiatives for cross-border connectivity now complement India’s growing trade volumes with its neighbors. 
  • Infrastructure: Trans-border projects to promote rail, road, energy, power, financial, and digital connectivity have all gained momentum in India’s engagement with its neighbors. 
• The Statistics:
  • Bangladesh is the fourth-largest destination for Indian exports — valued at about $16 billion in 2022.
  • India’s exports to Sri Lanka at about $6 billion are comparable with India’s exports to Japan.
  • Delhi’s exports to Nepal are more impressive at $8.5 billion.
• China Factor: 
  • The rivalry between the US and China and the deepening conflict between India and China have changed the Subcontinent’s geo-economic template.
  • In de-risking their commercial ties with China, the US and its allies now actively promote economic and technological engagement with India.
• Co-Working: India is now working with its like-minded partners to offer credible economic alternatives to its neighbors.
  • They are also promoting economic integration between India and its smaller neighbors. 
    • Examples: 
      • The US helped Nepal’s energy and road connectivity with India with the $500 million Millennium Challenge Grant.
      • Japan is now promoting sub-regional connectivity between India and Bangladesh that can potentially transform the economic map of the eastern subcontinent and the Bay of Bengal.

Conclusion:

• India has a long way to go before it can radically restructure South Asia’s economic architecture, but it now has economic weight and political purpose to ensure the integration of the region.
• The region’s new economic openness, India’s flourishing neighborhood policies, and Western support for an India-centered regionalism in South Asia could transform the Subcontinent’s geo-economic landscape.

News Source: The Indian Express

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