India's trade with S Asia less than 4% of its global trade

10 Jun '20

3 min read

Pic: Brookings

While India’s trade with South Asian nations has been in the range 1.7-3.8 per cent of its global trade, China has consistently raised its exports to the region from $8 billion in 2005 to $52 billion in 2018, a growth of 546 per cent, according to a Brookings India policy brief. Trade within South Asia was among the lowest at 5.6 per cent in 2017.

South Asia, as noted in the paper, comprises Afghanistan, Bangladesh, Bhutan, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka.

Enhancing trade in the South Asian region is not only economically beneficial, it is also strategically important to integrate India with the global economy, the May policy brief by Riya SInha and NIara Sareen said.

Regional integration in South Asia requires addressing several non-tariff barriers (NTBs) and further reduction of the ‘sensitive lists’ maintained by countries to ensure the effectiveness of trade agreements. Furthermore, good practices from other regions must be tailored to the South Asian context to facilitate the resolution of reported barriers to trade, it said.

For India and her neighbours, a stronger political will is required to combat barriers to trade in the region, especially after the COVID-19 crisis, which may result in unleashing a new wave of protectionist measures.

South Asia’s lack of regional connectivity, despite the advantages of proximity, has a long history of mistrust, conflict and political upheaval. In addition, India’s presence as ‘big brother’ in the region has made its smaller neighbours wary to take the initiative. Moving forward, policies must focus on reducing barriers and facilitating greater connectivity in all spheres to build trust and counterbalance China’s growing ties with India’s neighbours, the researchers noted.

The momentum for free trade of the 2000s has been largely lost with India’s neighbours. Trade liberalisation initiatives under the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) have been under negotiation for more than 15 years.

SAFTA and the even bolder idea of a South Asian Economic Union no longer feature in New Delhi’s regional focus today. India’s free trade agreement (FTA) with Sri Lanka dates back 20 years, and negotiations towards an expanded Comprehensive Economic Partnership Agreement (CEPA) keep getting delayed, the paper noted.

Given that the global agenda of multilateral trade liberalisation has stalled, India must redouble its focus on regional trade arrangements. This will require political leadership to sacrifice domestic protectionism to pursue long-term strategic interests of greater trade interdependence with its neighbours.

Paratariffs, which are additional tariffs levied on imports by states, are not a part of SAFTA or any other FTAs in the region. Additionally, NTBs such as import policy barriers, anti-dumping and countervailing measures, testing and certification requirements, export subsidies and government participation have all curtailed the potential of intra-regional connectivity, the policy brief added.

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