{"id":46133,"date":"2025-06-24T20:34:06","date_gmt":"2025-06-24T15:04:06","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=46133"},"modified":"2025-06-26T15:37:30","modified_gmt":"2025-06-26T10:07:30","slug":"state-of-south-asian-economic-integration","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/24-06-2025\/state-of-south-asian-economic-integration","title":{"rendered":"State of South Asian Economic Integration"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/International Relations; GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>South Asia, despite being home to <strong>over a fifth of the world\u2019s population<\/strong> having cultural and historical linkages, remains<strong> one of the least economically integrated<\/strong> regions in the world.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>State of the South Asian Economy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>South Asia, comprising countries like <strong>India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives<\/strong>, is home to <strong>over 1.8 billion people<\/strong> and represents a <strong>combined GDP of around $5 trillion<\/strong>.\n<ul class=\"wp-block-list\">\n<li><strong>EU:<\/strong> $18 trillion with only about 5.8% of the global population.<\/li>\n\n\n\n<li><strong>NAFTA:<\/strong> $24.8 trillion<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Growth Amidst Divergence:<\/strong> Indian economy has rebounded strongly, driven by robust <strong>domestic demand, infrastructure investment, and digital innovation<\/strong> (Economic Survey 2024\u201325).\n<ul class=\"wp-block-list\">\n<li><strong>Bangladesh <\/strong>has maintained steady growth, particularly in its <strong>garment exports and remittance inflows.<\/strong><\/li>\n\n\n\n<li><strong>Other nations<\/strong> \u2014 such as <strong>Sri Lanka and Pakistan <\/strong>\u2014 have faced <strong>economic crises, high inflation, and debt distress<\/strong>, highlighting the region\u2019s economic divergence.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Low Regional Trade:<\/strong> Intra-regional trade under the <strong>South Asian Free Trade Area (SAFTA)<\/strong> accounts for<strong> just 5% to 7% of total trade <\/strong>\u2014 among the lowest globally.\n<ul class=\"wp-block-list\">\n<li>It is far below the <strong>EU (45%), ASEAN (22%) and NAFTA (25%).<\/strong><\/li>\n\n\n\n<li>High tariffs, poor connectivity, and bureaucratic red tape discourage cross-border commerce.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Trade Gaps: <\/strong>Even countries like <strong>Bangladesh (93% unutilized potential)<\/strong>, <strong>Pakistan (86%), and Afghanistan (83%)<\/strong> have enormous room for economic collaboration.\n<ul class=\"wp-block-list\">\n<li>Meanwhile, the r<strong>egion\u2019s trade-to-GDP ratio<\/strong> fell from <strong>47.3% in 2022<\/strong> to <strong>42.94% in 2024<\/strong>, indicating <strong>declining interdependence<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>High Cost of Being Neighbours: <\/strong>Paradoxically, <strong>it is more expensive to trade within South Asia than with distant partners<\/strong>:\n<ul class=\"wp-block-list\">\n<li><strong>Intra-SAARC trade cost:<\/strong> 114% of goods\u2019 value<\/li>\n\n\n\n<li><strong>Trade cost with the U.S.:<\/strong> 109%<\/li>\n\n\n\n<li><strong>India-Pakistan trade cost is 20% higher than India-Brazil, despite Brazil being 22x farther<\/strong><\/li>\n\n\n\n<li><strong>ASEAN\u2019s intra-trade cost:<\/strong> 76% \u2014 about 40% cheaper than SAARC<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Missed Opportunities:<\/strong> South Asia\u2019s current intra-regional trade among SAARC countries stands at around <strong>$23 billion<\/strong>, far below the potential <strong>$67 billion<\/strong>, and drastically lower than the estimated <strong>$172 billion potential<\/strong> <strong>identified by UNESCAP <\/strong>for 2020.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Other Key Challenges<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Geopolitical Tensions &amp; Distrust:<\/strong> Long-standing rivalries \u2014 especially between India and Pakistan \u2014 have severely undermined regional cooperation initiatives like SAARC and SAFTA.\n<ul class=\"wp-block-list\">\n<li>Political disagreements often spill over into economic decision-making.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Protectionist Trade Policies:<\/strong> High tariffs, restrictive quotas, and non-tariff barriers discourage trade between neighboring countries.\n<ul class=\"wp-block-list\">\n<li>Many South Asian economies have prioritized self-reliance over interdependence.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Poor Connectivity &amp; Infrastructure:<\/strong> Inadequate transport links, cumbersome customs procedures, and underdeveloped logistics networks limit the flow of goods, services, and people across borders.<\/li>\n\n\n\n<li><strong>Asymmetry Among Member States:<\/strong> India\u2019s economic dominance within the region has created power imbalances, leading to concerns among smaller countries about unequal benefits and influence.<\/li>\n\n\n\n<li><strong>Weak Institutional Frameworks: <\/strong>Regional cooperation mechanisms often lack teeth, enforcement capability, or political will to deliver on integration promises.\n<ul class=\"wp-block-list\">\n<li>SAARC, for instance, has been largely dormant.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>China\u2019s Growing Influence:<\/strong> The growing involvement of external powers, particularly China, has led some South Asian countries to prioritize bilateral engagements over intra-regional collaboration.<\/li>\n\n\n\n<li><strong>Climate vulnerability: <\/strong>The region is highly susceptible to climate shocks, from floods to heatwaves, which threaten agriculture and livelihoods.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Initiatives By India Supporting South Asian Economy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Development Partnerships and Lines of Credit:<\/strong> For infrastructure, energy, and capacity-building projects, that include road and rail links with Nepal and Bangladesh, power-sharing agreements, and port development in Sri Lanka and the Maldives.<\/li>\n\n\n\n<li><strong>Infrastructure and Connectivity Projects:<\/strong> Projects like the India-Bangladesh Maitree Power Plant, the India-Nepal cross-border petroleum pipeline, and the Kaladan Multi-Modal Transit Transport Project (linking India to Myanmar and beyond) are designed to boost regional trade and integration.<\/li>\n\n\n\n<li><strong>SAARC Development Fund (SDF)<\/strong>: It finances regional projects in areas like energy, transportation, and social development.<\/li>\n\n\n\n<li><strong>BIMSTEC and BBIN Initiatives: <\/strong>These sub-regional groups aim to promote trade, connectivity, and energy cooperation.<\/li>\n\n\n\n<li><strong>Startup India and Digital Outreach: <\/strong>India\u2019s Startup India initiative has <strong>inspired cross-border collaboration<\/strong>, with Indian incubators and digital platforms offering mentorship and market access to entrepreneurs from neighboring countries.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Forward: Strategic Regionalism<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>South Asia\u2019s development hinges on genuine regional cooperation. To tap into its potential:\n<ul class=\"wp-block-list\">\n<li><strong>Reform SAFTA<\/strong> and focus on actionable enforcement;<\/li>\n\n\n\n<li><strong>Address border and trust issues<\/strong> through sustained diplomacy;<\/li>\n\n\n\n<li><strong>Create regional value chains<\/strong> to boost employment and innovation;<\/li>\n\n\n\n<li><strong>Develop trade infrastructure<\/strong> that supports integration over division;<\/li>\n\n\n\n<li><strong>Separate economic cooperation from political conflict<\/strong>, as seen in the EU model.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> To what extent do political rivalries and historical tensions contribute to the failure of economic integration in South Asia, and how might regional actors overcome these challenges to unlock shared prosperity?<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.thehindu.com\/opinion\/op-ed\/the-sorry-state-of-south-asian-economic-integration\/article69728619.ece\" rel=\"nofollow noopener\" target=\"_blank\">Source: TH<\/a><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/ca\/wp-content\/uploads\/2025\/06\/UPSC-Editorial-Analysis-24-June-2025.PDF.pdf\">Download PDF<\/a><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>South Asia, despite being home to over a fifth of the world\u2019s population having cultural and historical linkages, remains one of the least economically integrated regions in the world.<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-46133","post","type-post","status-publish","format-standard","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/46133","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=46133"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/46133\/revisions"}],"predecessor-version":[{"id":46188,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/46133\/revisions\/46188"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=46133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=46133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=46133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}