7 PM Editorial |Integrating South Asia Through Trade| 13th July 2020

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Integrating South Asia Through Trade


China is using its  economic strength to increase its influence in South Asia. China-Pakistan Economic Corridor(CPEC); investments in Sri lanka, Bangladesh and Nepal are pursued actively. Such investments are leading to debt traps as is seen in case of Sri Lanka, Maldives.

In such a scenario, India must rejuvenate its own neighbourhood policy to counter expansionist moves of China in south asia. Trade is one important tool to do so.

Unfulfilled potential of intra regional south asian trade:

World bank’s report on south asian trade points out that restrictions in a south asian country are 2 to 9 times more for trade from south asian countries compared to other countries. While SAFTA(South Asian FTA) is in force, it has a lot of tariff lines excluded from the agreement on the basis of a ‘sensitive list’. This has resulted in only $23 billion goods trade in 2015 against a potential of $67 billion.

Further, average trading cost between country pairs in South Asia is 20 percent higher than among country pairs in ASEAN. It is cheaper for India to trade with Brazil than with Pakistan.

It is a result of lack of trading infrastructure, complex non tariff barriers and red tape.

Hence there is a need for renewed focus on intra regional trade.

Proactive approach for facilitating trade:

India being the largest economy and country must assume asymmetric responsibility in promoting intra regional economic integration. India can expand imports of other south asian countries without expecting immediate reciprocity. Such early harvest can generate trust and good will.

In 2012, India provided unilateral duty-free access to its market for the least developed countries from South Asia(Afghanistan, Bangladesh, Bhutan, Maldives and Nepal). Further steps that can be taken to facilitate imports from neighbourhood are:

  1. Encouraging Indian private sector to invest morein the neighbourhood. This leads to building of regional value chains which will increase regional trade. Further Indian companies can tap markets in south asia. IT services, tourism, spices, garments, leather products, agriculture products are some areas which can be explored.
  2. Investing in hard and soft infrastructurethat enables trade and investment. Hard infrastructure includes Integrated check posts, port infrastructure, waterways, logistics. Soft infrastructure include digitalization, data exchange mechanisms, single window clearances and risk management. This seamless integration at borders will enable reduced costs and promote investments.
  3. Enabling adherence to non tariff measures(NTMs) of India. India must conduct systematic workshops to create awareness on NTMs. This builds capacities of exporters and also provides feedback to Indian authorities on NTMs.
  4. Capacity building for standards and testing. This ensures conformation to Indian standards. Bureau of Indian Standards (BIS) has been providing technical support to the Bangladesh Standards and Testing Institution to help in standardisation and conformity assessment. Such programs must be made intensive and systematic.

Size and capacity asymmetry make its neighbours view India with suspicion and mistrust. This can be bridged through a proactive ‘Neighbourhood First’ policy with India adopting import liberalization from South asia. This promotes trade and investments which will serve India’s strategic interests in the long term.


Mains Question:
  1. South asia remains one of the least economically integrated regions of the world. What are the challenges to trade in South Asia?  What steps need to be taken to promote economic integration in the region? [15 marks, 250 words]
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