Trade and connectivity are the main factors of strong relations with neighboring countries. The opportunities and challenges that exist in South Asia in this context.

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Question – Trade and connectivity are the main factors of strong relations with neighboring countries. Discuss the opportunities and challenges that exist in South Asia in this context. – 24 January 2022

AnswerWith the rapidly changing scenario, the policies to deal with foreign affairs also keep on changing. Therefore, India also keeps on making such changes in its foreign policy from time to time, so that maximum benefit can be obtained from the circumstances. India launched the ‘Neighborhood First Policy’ in the year 2005 to meet the need of regional integration in South Asia in the current era of globalization.

‘Neighborhood first policy’ means to give priority to our neighboring countries i.e. ‘Neighborhood first’. The policy focused on the development of border areas, better connectivity and cultural development of the region and promoting people-to-people contact. It is noteworthy that this is a medium of soft power policy only.

In recent times, India has reiterated the importance of engagement with its neighbors through its Neighborhood First Policy. Its importance has increased with China’s growing economic and strategic presence in the region.

In this context, India should harness the vast unprocessed potential of the South Asian region for trade and connectivity:

  • Intra-regional trade in South Asia accounts for 5% of the region’s global trade, which is well below its potential. Actual trade between South Asian countries stood at only $23 billion in 2015 against a potential of $67 billion.
  • According to an analysis by the Department of Commerce, there has been no significant increase in imports from South Asian countries to neighboring countries from 2012-13 to 2016-17, but exports from India have been increasing regularly for most parts.
  • Lack of connectivity in South Asia: Despite the geographical connectivity, connectivity initiatives in South Asia are underdeveloped. South Asia lacks roads, rail networks, inland waterways, air corridors and maritime connectivity.
  • It is widely held that connectivity corridors can pave the way for economic corridors.

However, there are some challenges for the capacity development of this sector which need to be addressed:

  • India’s neighbors view India with suspicion and mistrust because of the disparity in size and affection between India and its neighbors. Furthermore, criticism of India’s harsh power strategy, for example the blockade of Nepal, the emergency in Maldives, etc., widens the gap.
  • Due to mistrust between exporting and importing countries, it becomes difficult to put all countries on the same line, share data electronically, and establish agreed and preferably cohesive mechanisms for cargo clearance.
  • There is a lack of consensus on fundamental security and developmental issues. Furthermore, South Asia is one of the few regions that does not have a regional security infrastructure.
  • The average trade cost between the two countries in South Asia is 20 percent higher than in ASEAN, and it is cheaper for India to do business with Brazil than to trade with Pakistan. Non-tariff measures (NTMs) are also a major barrier to trade between countries in the region.
  • The region also has a wide history of historical conflicts, such as border conflicts between India and its neighbours, the issue of terrorism, ethnic violence, trade in counterfeit goods, counterfeit currency, etc.
  • Trade, investment and connectivity are closely linked, and there is an opportunity for the private sector in India to invest in neighboring countries and help accelerate regional value chains and increase regional trade in various parts and components.
  • Such opportunities can arise in sectors like IT services, tourism, spices, clothing, leather products, agricultural products etc.
  • In addition, companies from neighboring countries can also invest in India to generate a similar positive impact on regional trade and value chain.
  • India can help build capacity for standardization and testing, so that exporters from neighboring countries can more easily certify their products. India is providing such assistance to Bangladesh, Nepal, Afghanistan etc.
  • Timely execution of the BBIN (Bangladesh, Bhutan India and Nepal-BBIN) Motor Vehicle Agreement, as well as bilateral initiatives with Bangladesh and Nepal, are highly needed in the current context.

Therefore, for its success, it is necessary that there is a minimum of deadlocks by our neighbors, in such a situation the policy of Neighborhood First policy can prove to be an effective option, provided its continuity is maintained with commitment. There is no doubt about it. That India will soon become the fourth largest economy of the world but with this development it is necessary to always maintain peace in India that India should not worry about the relations of its neighbors.

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