India Has Potential To Triple Its Trade With South Asia, Says World Bank


India has the potential to more than triple its trade in goods with its South Asian neighbours to $62 billion against its actual trade of $19 billion, said a World Bank report. In a report titled ‘A Glass Half Full: The Promise of Regional Trade in South Asia’, the bank estimates India’s potential trade in goods with South Asia at $62 billion against its actual trade of $19 billion, which is a mere 3% of its global trade and about $43 billion below its potential.

Deeper regional trade and connectivity can reduce the isolation of Northeast India, give Indian firms better access to markets in South Asia and East Asia, and allow it to substitute fossil fuels by cleaner hydropower from Nepal and Bhutan. Citing gains for Indian consumers will also gain from the availability of a greater variety of consumer goods at cheaper prices. It said the trade between India and Pakistan is $2 billion but without trade barriers, this could be $37 billion.

Given its complicated history, size asymmetries, and a trust deficit, small steps backed by policy persistence is probably the right way to go for South Asia. An incremental approach towards deeper trade cooperation could be powerful. It highlights two specific examples of cooperation in the region that sheds light on both the barriers and the opportunities related to regional trade and connectivity-the setting up of borders haats by India and Bangladesh to enable small-volume trading among local communities on both sides of the border and second, liberalization of India-Sri Lanka air services, which has improved connectivity, reduced air fares, and increased passenger traffic and air cargo volume.

The report emphasized that South Asian trade regimes discriminate against neighbours and protection is greater in the case of imports from within the South Asia region than from the rest of the world.  he costs of trading, which are a reflection of the transportation and logistics infrastructure and the efficiency of customs and border procedures, are considerably higher within South Asia than within other trade blocks of comparable size.

Complicated and non-transparent non-tariff measures erode the market access granted by South Asian countries to each other and are sometimes held responsible for undermining the unrestricted market access granted to the least developed countries by India. The report recommends an approach of open regionalism, and views intra-regional trade as complementary to, and as a stepping stone for, deeper global integration.