Why is South Asia considered as the world's politically and economically least integrated region? Explain. (UPSC CSE Mains 2021 - Political Science and International Relations, Paper 2)
South Asia region was geographically and culturally designed for the widest possible cooperation but in reality, it was the least integrated region in the world. Protectionism is highly prevalent in South Asian countries, while Southeast Asian economies have preferred accelerated trade and investment reforms even after the Asian crisis.
- Low Inter-Regional Trade:South Asia’s intra-regional trade is the lowest globally, constituting only 5% of the region’s total trade. The current economic integration is just one-third of its potential with an annual estimated gap of 23 billion dollars.
- External Influence in South Asia:Smaller neighboring countries are quite predictable in seeking to balance India''s influence through closer relations with external powers, in the past this was the US at the moment it is
- Recent Chinese actions and policies in South Asia as well as its maritime neighbours, including Indian Ocean Island nations,have made it necessary for India to take its neighbours very seriously.
- Territorial Issues:Territorial disputes in South Asia remain a challenge to the peace, stability, and prosperity of the region.
- Of all interstate disputes, those over territory tend to be more likely to lead to armed conflict.
- Inefficient Management of Global Supply Chain:South Asia’s international trade integration is lower than the global average, and it is way less integrated into global value chains compared to East Asia.
- The countries have abysmally low exports due to the low productivity of many countries in this region.
South Asia is the least integrated in the world which needs to be improved through bilateral FTAs for fuller benefits of cooperation with ASEAN and political commitments from the governments.
Trade creation and trade diversion will cause overall welfare gains in the economies of South Asia as the larger countries India and Pakistan would particularly gain from preferential arrangements with a bigger block such as North American Free Trade Association and the European Union, while smaller ones like Bangladesh and Nepal would benefit more from regional integration.
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