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24
September 2018
 |
World Bank (The
Total Investment & Insurance Solutions)
Deeper regional trade and
connectivity has the potential to more than triple India’s trade with its South
Asian neighbors, World Bank said in a report on Monday.
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,” the bank said in the report.
Citing gains for Indian consumers will also gain from availability of 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 the context of South Asia, an incremental approach toward deeper trade cooperation can be very powerful, and the region has witnessed examples of this in the form of India-Sri Lanka air services liberalization and India-Bangladesh border haats,” said Sanjay Kathuria, Lead author of the report and Lead Economist, World Bank.
India, the report points out, can play a critical role in regional cooperation for mutual economic and welfare gains. 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.
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,” the bank said in the report.
Citing gains for Indian consumers will also gain from availability of 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 the context of South Asia, an incremental approach toward deeper trade cooperation can be very powerful, and the region has witnessed examples of this in the form of India-Sri Lanka air services liberalization and India-Bangladesh border haats,” said Sanjay Kathuria, Lead author of the report and Lead Economist, World Bank.
India, the report points out, can play a critical role in regional cooperation for mutual economic and welfare gains. 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.
Barriers:
SAFTA’s failings
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.
In 2016, average tariffs in South Asia where 13.6%, more than double the world average of 6.3% and the highest among major regions of the world despite a regional free trade agreement (SAFTA) which came into force in 2006.
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.
In 2016, average tariffs in South Asia where 13.6%, more than double the world average of 6.3% and the highest among major regions of the world despite a regional free trade agreement (SAFTA) which came into force in 2006.
It pointed to two drawbacks
of the agreement. First, each country maintains a long “sensitive” list of
products that are exempted from the tariff liberalization program. Almost 35%
of the value of intraregional trade in South Asia is subject to sensitive list
tariffs; over 39% of India’s exports to the region fall under the sensitive
lists of various partners.
Second, several countries in the region maintain high para tariffs (that is, duties imposed on imports, but not on domestic production), which have not been included in the tariff preference programmes in free trade agreements. Among the major economies in South Asia, Bangladesh, Pakistan, and Sri Lanka main high para tariffs.
Further, the costs of trading, which are a reflection of the transportation and logistics infrastructureNSE 3.09 % 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 least developed countries by India.
The report recommends an approach of open regionalism, and views intraregional trade as complementary to, and as a stepping stone for, deeper global integration.
Kathuria added that given the complicated history of the region, size asymmetries, and a trust deficit, small steps backed by policy persistence is probably the right way to go for South Asia. The Total Investment & Insurance Solutions
Second, several countries in the region maintain high para tariffs (that is, duties imposed on imports, but not on domestic production), which have not been included in the tariff preference programmes in free trade agreements. Among the major economies in South Asia, Bangladesh, Pakistan, and Sri Lanka main high para tariffs.
Further, the costs of trading, which are a reflection of the transportation and logistics infrastructureNSE 3.09 % 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 least developed countries by India.
The report recommends an approach of open regionalism, and views intraregional trade as complementary to, and as a stepping stone for, deeper global integration.
Kathuria added that given the complicated history of the region, size asymmetries, and a trust deficit, small steps backed by policy persistence is probably the right way to go for South Asia. The Total Investment & Insurance Solutions
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