To offset China, India should go for unilateral trade liberalisation along with boosting regional connectivity

A total of 142 connectivity projects in Afghanistan, Bangladesh, Bhutan, Maldives, Myanmar, Nepal and Sri Lanka have been initiated by India over the last six years, of which 53 have been completed, writes N Chandra Mohan for South Asia Monitor

N Chandra Mohan Jul 31, 2020
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India is belatedly defending its fast-diminishing sphere of influence in South Asia by improving connectivity with neighbours like Bangladesh and Nepal. Bangladesh and India are now operating commercial container trains to boost cross-border commerce. A container ship from Kolkata docked in Bangladesh’s Chattogram port, from which the consignment was sent by trucks to an Integrated Check Post adjacent to Agartala in India's northeastern state of Tripura. With Nepal, the second ICP at Jogbani-Biratnagar was inaugurated in January this year. Around 1,650 kilometers of rural roads are being
built. Cross-border rail links are in the planning stage.

The drive for regional connectivity has no doubt been dictated by the lengthening shadow of China over South Asia. That the dragon is Bangladesh’s largest trading partner is a painful reminder to India of its failure to deepen economic integration with its neighbours. China has urged Nepal, Afghanistan and Pakistan to forge “four-party cooperation” to work together on projects under the Belt and Road Initiative, including the China-Pakistan Economic Corridor (CPEC), according to the Hindustan Times. The fact that such “four-party cooperation” is being actively promoted without involving India will not be music to New Delhi's ears.

Rolling out connectivity projects to match China, however, is no substitute for a strategy of integration. New Delhi cannot match Beijing with checkbook diplomacy. The latter has cumulatively invested upwards of USD 100 billion in power, roads, railways, bridges, ports and airports in the region. By contrast, India has invested much less: an official estimate of its investments is pegged at USD 8 billion since May 2014. A total of 142 connectivity projects in Afghanistan, Bangladesh, Bhutan, Maldives, Myanmar, Nepal and Sri Lanka have been initiated by India over the last six years, of which 53 have been completed.

India’s External Affairs Minister S Jaishankar elaborated on India’s track-record on connectivity projects during the Raisina Dialogue in January this year. On Bangladesh, he noted that the pre-1965 road and rail connections which were disrupted have all been restored; that there are projects underway for inland waterways, ports, roads and rail. On Nepal, there is a sea-change in its electricity situation because of transmission projects successfully completed during the last five years. The minister also mentioned the gas pipeline from Motihari in Bihar to Amlekhgunj in Nepal, the first cross-border pipeline in South Asia inaugurated last year.

Enhancing connectivity with Bangladesh, Bhutan, Nepal 

Jaishankar was present when India handed over 10 broad gauge locomotives to Bangladesh. India obviously sees improved rail connectivity with its neighbor as vital for improving bilateral trade. “Thanks to our well-timed efforts, the business communities of the two countries have started utilising freight trains for transporting commodities and raw materials for manufacturing industries”, he noted. A total of 17 railway projects have been included in the Line of Credit assistance extended by India to Bangladesh, entailing a commitment of USD 2.44 billion. Of these, nine projects have been successfully
executed.

Besides Nepal, more than a dozen ICPs are being constructed or expanded along borders with with Bangladesh, Bhutan and Myanmar. On Bhutan’s request, India opened a new trade route which will decongest vehicular traffic along the Jaigaon-Phuentsholing route which accounts for the bulk of land-locked Bhutan’s trade with India and other countries. India is also fast-tracking a railway link between Mujnai in West Bengal and Nyoenpaling in Bhutan. A noteworthy development on the connectivity front is that for the first time Bhutanese cargo of stone aggregates reached Bangladesh on an Indian
vessel on the Brahmaputra river last year. 

Healthcare delivery 

Better connectivity is necessary for more flows of trade and commerce within the region. South Asia is one the least integrated zones with intra-regional trade of only 5 percent of its total trade. The region has a quarter of the global population and half the number of the world’s poor. The case for greater regional cooperation, if not integration, is compelling. As the dominant economic power in the region, India has an important role to play in this regard. Unfortunately, the region receded from its priorities due to its on-going troubles with Pakistan in favour of groupings like the Bay of Bengal
Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

Besides the growing heft of China, Covid-19 provided India an opportunity to reconnect with South Asia. There is much that India can contribute with its capabilities in producing affordable medicines and healthcare delivery. South Asia has limited resources. Its human security indicators per person are inadequate. 

Now there is also a sense of urgency in pushing for greater regional connectivity to defend its turf. India must immediately follow up with unilateral trade liberalisation that ensures greater market access for the goods of its neighbours. This will blunt some of their resentment of only registering massive trade deficits with India when they begin to acquire a greater stake in the opportunities provided by its economy.

(The writer is an economics and business commentator based in New Delhi. The views expressed are personal.)

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