SOUTH ASIA is today the politically correct way to refer to a region once better known as the Indian subcontinent. While political divisions may have made the ‘Indian’ prefix somewhat presumptuous, the subcontinent remains a reality as a compact and easily identifiable geographical space occupied by a diverse people, who nevertheless share a common history and enjoy strong cultural affinity and kinship ties.

The subcontinent is also a natural economic unit with a very high degree of intra-regional complementarities. Therefore, even though our region is home to several independent and sovereign states, there is a compelling argument in favour of charting a course towards a South Asia Union, where political divisions become progressively less relevant as benefits of economic integration and growing interdependency grow in salience.

It is on the basis of these geographic, historical and cultural continuities that one can hope to build a new and productive architecture of cooperation that has so far eluded the South Asian Association for Regional Cooperation (SAARC). For India, the important question is whether regional economic integration will serve India’s interests involving, as it inevitably would, a free flow of goods, services, peoples and ideas across our borders. Or would a policy of insulating ourselves from our neighbours be more prudent? How will regional economic integration impact on the ongoing process of globalization of the Indian economy? Will the forces of economic integration and interdependence help in overcoming political and psychological barriers which have bedevilled the region? Conversely, will these barriers continue to trump the forces of economic integration and interdependence?

It is now accepted wisdom that the globalization of the Indian economy with more outward and liberal economic policies has delivered high growth rates and relative prosperity. India sees itself as an integral component of the dynamic and even dramatic transformation of the Asian economy. The much talked about shift in the centre of gravity of the global economy from West to East is both a condition as well as a consequence of India’s own emergence as an economic powerhouse. We see the globalization process as involving India in concentric and ever widening circles of economic cooperation. In this architecture, regional economic integration in South Asia becomes an integral part and inner most zone of these concentric circles. It is difficult to see how India can take full advantage of the growing and even more dense web of economic interaction and interdependence binding Asia together, while remaining in relative isolation from its own immediate periphery.

 

It is also difficult to visualize India being able to focus over an extended period of time, say for the next 20 to 25 years, on delivering rapid economic growth, unless we can ensure a relatively peaceful and stable periphery. Crises in neighbouring countries, conflict situations or worse, the possible emergence of failed states, may so completely preoccupy us that we may be compelled to divert our national energies to dealing with the consequences of a troubled neighbourhood. Therefore, efficient management of our neighbourhood becomes a necessary condition of ensuring that for the forseeable future, our energies remain focused on economic development and eradication of poverty. Insulating ourselves from developments in our neighbourhood is not possible. In an age of globalization, it is also not desirable, since the larger integration into the global economy which we seek, also requires pursuit of economic integration in our own region if it is to deliver its full benefits.

If the pursuit of regional economic integration of South Asia is in India’s interest, what would be the most appropriate strategy to achieve this? What are the challenges we need to overcome?

The defining feature of South Asia is asymmetry. India is by far the largest among the countries of the region, larger in size, population and economic and military capability compared to all others combined. It shares land and maritime boundaries with all its neighbours, but they do not with each other. There are significant ethnic, linguistic and cultural spill-overs across India’s borders with each of its neighbours. The Indian footprint is visible across the subcontinent. These are largely absent if we consider relations among our neighbours themselves. It is this asymmetry which influences the perceptions and attitudes that shape the neighbourhood policies of India and South Asian nations. This is the challenge of proximity we need to deal with.

 

Apprehensions among our neighbours concerning political and economic domination by India are a given. They are inherent in asymmetry. It is inevitable that our neighbours will engage in ‘hedging’ tactics to countervail India’s dominant position. This should neither lead to a constant moaning about a perceived lack of affection from our neighbours; nor should India react with a prickliness that often borders on acute anxiety, whenever our neighbours are deemed to be wooing other suitors. The first often leads to excessive and mostly misdirected generosity and accommodation; the second to harsh over-reaction and a constant blame game. There arises a kind of siege mentality and a tendency to shut out a neighbourhood perceived as being hostile and unfriendly.

Against this background, it is not difficult to see why, in 1985, when SAARC (South Asia Association for Regional Cooperation) was established, it was mostly seen in India as a ganging up of hostile neighbours to try their own containment strategy against this country. These suspicions were to a large extent justified, certainly if we examine the motivations of at least some of our neighbours.

During the past decade there has been a steady rethink in India’s approach to its neighbourhood. The new Indian approach is encapsulated in India’s current message to its neighbours – look upon India as an opportunity and not as a threat. From being a reluctant and often suspicious partner in SAARC, India is now an unambiguous champion of a vision of an integrated region where shared prosperity could help usher in peace. It is India which articulated, at the SAARC Summit of 2002, a blueprint for a South Asian Union with a common market and also a common currency. Since then, it has taken a number of initiatives to promote economic integration in the region and this trend is likely to be further strengthened in the coming years.

 

What has led to this change in outlook? This policy shift has been based on the growing belief that the pursuit of economic integration in South Asia must be an indispensable component of the globalization of the Indian economy. Additionally, there is also an assumption that the pursuit of economic integration with a web of interdependence it will inevitably result in, offers prospects for overcoming the political and psychological barriers that divide the region. Asymmetry in this context can be an advantage. The very size of the Indian economy, its expansive diversity and increasing openness and liberalization, provides an opportunity for this country to emerge as the indispensable engine of growth for all its smaller neighbours. The same asymmetry should give us confidence to remove barriers to the free flow of goods, services and investment as part of a SAARC Free Market, even if this requires non-reciprocal benefits to be extended to our neighbours.

The experience of free trade and comprehensive economic cooperation with Sri Lanka, the mutual benefits that Bhutan and India are beginning to enjoy as a result of hydropower development in Bhutan, the enmeshing of the Indian and Nepali economies thanks to an open trade and open border regime, have resulted in greater mutual sensitivity to political and security concerns and overall, more stable and positive political relations between India and these countries.

Nevertheless, if our objective of building a dense web of interdependency in our region is to be realized, a number of challenges will need to be overcome.

First, the mindset needs to change. We must stop looking at our borders as walls behind which we can insulate ourselves from our neighbours (which in any case is practically not possible as the porousness of the Indo-Bangladesh and Indo-Nepal borders would testify) and begin to treat them as ‘connectors’.

 

Second, and related to the first, we must stop treating our own border states and border areas as some kind of buffer zone, safeguarding the more populous and more developed interior areas. Such an approach may have had a certain logic during the time of British colonial rule. However, in independent India, all territory within our borders is national territory. All people living within these borders have an equal status and equal rights to development. The hangover of British colonial attitudes, which most visibly survives today in the continuing institution of ‘inner-line permit’, has retarded development in our sensitive border areas, increased the sense of alienation among people residing in those areas and increasingly detached them from the national mainstream. Both development and security have suffered as a result.

Third, once we are able to bring about this critical shift in our approach to borders, border states and frontier areas, the objective of regional economic integration would require a concerted plan for improving connectivity – between these areas and the rest of the country, and parallely, between India and our neighbouring countries. These must go hand in hand. There is also an urgent requirement for upgrading border infrastructure, such as immigration and custom checkpoints, quarantine facilities and tourism promotion facilities. Our border states and border areas can play the role of ‘connectors’ only when such transport and border infrastructure is put into place. This is a huge challenge since today we are not even as connected as we were in the subcontinent before 1947.

In the context of our relations with Pakistan, Prime Minister Manmohan Singh signalled a new approach when he said, ‘I do not have the mandate to change borders; but I do have the mandate to make these borders irrelevant over a period of time.’ But this is a principle applicable to all our neighbours. Over a period of time, the establishment of transport and communication connectivity amongst all the countries of South Asia will enable the uninterrupted flow of goods, services, peoples and ideas through such cross-border ‘transmission belts’. After years of relative neglect, the government has finally begun to fast-track the implementation of projects in this sector.

 

Another significant part of India’s neighbourhood policy is based on the recognition of the crucial role that culture and people to people contacts can play in forging a shared identity. There are very strong cultural affinities among the people of the subcontinent. The ethnic, cultural and linguistic spillover across India’s borders with its neighbours is as much an asset as it is a complicating factor in our interactions with them. These cultural affinities with peoples of neighbouring countries (witness the success of the celebration of ‘Punjabiyat’ between Punjabi-speaking people across the India-Pakistan border) can be leveraged into reinforcing a sense of togetherness and shared identity. This, too, is beginning to be reflected in our cultural exchange policies, with a conscious priority being accorded to our neighbours.

 

India is the current chairperson of SAARC and thus in a unique position to promote the objective of economic integration in the region. We must use this opportunity to convince our neighbours that far from being threatened and dominated by India, they have available to them a vast, productive hinterland that would give their economies far greater opportunities for growth than if they were to rely on their domestic markets alone or on economic and trade relations with countries outside the region. India must make itself relevant to the growth aspirations of the people of the entire subcontinent.

As the largest economy in the region, India will inevitably have to shoulder the greater responsibility. It will have to be far more liberal in opening up its markets to goods from SAARC neighbours than it has been so far. We will have to make a larger financial contribution to developing connectivity and cross-border infrastructure. If we are able to convince our neighbours that India is prepared to make them full stakeholders in its economic destiny, then the goal of a vibrant and globally competitive South Asian Economic Community would be within reach. The impact this would have on the Asian and global economy would truly be momentous.