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South Asia important geo-politically, not economically: CEA

Economic integration with South Asia is not a top priority for India as its economy relies more on other regions, Chief Economic Advisor Arvind Subramanian said on Tuesday. Geo-political considerations, however, make the area important for India, he added.

“Regional economic integration in South Asia is not a first priority for India. India’s economic fortunes are tied to the rest of the world. Geo-political considerations make South Asia important for India,” Mr. Subramanian said while speaking at the South Asia Economic Conclave organised by CII and the Ministry of Commerce and Industry.

“South Asia has several important, growing markets, but even looking at India’s current pattern of trade, India’s biggest markets are international,” Mr. Subramanian said, referring to India’s trading partners in the rest of the world.

Mr. Subramanian was addressing the gathering on “Expanding intraregional trade: Drawing lessons from ASEAN and NAFTA”. Regarding this, he said that there are several differences between the Association of Southeast Asian Nations (ASEAN) and the North American Free Trade Agreement (NAFTA), which made it difficult to draw lessons from one for the other.

First of all, the levels of development in both regional groupings are very different, he said. “Around 1990, U.S. per capita GDP was 10 times that of Mexico. The difference in per capita levels is not that much in South Asia,” Mr. Subramanian said.

The second difference is that NAFTA was created by Mexico looking to use the U.S. as an anchor economy, he said. “I don’t know if India is that anchor or if its South Asian neighbours want it to be that anchor,” the CEA said.

The third difference is that in NAFTA, Mexico got a certainty of access to the U.S.’ markets in return for it liberalising its economy considerably. The situation is different here, the CEA said, because it will involve a situation where all the economies will have to open up to each other. The certainty of access angle does not apply.

Finally, the CEA said that there was no competition for the U.S. to be the anchor in NAFTA. “For South Asian integration, Sri Lanka and our other neighbours have China as an alternative,” he said.

Two other issues that could hinder South Asian economic integration are the twin problems of external politics impeding economic integration, and the domestic political ramifications of opening up markets to India’s South Asian neighbours, Mr. Subramanian said.

The way to tackle these problems, Mr. Subramanian said, is to address them simultaneously — boost economic trade between countries in the region while at the same time using soft options to smoothen the political wrinkles surrounding the issue.



“South Asia has several important, growing markets, but even looking at India’s current pattern of trade, India’s biggest markets are international



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