Regional integration: incredibly important for India

Even before SM Krishna landed in Islamabad to chair a meeting of the revived Joint Commission and hold talks with Pakistan regarding outstanding issues between India and Pakistan, media outlets on both sides of the border voiced skepticism that much headway would be achieved in the moot. Indian newspapers played up Hina Rabbani Khars insistence that Indians should look at the 26/11 investigation "unemotionally". Pakistani writers cited Indias high growth rate as a chest thumping opportunity for the regional giant, which to them, appears content at dragging on with its insistence on the same investigation, at the expense of all other aspects of bilateral relations. Yet the agreement to liberalise the visa regime between the two countries is a step forward and underscores the necessity for both countries to increase regional integration. Despite the fact that India has been elevated into the BRIC club of upcoming global trade giants, the facts on the ground show that higher trade with the region is a crucial need, if India is to continue on its high growth trajectory. Exports to South Asian countries as a percentage of total exports have dropped from an already dismal 5.51 percent in FY05 to 4.64 percent in FY11. Where trade has expanded, the benefits have flowed particularly to Indian states adjoining the relevant border. For instance, "cross border exports from India to Nepal are procured from states closer to (that) border, like Bihar, Uttar Pradesh and West Bengal", according to "Indias Border Trade with Its Neighboring Countries", a research paper from the Journal of Applied Economic Research, London. This observation, when considered in light of the close proximity between not just the land border between India and Pakistan, but also the calm sea routes from Pakistans coastline to Indias south western region alludes to the potential for booming commerce in the region. The Indian government and businesses have realised the trade potential in the region in recent years. That countrys international trade statistics show that exports to other South Asian countries have increased from 4.6 billion dollars in FY05 to 11.7 billion dollars in FY11. Indias trade surplus with other South Asian countries has grown from 3.6 billion dollars in FY05 to 9.5 billion dollars in FY11. Compare this trend to Indias rising trade deficit which has swelled to almost 119 billion dollars in FY11. Clearly, given Indias dominance in industries such as steel, chemicals, and other value added goods and services, the country can reap the returns of a favourable trade balance by increasing trade within the region. Given the countrys poor performance in the recently released Global Competitiveness Report 2011-12, that countrys economic managers need to push for greater access for its businesses to markets close to home.