UPSC DAW Mains Answer Writing 24 June 2025

UPSC DAW Mains Answer Writing 24 June 2025

Question

Q) ‘South Asia remains one of the least economically integrated regions despite frameworks like SAFTA.’ Analyse the key impediments to South Asian economic integration. How can India recalibrate its regional approach to foster greater economic cooperation? (15 marks, 250 words) 

Model Answer

Paper  

GS II 

Subject 

International Relations 

Topic 

South Asian economic integration 

Syllabus As Per Notification 

India and its neighbourhood - relations. 

 Introduction:  

  • Despite the existence of the South Asian Free Trade Area (SAFTA) under the aegis of SAARC, South Asia remains one of the least economically integrated regions globally, with intra-regional trade accounting for just 5–7% of total trade. This stands in stark contrast to ASEAN (22%), EU (45%), and NAFTA (25%). This persistent fragmentation, amid significant shared geography, history, and potential, reflects deeper geopolitical, institutional, and infrastructural impediments. 

 Key Impediments to South Asian Economic Integration: 

  •  Trust Deficit and Geopolitical Tensions:  

  • India-Pakistan hostility post events like the Pahalgam terror attack (2025) and revocation of Article 370 has led to diplomatic downgrades and near-collapse of trade ties. 

  • Lack of security cooperation, with terrorism and insurgency often spilling across borders, fuels strategic mistrust. 

  • Weak Institutional Mechanisms: 

  • SAARC’s ineffectiveness is evident from its last summit being held in 2014. 

  • SAFTA’s rules of origin and negative lists are opaque and inconsistently implemented. 

  • High Trade Costs: 

  • World Bank (2023): Intra-SAARC trade costs are 114% of the value of goods, compared to 76% in ASEAN. 

  • India-Pakistan bilateral trade costs are 20% higher than with Brazil, despite geographic proximity. 

  • Non-Tariff Barriers (NTBs) and Poor Connectivity: 

  • Poor infrastructure at borders (e.g., Petrapole-Benapole). 

  • Cumbersome customs procedures, delays, and regulatory divergence increase costs. 

  • Limited Regional Value Chains (RVCs): 

  • Unlike ASEAN, which has developed robust RVCs, SAARC nations lack complementary trade structures. 

  • Informal trade flourishes (est. $10 billion), indicating barriers in formal systems. 

  • Underutilized Trade Potential: 

  • UNESCAP (2020): South Asia’s trade potential was $172 billion, but only $23 billion is realized. 

  • Countries like Bangladesh (93%) and Maldives (88%) have highest unexploited intraregional trade. 

  India’s Role in Recalibrating Regional Economic Cooperation: 

  • Championing Connectivity and Infrastructure: 

  • BBIN Corridor, Chabahar Port, and Kaladan Multimodal Project can transform regional trade geography. 

  • India-Nepal Cross-Border Rail (2023) is a success model for integrated transport. 

  • Trade Facilitation and Border Modernization: 

  • Streamlining customs protocols, digitization of border procedures, and harmonizing standards with neighbours. 

  • Leveraging ASEAN-India FTA experience to offer technical support to SAARC nations. 

  • Depoliticizing Trade: “Trade Despite Conflict” Approach: 

  • Emulate China-Taiwan model of economic cooperation amid political discord. 

  • Reintroduce Most Favoured Nation (MFN) status on conditional basis to Pakistan, fostering gradual re-engagement. 

  • Reviving and Reimagining SAARC: 

  • Push for sectoral cooperation in health, education, energy (e.g., SAARC Grid) where consensus is easier. 

  • Use SAARC Development Fund (SDF) to support joint MSME, agriculture, and start-up ventures. 

  • Alternative Regional Platforms: 

  • Strengthen sub-regional blocs like BIMSTEC and BBIN to create success templates for wider replication. 

  • Leveraging India’s Economic Weight: 

  • India’s $3.7 trillion economy gives it convening power; initiatives like Udaan (regional startup connect) or SAARC Digital Corridor can create ecosystems of innovation. 

 Conclusion:  

  • India, as the largest and most stable economy in South Asia, must anchor regional integration through a pragmatic blend of trade diplomacy, strategic patience, and institutional innovation. Reviving trust and reducing economic friction is essential not only for regional prosperity but also for India's own strategic depth in the neighbourhood.  

 Value Addition:  

Key Term / Concept 

Utility 

SAFTA (2006) 

Framework for tariff liberalization; largely underutilized. 

Trade Cost Indicator 

World Bank measure showing SAARC at 114%, ASEAN at 76%. 

UNESCAP South Asia Gravity Model 

Highlights over 86% unexploited trade potential. 

India@100 (NITI Aayog) 

Envisions India as regional trade and innovation hub by 2047. 

Operation Sindoor (2025) 

Case on balancing national security with foreign policy restraint. 

BBIN & BIMSTEC 

Sub-regional platforms to circumvent SAARC deadlock. 

Brand Finance Soft Power Index 

Ranks India in global soft power; useful in economic diplomacy. 

World Bank “Glass Half Full” Report 

Identifies policy barriers costing South Asia $44 billion annually.