Promoting South Asian trade KHILENDRA BASNYAT
Economic development is a prerequisite for raising the standard of living of South Asian people .International trade is one of the major components that can contribute to this region’s economic development.
South Asian economy was by and large complementary in the colonial period. With the dawn of independence, however, because of political considerations and shortsighted policies pursued in this region, the complementary has almost ceased.
This region’s economic growth rate has declined. However, the share of imports from industrialized countries remains high. The terms of trade have worsened.
Agricultural products are predominant in most South Asian counties with the exception of India and Pakistan. In these two countries, manufactured goods constitute a very high proportion of the total export.
South Asia is a resource poor and less developed region where he primary sector dominates the economy. About 60 percent of the region consists of primary products, which suffer from sagging demand and relative price fall.
This region is heavily dependent on import of capital goods, industrial, agricultural and essential consumer goods including food and petroleum products, Its export has decreased and so has its balance of payment. This unfavorable situation tends to perpetuate reliance on external assistance. Since foreign aid seems to be uncertain, even low level of development, which is continuing in this region, may stagnate in future.
There is a possibility for not only a horizontal type of trade between South Asian countries but also for vertical types of trade among these nations. Actually, they are capable of meeting each other’s needs in capital as well as consumer goods.
Although the existing trade in manufactured goods among South Asian countries is small. There are possibilities for increasing this trade. India, with the background of industrialization, can furnish adequate quantity of manufactured goods, including capital goods imported by other countries of this region. However other countries of this region cannot supply manufactured goods imported by India.
India needs high technology items for import, which other South Asian countries cannot produce. Hence, the scope for mutually beneficial trade in manufactured goods among these countries is limited. However, adoption of appropriate policies can expand this scope in future.
South Asian Countries have a common history and composite culture. To begin with, all these countries should strive for resumption of normal trade especially between Bangladesh, India and Pakistan. Apart from this, they should adopt a coordinated export strategy with regard to the scale of primary commodities such as jute and tea.
Since there is expanding scope for mutually beneficial trade in manufactured goods among South Asian countries, they will have to adopt suitable policies. In this respect, India should gradually give up the policy of self-sufficiency regarding some manufactured consumer goods. Rather it should plan for dependence on other South Asian countries, including Pakistan for supply of such consumer goods, which they can produce more advantageously. This would mean a policy decision by India not to expand productive capacity of some consumer goods. Also, it means that India should vacate certain industries over a period of time in preference to other countries of this region. Most South Asian countries have limited domestic markets. It is arduous to demonstrate superiority of economies of scale in these domestic markets. Also, if these countries bring up import substitutes by duplicating each other’s efforts, optimum distribution of resources in the whole region will be disturbed. Consequently, there cannot be effective economic growth in the region as a whole. Therefore, it is essential to adjust each nation’s economic plan, bring up import substitute industries on the basis of agreed specialization more effectively. This will pave the way for ultimate economic integration.
To import producers’ goods from advanced countries outside the region as much as possible, South Asia must increase its exports outside the region. It is also necessary to promote the inflow of long-term capital and techniques from outside the region to offset capital shortage as well skills in this region.
Most defects could be rectified if there is proper coordination of development plans among South Asian countries. Ultimately, an environment will be created to stimulate these countries economic growth rate, thereby making them react to a higher level of intra-regional trade.
More abstracts about the Promoting South Asian Trade