Regional Trade in the Political Economy of South Asia: A Case Study of India-Pak Trade-Off

In the conflict-ridden South Asian region, economic cooperation has remained a distant reality as the dream of the South Asian regional integration is yet to materialize. The formation of SAARC in 1985 was also meant to achieve a regional trading bloc with an application of David Ricardo's theory of ‘Comparative Advantage'. As a result, the ultimate objective was free trade in the South Asian region. However, this seems unachievable at the SAARC's forum. The economic fragmentation has resulted in India's bilateral and multilateral trade agreements within and without the region. Currently, India is the only country with numerous and trading accords with almost all regional countries except Pakistan. In a way, she succeeded in isolating Pakistan economically thus further pushing the region into conflict and subsequent instability. Will this strategy succeed or falter is the question of the questions. With the re-election of economic-minded PM Modi in power; isolating a nuclear power country- Pakistan – will prove counterproductive. Moreover, Pakistan may go for checkmate by furthering its trade towards east in the region with its own economic maneuvering. This may prove detrimental to India's dream of becoming an economic giant and regional power. In this context, India-Pakistan's trade competition needs to be examined. India's bilateral and multilateral agreements are a success. A South Asia with free trade and ‘comparative advantage' will be to the advantage of both the countries especially India. This will contribute to South Asian Regional Economic integration- an objective envisaged by the SAARC.