WHY OUR EXPORT FIX IS JUST A KNOCK AWAY

As the US reshapes global trade, India could turn to regional opportunities closer home. From Pakistan to Bangladesh, the neighbourhood offers multiple avenues for India to lead trade reintegration in South Asia.

- BY SURBHI BHARADWAJ

India's exports are heavily dependent on the US, and are currently under threat due to high tariffs. But hidden in the numbers is another simple story: the region that could boost Indian exports is not across the Pacific, but across its borders. India barely trades with its neighbours and leaves value on the table every year, even before new global barriers emerged.

India's trade with its neighbours-Pakistan, Bangladesh, Nepal, Afghanistan, Bhutan and Sri Lanka-was $30 billion in FY25, only 2.7% of total trade. Worse, trade with all neighbours, except Bhutan, has declined since 2021, even as global trade has been stable. The reasons are several: terror attacks, political tension, domestic unrest, limited infrastructure, tariff and non-tariff barriers and lack of integration.

Since exports to the US came under threat, India's prime minister Narendra Modi has embraced Vladimir Putin and Xi Jinping while negotiating treaties with the European Union and Australia. But even as India courts partners elsewhere, it would do well to look closer to home.

South Asia, home to a quarter of the global population, is one of the world's least economically integrated regions. Intraregional trade is just 5% of South Asia's total, versus 48% in East and Southeast Asia and 66% in Europe.

Using 2015 statistics, the World Bank had estimated in 2018 that removing tariffs and infrastructural barriers within South Asia could triple the regional trade volume at the time, from $20 billion to $60 billion. It has not updated this 'gravity' model to account for regional changes in the last decade, but a naive extrapolation to GDP and trade figures in 2025 implies that South Asia could stand to gain $50-60 billion in trade volume from liberalization.