A common image of the South Asian Subcontinent is that it is the least integrated part of the world. The lack of progress in regional integration under the aegis of South Asian Association for Regional Cooperation (SAARC) is widely lamented. The dominance of strategic pessimism in the Subcontinent may suggest that the situation is unlikely to change in any significant manner by 2030.

C. Raja Mohan
A leading analyst of India’s foreign policy, Mohan is also an expert on South Asian security, great-power relations in Asia, and arms control.
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There are sound reasons indeed for this pessimism. The Great Partition of the Subcontinent had sundered apart spaces that were united, and coherent, for millennia. The inward economic orientation of India and its neighbors throughout the second half of the 20th century reinforced the political partition of the Subcontinent. Meanwhile, the persistence of the India-Pakistan conflict even 70 years after the Partition has cast a shadow over the main regional forum, SAARC.

Notwithstanding a strong negative inheritance, there is much room for strategic optimism about the future of the Subcontinent. By 2030, South Asia is bound to be a far more connected place within itself as well as the rest of the world, thanks to a number of new factors reshaping the region’s economic and political geography.

The first is the fact that after the turn of the 1990s, most of the region has traded economic insularism of the past for economic globalisation. This very different condition, despite the slow pace of economic reforms, has begun to reorder the economic geography of the Subcontinent. The impact of this economic redirection is likely to be far more visible by 2030.

Second is the slow but certain rise of India, which has become the world’s third largest economy in the world (by the Purchasing Power Parity measure). Although India has some distance to go in opening its markets to neighbors, Delhi’s political approach can be seen to be evolving in favor of regional economic integration.

Third, beyond India, Bangladesh, Nepal, and Sri Lanka have all shown a new economic dynamism. This in turn has made the Subcontinent one of the fastest growing regions of the world during the 2010s. Barring Pakistan and Afghanistan, where the economic prospect is clouded by uncertainty, the rest of the region is likely to grow at an impressive pace in the coming years.

Fourth, China’s rapid economic rise to the status of the second largest economy in the world is having a powerful impact on the Subcontinent. China has become the region’s largest trading partner. China is also becoming a big investor in the region’s infrastructure projects. Beijing’s ambitious One Belt One Road (OBOR) project now involves a gigantic effort to connect China’s economic space with that of the Subcontinent. The USD 46 billion economic corridor in Pakistan is one example. China’s trans-frontier economic push in the north is being matched by a massive maritime economic activism in the South. Together they are certain to reorient the region’s economic profile in the world.

Fifth, Japan, which has long been a major aid donor in South Asia has become a more consequential strategic economic actor in the region. Like the China’s OBOR, Japan now has its own framework, the Partnership for Quality Infrastructure (PQI). Japan’s support to the Mumbai-Delhi industrial and freight corridors, high speed railway system between Mumbai and Ahmedabad, the Bay of Bengal Industrial Growth Belt in Bangladesh are a few examples. Japan is also eager to develop connectivity between South and South East Asia. It is keen to extend current production networks in East Asia to the Subcontinent. Working with India and the United States, Japan is likely to emerge by 2030 as a critical external economic influence on the Subcontinent.

Six, the region has begun to find alternatives to the ineffective SAARC. Facing Pakistan’s reluctance to economically integrate with India, Delhi has reconciled itself to a ‘twospeed SAARC’. India’s efforts are now focused on subregional mechanisms for regional integration. Wishing the Subcontinent, the BBIN framework involving Bangladesh, Bhutan, India and Nepal has become an attractive complement to the SAARC process.

Seventh, there is also growing interest in trans-regional cooperation. In the east, Bay of Bengal littoral offers an opportunity for India to connect with the regional markets in East Asia. In the west, India’s engagement with Afghanistan and Iran has created the opening for India to circumvent Pakistan in future economic integration with inner Asia.

Eighth, the geo-economic transformation of the Subcontinent has been complemented by the growth in the region’s geopolitical significance. In the second half of the 20th century, the region was considered marginal to the high politics of the Cold War. The Af-Pak region was the lone exception. Today almost every corner of the Subcontinent resonates with strategic potential. This is likely to take the region’s strategy identity away from the vexed questions of India’s north western marches. If Bangladesh has become a potential bridge to South East Asia, Bhutan and Nepal have a similar role between India and China, the world’s second and third largest economies. To the South, Sri Lanka is rediscovering its central location in the Indian Ocean, as all major powers; China, US and Japan pay unprecedented attention to Colombo. Maldives, which straddles the vital sea lines of communication in the Indian Ocean, has now become a highly coveted piece of maritime real estate in the Indian Ocean.

As other powers begin to devote quality time to engaging South Asian nations, big and small, Delhi has begun to come to terms with the unfolding strategic globalization of the Subcontinent. It has also begun to put some energy behind the foreign policy slogan of ‘neighborhood first’. Although India has many problems with its neighbors, the economic geography of the Subcontinent remains in favor of India.

As Delhi recognizes that no region in the world today can be an exclusive sphere of influence for any power, plays to its natural economic strengths in the region, and accepts the possibilities for greater collaboration with other powers, it is likely to be more effective in securing its core regional interests in the region while accelerating the Subcontinent’s integration with itself and the wider world.

This piece was originally published as part of Docking Nepal’s Economic Analysis by the Nepal Economic Forum.