A lot has been said in the past about what India’s new prime minister might bode for its neighbours. In Narendra Modi’s context, there seems to have been some skepticism in Bangladesh and Pakistan for obvious reasons, despite his stress on economic development and growth as the singular agenda for his candidature. Irrespective of those, it is now encouraging to note the news of the Saarc region being featured as being Modi’s first active engagement overseas, even ahead of the usual USA, China, Japan, or Europe.
This start is extremely forward-looking, given that the immediate neighbourhood has a major bearing for any country. Constructive engagement with neighbours has been a drawback of India in recent years, given the tussle between a weak federal coalition and strong regional parties who share borders with neighbours. Modi had stressed on economic co-operation and the aim to work for mutual benefit during his campaigns, as far as neighbours were concerned. It is positive to see that he has taken the first steps to convert that promise into action, by engaging with Bangladesh. Following Dhaka, one hopes that his next engagement would be with Islamabad and Colombo. He has already interacted with Pakistan’s prime minister, while the Sri Lankan president might come for the swearing-in ceremony next week.
These four countries offer the maximum scope for mutually beneficial opportunities within the Saarc universe, simply because of the scale of each one’s existing industries and labour pool. Indian products can act as input products for industries in these countries, and similarly, they have products that can be competitive input products for Indian industries. This is the textbook format of utilising backward and forward linkages as part of the overall value chain of a particular product. This form of economic co-operation in the production process of a product means that all the intermediate products that go into it are naturally produced in the lowest-cost region, whichever country it is.
This is in line with competitive advantages and means the best price for consumers. Of course, it means that the same industry in the other country would suffer, whichever it is. But that is where its ability to compete and yet emerge as a feasible supplier would test its own management skills and reforms. Protectionist-first policies always appeal to politics due to emotions related to the vote bank. But it handicaps local industries by resulting in inefficient management, low-quality products, and unnecessarily higher prices for consumers. Economics-first policies actually help sustain a country’s industrial development in the long run. It creates productive job opportunities instead of just disguised unemployment. Competition compels businesses to produce the best quality at the most competitive prices, which is beneficial for consumers. It eventually helps boost the overall output for both economies concerned.
Opportunity for mutual co-operation between India, Bangladesh, Pakistan, and Sri Lanka are not just restricted to industrial products. It includes supply of resources to fuel industries, sharing technologies on agriculture or industrial processes, skill-sharing on manufacturing and services sector activities, usage of a country’s soil to transport consignment between two other countries over land, processes on empowering people economically to take them out of poverty, accessibility to healthcare, opportunity to learn for the other’s local small-scale industries to develop similar establishments in one’s own country, availability of raw materials and intermediate goods at competitive prices, etc.
However, it is also important to maintain the mutual-benefit stance during all this engagement. Otherwise there might be chances of someone ending up disgruntled. But this should not be at the cost of holding future engagements at ransom.
Ironically, trust deficits in the past between Saarc countries often led to them engaging with other countries, some of whom are actually low-cost manufacturing giants, much larger than any of the Saarc countries. Influx of their cheap products actually spelt a doom for the local industries as the output of the local industries were not used anywhere in the production process. This is something which the mutual co-operation approach within the Saarc countries might achieve.
Modi’s start with a Saarc-first approach seems constructive. It is now imperative for his administration to continue the engagement. Statistics shows that even the neighbouring countries are far from reaching their own economic potential. Hence, committing to mutually beneficial and constructive engagement processes would be a win-win for all countries, and might result in the 21st century becoming the century of South Asia.
