Economic Relations

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  • Kovid Kumar asked: How do we achieve economic integration in South Asia?

    Nitya Nanda (Fellow, TERI) replies: The question presumes that the level of economic integration in South Asia is very low compared to other regions of the world. This may appear so if one looks at the intra-regional trade in South Asia which is very often considered an indicator of regional integration. But this may not be the right indicator to measure the level of economic integration in South Asia due to its extremely skewed size distribution in the region as well as due to the fact that most countries do not share border with each other. In fact the level of trade integration of Nepal, Bhutan, Bangladesh and Sri Lanka is reasonably high with India. Indian investment is also quite high in these countries except Bangladesh. Thus even higher level of integration can happen only if there is better relationship between India and Pakistan. This will strengthen economic ties not only between India and Pakistan but also between India and Afghanistan as well as Pakistan and Nepal. There can also be sectoral cooperation, particularly in the fields of energy, telecom, transport, information technology and education. Economic integration also requires greater movement of people. As of now people can move freely betwen India and Nepal and India and Bhutan. Indians also get visa on arrival in Sri Lanka. India can also offer similar facility to Sri Lankans. Making movement of people between India and Bangladesh easier should not be too difficult. Overall, I would argue that the level of economic integration is not as low as is often made out to be. But the the key to furthur economic integration lies in the domain of politics, particularly in India Pakistan relationship.

    Inherent values and substance bind India and the United States

    Shared values and growing cooperation in a range of fields are transforming India-US relations into an enduring strategic partnership in the 21st century.

    August 24, 2010

    Seeking Truth from Facts: The Sino-Taiwanese Trade Pact

    While the economies of China and Taiwan are getting integrated and there has been increasing contact between the people across the strait, the two sides are maintaining a studied silence on unification.

    July 22, 2010

    Gopi Krishnan asked: Is China's economic development sustainable? Once the wages increase?

    Smita Purushottam replies: This question is increasingly being asked in the wake of the economic crisis, which China coped with by investing in massive domestic stimulus packages, but which contributed to overheating in the property market and greater indebtedness in the banking sector. China’s exports to the developed world, which fell at the height of the crisis in 2009, are also projected to face challenges (though first half yearly 2010 trade statistics show a rebound at 43 per cent, with the trade surplus shrinking by 42.5 per cent), as the latter shift to savings over consumption, boost exports, and maintain pressure for yuan appreciation. In addition, inflation, inequalities (China’s GINI coefficient is 0.47), environmental and societal problems, demographics and related dips in savings rates - are the near to long term challenges for China (please see

    However, China’s economy has a robust base. Chinese reforms in the 1980s were directed at building a strong infrastructure and supporting China’s manufacturing and export sectors. The Chinese manufacturing sector thus got its factor inputs at relatively lower rates than India’s - cheaper electricity, currency, land, labour, and capital - and is 48 per cent of GDP compared to India’s 29 per cent. This led to creation of many virtuous cycles and assets like a competitive workforce. China later shifted to a more high-tech production strategy. Its export basket now more closely approximates the export baskets of advanced economies (after making allowances for processing trade – i.e. exports minus imported inputs) than India’s.

    To tackle these problems China has announced it will encourage greater consumption, manufacture more high value-added manufactures/exports to cope with currency appreciation, invest in China’s less developed, western regions, etc. Rising wages are being seen as a means to increase domestic consumption and shift to a more high value added economy.

    It may be recalled that a 2000 projection by Chinese strategic experts had forecast a US $2.5 trillion economy in 2010, but, in reality, nominal GDP has reached nearly US$5 trillion (at current prices) in 2010.

    As mentioned above, there are problems in the Chinese economy with Chinese growth rates expected to moderate to 8-9 per cent. The challenge will lie in managing the issues raised in the transition as the economy is restructured and slows down.

    India’s strategic advantage over China in Africa

    Focusing on specific sectors, beyond the options much in vogue with offensive emulationists or passive singularists, will help India to clarify its priorities, optimize its policy-making process and infuse its Africa policy with greater strategic depth.

    June 30, 2010

    Forging a Strategic Partnership with Saudi Arabia

    India and Saudi Arabia are entering into a long term strategic partnership that encompasses political, economic, scientific and cultural relations.

    March 04, 2010

    Convergence of Strategic Interests between India and Japan

    The Joint Statement catapulted India-Japan strategic and global partnership to a “New Stage” in which the bilateral relationship is going to be deepened on all fronts, embracing regional, global and economic issues.

    January 07, 2010

    Dynamics of Indo-Myanmar Economic Ties

    Clearly, there is immense scope for cooperation between India and Myanmar to deal in agro-based products, floriculture, engineering, timber and tobacco and expand business cooperation. Although there has been a significant increase in bilateral trade in recent years, full potential has yet to be realised.

    January 06, 2010

    India-US Relations: The Need to Move Beyond Symbolism

    Apart from the reluctance to move beyond viewing the India-US relationship through the prism of US-China or even US-Pakistan ties, the Indian political leadership and the strategic community have so far failed to define India’s role in the growing partnership with the United States.

    December 03, 2009

    Japan’s quest for East Asian Community

    Japan is seeking to forge an East Asian Community inline with the European Union. But the optimism that East Asia will realize the goal of European Union (EU) type integration does not seem realistic since historical issues still impede normal diplomatic relations.

    October 28, 2009