India's trade with neighbours only 31% of total potential: World Bank

India's current trade in goods with its neighbouring countries in the South Asian region is a mere 30.65 per cent of the potential trade of $ 62 billion, which can be boosted if certain restrictions on the current trade, like tariffs, port restrictions and other non-tariff barriers can be eased, a report from the World Bank said.

Currently, India's actual trade in South Asia accounts for $19.1 billion which is just three per cent of its total global trade at $637.4 billion and around $43 billion below the potential.

According to Sanjay Kathuria, lead economist at the World Bank, owing to economic and non-economic barriers, it is cheaper for India to import the same set of goods from Brazil as compared to its neighbour Pakistan, while for Sri Lanka or Bangladesh, imports from Nepal are more costly as compared to Brazil.

The report indicates that while the trade between India and Pakistan presently stands at $2 billion, without any trade barriers, this alone could go up to $37 billion which will far exceed India's current total trade with south Asian countries. Average tariffs in south Asia during 2016 stood at 13.6 per cent as against the global average tariff of 6.3 per cent.

“Despite significant liberalisation in tariff regimes, south Asian countries still maintain a long list of products which are exempted from the tariff liberalisation programme while several countries in this region maintain high para tariffs which have not been included in the free trade agreements”, Kathuria said.

According to Kathuria, liberalisation of air services between India and Sri Lanka is an example how countries stand to benefit from such a process.

A book titled ‘A Glass Half Full – The Promise of Regional Trade in South Asia’, which Kathuria has edited, shows that India has the highest number of flights with Sri Lanka at 147 departures and arrivals in a week while only six flights are scheduled between India and Pakistan. In effect, the book has claimed that since 2003, when the first such air service liberalisation happened, there was a steady growth in Sri Lankan tourist arrivals in India and since 2005, India is the biggest source of tourist arrivals in Sri Lanka.

“Besides the tariff barriers, there is also the problem of non-tariff barriers as well. Information about the clearance procedure, regulations and standards is an obstacle while trust deficit is also a major issue – in fact, trust is very fragile in south Asia”, Kathuria said.

The other key non-tariff issues impacting trade are lack of absorbing the imported goods in a consuming country, issues at the borders and capacity of countries to produce testing and certification centres for exports.

Border Haat
 

According to the World Bank, India will be coming up with six more Border Haats (Border Marketplaces) taking the total to 10 from the existing four. These Border Haats, which are set-up on the zero line between India and Bangladesh, are crucial towards trust-building measures between the buyers and sellers from both India and Bangladesh.

Currently, on the Indian side of the border, two such Border Haats are located in Meghalaya in Kalaichar in West Garo Hills and Balat in East Garo Hills while another two are located in Tripura in Srinagar and Kamalsagar. 

Although not featuring as a significant revenue contributor for either India or Bangladesh in their foreign trade, such weekly marketplaces bring in people from both sides of the border together and help in confidence-building measures. 

Vending permits for such Haats are issued to 50 vendors per country from a 5-kilometre catchment area radius are products ranging from fruits and vegetables, cottage industry products to garments, plastics,, kitchenware and baby food, among several other items are bargained and sold.

Kathuria is of the view that that such Haats has not only helped India and Bangladesh build more trust in each other but has also helped curb illegal trade between these two countries.