Statsguru: Neighbourhood ties weaken as global economic partnerships evolve

The share of its neighbours in India’s trade shows signs of weakening from an already low base amid a review of regional trade agreements.
 

The trade deal with the Association of Southeast Asian Nations (Asean) will be reviewed in February. The planned India-Bangladesh trade agreement is being reassessed over concerns about Bangladesh potentially joining the China-backed Regional Comprehensive Economic Partnership (RCEP). Bangladesh is one of the few countries with which India has a trade surplus. India imports more than it exports to most Asean, RCEP nations.
 

 

India’s trade ties with its immediate neighbours are also weakening. South Asia’s share of 2.6 per cent in the country’s total trade so far this year is the lowest in a decade.

 

Imports from the region are up 133 per cent since 2013 to $3.1 billion in 2023. The lag has come from exports which have grown at around half that pace.

 

Lower competitiveness on merchandise exports has limited the ability of trade to drive gross domestic product (GDP) growth in India. The country’s trade-to-GDP ratio was 21.7 per cent between 2020 and 2022, according to the World Trade Organization. It was higher for many large economy peers. Germany had 44.8 per cent, France 33 per cent, the United Kingdom 30.8 per cent, and South Africa 28.9 per cent among emerging market peers.

Services are a silver lining. Commercial services exports increased by eight per cent between 2010 and 2022, faster than many peers. It was five per cent for Germany, four per cent each for the United States and the United Kingdom.

Service exports to the immediate nei­g­h­bourhood remain limited. The largest mar­k­ets include North America and Europe.