Certainly it is “high time” — to borrow an expression of Pakistan’s PM Nawaz Sharif – that India and Pakistan bury the hatchet so that South Asian development gets a boost. This region is the epicenter of global poverty while billions of dollars are spent on acquiring the latest fighter jets and costly weaponry. The brief stop-over in Lahore by India’s PM Narendra Modi has triggered fresh hopes that the two largest neighbours will negotiate contentious issues while encouraging greater people-to-people contact. With softer borders and freer trade, the hope is that a peace dividend can kick in.
This hope is not new. It has surfaced time and again with metronomic regularity. Way back in the 1990s, Pakistan’s economist Mahbub ul Haq forcefully articulated the underpinnings of a peace dividend. If India, Pakistan and rest of Asia froze their military spending, the dividend of more than a hundred billion dollars would finance their development goals over a decade. This includes providing clean drinking water, universalising elementary education and healthcare. But these imperatives haven’t prevented these countries from stepping up arms expenditures.
A variant of this hope is to push for greater integration through a regional trade agreement. In line with a fast expanding global trend for free trade arrangements, the seven members constituting the South Asian Association for Regional Cooperation (SAARC), notably, India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka and Maldives intended to operationalise a South Asian Free Trade Agreement a decade ago. As this region has a substantial part of the world’s poor, the rationale for greater regional cooperation, if not integration, remains compelling.
Unfortunately, politics has cast a long and troubled shadow over this process. This regional formation hasn’t quite taken off like the other regional FTAs like ASEAN, APEC, MERCOSUR, NAFTA among others for a simple reason. India is the dominant economic power in South Asia but most of its neighbours who are rapidly becoming failed states resent its dominance. Persisting tensions between India and Pakistan have virtually put paid to freer trade in the region. What sort of trade ties is possible when Pakistan doesn’t even extend most favoured nation status to India?
India and Pakistan must cooperate to make South Asian integration a reality. The espousal of Akhand Bharat does not necessarily indicate how this can come about. It only harks back to an earlier phase of history when the Indian sub-continent comprised today’s Pakistan, Bangladesh and India as one entity. Getting together again implies that the partition of these countries by the Britsh is undone. In the absence of a clamour for such a process, how can a federation of Pakistan, Bangladesh and India come about in which there is a common currency, freer trade and movement of people like in the EU?
The late veteran journalist Rajinder Puri devoted a lot of his writings to what he called a South Asian Federation. How is this idea different from Akhand Bharat or the romance of SAARC? He warned this writer not to overemphasise trade and ignore the force of politics or cultural identities of South Asia. I have always argued that integration would come about if India contributed to greater flows of trade through unilateral trade liberalisation. This implies ensuring greater market access for failing states in SAARC so that they acquire a greater stake in India’s rise as a global power and benefit from it.
However, for various reasons, a one-sided opening up has not happened. This has only deepened their resentment over India’s dominance. As if all of this weren’t bad enough, India has sold more goods to these countries every year, registering ballooning trade surpluses in the process. Bolder liberalisation is certainly a way forward as India has ample foreign exchange reserves and its balance of payments is healthy. As Puri rightly warned, how can even trade progress when political animosities linger and flare up every now and then? Clearly, this factor by itself is not magic bullet for integration.
A South Asian Federation or United States of South Asia is not possible without joint defence. A clause must be introduced in the Directive Principles of the Constitution to pursue the goal of creating a community of nations having common tariffs, common defence and no visa restrictions. Only then can a confederation of South Asian nations comprising India, Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka and Afghanistan be formed, he wrote. A catch that is common to this concept and Akhand Bharat is that the spirit of Partition must be undone. Is this feasible in today’s times?
Whichever idea it is whose time has come, a rapprochement between India and Pakistan is central to South Asia getting its act together. How can the level of human development improve within its borders when in countries like Pakistan soldiers outnumber physicians and teachers? Haq persuasively argued that each fighter jet acquired by the two large neighbours cost them over one million children in primary schools! These two countries must get together and fight poverty rather than each other. Only then can human development strategies work in South Asia as a whole.
PM Modi’s Lahore moment need not be compared to Nixon in China although the stakes for South Asia are huge. The only way that terrorism can be met is through joint defence. The building blocks of a South Asian Federation are incomplete without this crucial precondition. Only then is it legitimate to expect the benefits of freer trade and commerce within a common vast border. The moves to usher in a South Asian Federation would progress if there is also greater connectivity within the region like open skies and highways so that one can indeed enjoy breakfast in Amritsar, lunch in Lahore and dinner in Kabul. But connectivity remains a major problem, thanks to politics rather than economics. India and Pakistan must normalise their trading relationship with the former providing preferential access to its market. Harvesting this low hanging fruit will reduce the incentive to wage war and reap the benefits of a peace dividend.
(N Chandra Mohan is an economics and business commentator based in New Delhi)
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