South Asia, a region with a massive population of two billion people, has faced significant challenges in achieving regional trade, connectivity, and development. Since the partition of British India, complex geopolitical realities, regional complexities, and political and ideological differences have hindered these prospects from Dhaka to Kabul. The presence of the Hindu-led nationalist government in New Delhi further diminishes the chances of resuming and reviving regional trade between India and Pakistan. This stands in stark contrast to the region’s historical integration in terms of trade and investment, where individuals from diverse backgrounds participated in commerce across religious, ethnic, and racial lines.
Historically, the South Asian region exhibited a high degree of trade and investment integration, with a notable volume of regional trade, accounting for around 25% before the partition of British India. However, this figure drastically dropped to 5% by the 1950s. The visionary founder of Pakistan, M.A. Jinnah, envisaged a prosperous relationship between India and Pakistan, promoting free flow of trade, investment, goods, services, and people’s movement, similar to the relationship between the USA and Canada. Unfortunately, the reality diverged from this vision due to the uneven division of British India that sowed seeds of mutual hostility and led to conflicts, particularly the first Indo-Pak war over Kashmir.
India’s pursuit of establishing itself as the successor state to British India, coupled with hegemonic and dominant behavior in the region, has further stifled the prospects for regional trade and connectivity. Neighboring countries view India as a “big bully” due to its hegemonic behavior and political interference in their domestic affairs, hindering the establishment of trade and connectivity. From Pakistan’s perspective, India’s hegemonic behavior and fears of dominance led to a policy of non-engagement, resulting in a heavy reliance on the West for defense pacts, foreign wars, and financial support, thus prioritizing geopolitics over geo-economics in trade and investment.
However, the geopolitical and geo-economic landscape experienced a tectonic shift in the new century, with both China and India rapidly growing in terms of trade, GDP, and human development indicators. The USA’s strategic partnership with India to counteract China’s economic rise has influenced the regional dynamics. After the USA’s withdrawal from Afghanistan, Pakistani policymakers have begun to shift from a geopolitics-dominated era towards a revival of regional trade in a Geo-Economic outlook.
In this context, there is a growing push among Pakistani policymakers to revive trade relations with India, especially amid the country’s current economic crisis. The coalition government, led by the Sharif family, favors resuming trade with India. However, New Delhi maintains a policy of non-engagement and isolation under the leadership of Narendra Modi, associating Pakistan with terrorism.
Discussions on resuming trade with India have spurred two distinct groups. The pro-trade camp anticipates that improved economic relations would reduce poverty, encourage investment, and foster cultural ties, potentially resolving regional conflicts. Conversely, opponents argue that due to India’s economic advantage, trade would primarily benefit India, as evidenced by the trade surplus India enjoyed between 2004 and 2008. Additionally, any trade resumption without addressing the Kashmir issue, especially after the revocation of its special status, could weaken Pakistan’s stance.
For a meaningful resumption of trade, Pakistan cannot compromise its core positions toward India, particularly on Kashmir. Moreover, the South Asian Association for Regional Cooperation (SAARC), the primary body for regional trade, remains paralyzed by India’s non-engagement stance towards Pakistan. Indian involvement in terrorism and separatist movements within Pakistan poses another barrier to full trade relations, making it challenging to engage with India on equal terms.
Hence, the complexities of South Asian regional trade and connectivity reflect deep-seated historical, geopolitical, and ideological challenges. The visions of unity and prosperity envisioned by leaders like M.A. Jinnah face formidable barriers, necessitating a delicate balance between economic cooperation and addressing longstanding regional disputes. As South Asia navigates this intricate landscape, the prospects for meaningful regional trade and connectivity remain closely intertwined with resolving existing conflicts and fostering a spirit of mutual cooperation.
