India is undergoing a significant shift in its trade strategy, increasingly moving away from its traditional focus on South Asia. This change is largely driven by escalating tensions with neighboring countries, Pakistan and Bangladesh.
Key Reasons Behind the Shift
- Frozen Trade with Pakistan: Trade between India and Pakistan has been halted since 2019, severely limiting economic cooperation.
- Disruptions with Bangladesh: The closure of land borders, particularly at the Petrapole border, has disrupted about 30% of bilateral land trade and a significant portion of Bangladesh’s garment exports to India.
- Increased Costs and Delays: Due to restrictions, goods must now be transported via longer port routes, raising costs and causing delays.
Consequences for Regional Trade
South Asia’s share in India’s overall trade has fallen to just 2.8%, and regional trade integration remains remarkably low at around 5%. These strained relations have also impacted regional initiatives such as BIMSTEC, delaying the progress towards a free trade agreement.
Geopolitical and Economic Implications
- China’s Advantage: With India pulling back, China has expanded its trade presence across South Asia, surpassing India in volumes.
- New Trade Partnerships: India is increasing trade with countries like Australia, the UK, the EU, and the US, signaling a broader reorientation of its economic priorities.
As neighborhood issues persist, South Asia is becoming less central to India’s trade strategy in 2025. This re-prioritization reveals the complex interplay between politics and economics shaping the region’s future.
Stay tuned to Questiqa India News for more updates on this evolving story.
