India needs to remove trade restrictions, reduce tariffs in South Asia, says World Bank

How will integration of countries in the South Asian region help?
Integration is the key to boosting trade, transport connectivity, electricity transmission and climate change in the region. If the countries lift some of the policy restrictions and create a more modern trade infrastructure, we estimate the total inter-regional trade to increase by $44 billion.


Please elaborate on the policy restrictions that you are referring to?

In terms of trade, this is the region that has restrictive trade policies, and that results in high tariffs and non-tariff barriers. So the cost of trading is very high. Also, the cost of moving goods across the border is very high and there is a need for customs modernisation with focus on moving towards digitalisation and risk space inspection.

What is the role of the World Bank in strengthening inter-regional trade and addressing some of these challenges?
Our role is to support our client countries. We come in where there is demand. For instance, we are working on the policy side in creating an enabling environment for a shared electricity market. We are also working on some of the investments in terms of production, distribution and transmission of electricity.

How significant is India in the South Asia region?
India has a big role to play in the South Asia region with 72% of the region’s population and 76% of its GDP. Therefore, India has a very important leadership role to play in terms of setting the agenda for inter-regional integration, cooperation and supporting and implementing that agenda.

What are some of the big things that India needs to do to reap the benefits of trade in the South Asian region?
India has signed FTAs with most of the countries in the region. However, there are still a number of tariffs and non-tariff barriers that are very high and that can sometimes be a very high bar to reach for exporters. So, greater openness on the policy front is important, which means modernising the trade policy and tariffs.

Further, seamless connectivity and thinner borders are essential to ensure benefits accrue to India and particularly to the states in the north-east. It will open up opportunities for greater trade in agricultural goods and for tourism as well.

There is also a need to support the private sector. While some firms grow into exports on their own, others need support in terms of capacity building, knowing their neighbours and understanding the market needs to help them improve on their competitiveness.

Investment is required in improving infrastructure connectivity, including improving roads and waterways, while making sure those investments are inclusive and the benefits of those investments accrue to the communities.

The South Asian region has one of the highest rates of poverty in the world and the pandemic has worsened the situation. What are the urgent steps that can be taken to pull a huge population out of poverty?

The World Bank’s core mission is to reduce poverty and boost shared prosperity. So a large part of our work is in this space. From a regional perspective, we see that further regional integration can have very significant growth and poverty benefits.

By supporting greater trade openness, by reducing the transactions on connectivity and by bringing cleaner and cheaper energy sources we can make services more accessible to the poor and can also create new opportunities in terms of livelihood and jobs.