As Khan and Modi Feud, India and Pakistan Economies Miss Out

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VIAIain Marlow
SOURCEBloomberg
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India and Pakistan’s bitter rivalry is costing them $35 billion worth of annual trade, the World Bank said in a report.

Someone might want to tell the two countries’ leaders — both of whom want to boost trade to battle widespread poverty. The World Bank called for South Asia, the world’s least economically-integrated region, to start cooperating instead of feuding. Trade between India and Pakistan, the region’s two largest economies, could jump to $37 billion from $2 billion if New Delhi and Islamabad tore down artificial barriers, last week’s report found

Unmet Potential

South Asian nations lose billions because they barely trade with each other

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Chart

But the breakdown last week of the most recent attempt by the two nuclear-armed nations to mend ties showed, once again, why South Asia — with 33 percent of the world’s poor and 40 percent of the world’s stunted children — is unlikely to realize those gains

Also Read: Indo-Pak trade potential stands at $37 billion: World Bank

On Thursday, India’s foreign ministry announced it had accepted Pakistan’s request for a foreign minister-level meeting on the sidelines of the United Nations General Assembly in New York. It was the first such attempt since 2015 — when Indian Prime Minister Narendra Modi made a surprise visit to see then Pakistani premier Nawaz Sharif at his home in Lahore.

By Friday, amid fresh violence in the disputed region of Kashmir that’s claimed in full by both nations, India called off the sit down and its foreign ministry said Islamabad’s “evil agenda” had been exposed and any talks would be “meaningless.”

Pakistan’s Prime Minister Imran Khan, who suggested the renewed push at reconciliation after his July election victory, said he was disappointed by India’s “arrogant response”, noting that “all my life I have come across small men occupying big offices who do not have the vision to see the larger picture.”

The World Bank said total “intraregional” trade in goods could rise to $67 billion from $23 billion if South Asian nations eliminated tariffs and non-tariff barriers. The World Bank authors write that “trade liberalization in South Asia has not been smooth” and that numerous countries — including India — have reversed course by increasing tariffs.

(Updates with World Bank report in last paragraph. Earlier versions of this story corrected the spelling of Bangladesh in the chart and publication date of the report.)
(This news/article originally appeared in Bloomberg on September 26th, 2018)
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