It is worth remembering that even as free trade makes the headlines, agreements by themselves are not likely to work the magic. For South Asia to unleash its long-suppressed economic potential, there has to be the backing of a far bolder political leadership than it has historically enjoyed.
In recent years, economic cooperation in South Asia has been seen mostly as a matter of lowering the high trade barriers that exist between India and its neighbours. In other words, while efforts to create a South Asian Free Trade Area (SAFTA) have been stymied by the Indo-Pak stalemate, India has been pursuing its own bilateral deals.
It is worth remembering though that even as free trade makes the headlines, agreements by themselves are likely to have limited impact. But combined with other initiatives they could play a significant role in unleashing the region´s long-suppressed economic potential. This will, however, require far bolder political leadership than the region has historically enjoyed.
The desire to increase South Asia´s trading Capacity is not misplaced. Openness to trade correlates closely with economic growth in developing Asian countries, as Table 1 shows. Countries whose trade volumes were high relative to gross domestic product (GDP) by the mid-1980s enjoyed substantially higher rates of GDP growth over the next decade than did their trade-averse neighbours. As a group, the trade-to-GDP ratio of the five "tiger" economies of East and Southeast Asia was double that of South Asia in 1985-1987; over the next decade, the tiger economies´ GDP growth rate was 60 percent higher than South Asia´s. It is no coincidence that the Subcontinent´s richest country, Sri Lanka, has long been the most open to trade.