Elusive Regional Cooperation in South Asia: Is it in India’s Interest?

Introduction

South Asia, comprising eight nations—India, Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka, Maldives, and Afghanistan—is home to over 2.04 billion people, nearly a quarter of the global population. Given its vast human resources, shared cultural heritage, and geographic proximity, this region holds immense potential for socio-economic transformation through regional cooperation. Yet, despite these advantages, South Asia remains the least integrated region globally. The South Asian Association for Regional Cooperation (SAARC), established in 1985, was conceived as the principal mechanism for fostering regional unity and economic collaboration. However, decades later, the organisation’s efficacy has been stymied by entrenched political rivalries, most notably between India and Pakistan, and diverging national priorities.

This lack of amity and cooperation has serious implications not only for South Asia’s collective development but also for India, the largest and most influential country in the region. India’s strategic interests and global ambitions are intrinsically tied to the stability and prosperity of its neighbourhood. Understanding the reasons behind South Asia’s elusive cooperation—rooted in historical legacies, political obstacles, and strategic dynamics—and evaluating India’s role in overcoming these challenges is essential for charting a path toward a more economically vibrant South Asia.

The Paradox of Proximity

The irony of South Asia lies in its deeply interconnected history and geography juxtaposed against its fragmented political and economic landscape. Shared borders, rivers, and cultural ties have not translated into effective cooperation. Instead, historical grievances and asymmetric power dynamics have entrenched divisions.

The shadow of colonialism looms large over South Asia’s political landscape. The 1947 partition of British India, which resulted in the creation of India and Pakistan, remains a traumatic and polarising event. The partition led to widespread violence, displacing 15 million people and leaving nearly a million dead. Beyond the human cost, it entrenched territorial disputes, particularly over Jammu and Kashmir (J&K), a region claimed by both India and Pakistan. Partition also institutionalised mistrust that extended beyond India-Pakistan relations. Nepal’s deep-seated suspicions of Indian intentions trace back to colonial-era treaties that rendered it reliant on Indian trade routes. Similarly, Bangladesh, despite its independence with India’s support in 1971, has voiced concerns over water-sharing agreements, such as the contentious Teesta River dispute, accusing India of prioritising its interests at the expense of smaller neighbours.

The rivalry between India and Pakistan remains the most significant impediment to regional cooperation in South Asia. The two countries have fought four wars—in 1947, 1965, 1971, and 1999—and have been locked in a tense and adversarial relationship for more than seven decades. At the heart of this hostility lies the unresolved dispute over J&K, with Pakistan demanding its resolution as a prerequisite for broader collaboration. This entrenched conflict has spilled over into nearly every aspect of their bilateral relations, affecting trade, diplomacy, and efforts at regional cooperation. Pakistan’s foreign policy is heavily influenced by its military establishment, which perceives India as an existential threat. This perception drives Pakistan’s reliance on asymmetric warfare tactics, including support for terrorist groups that target India, further deepening the mistrust between the two countries.

India, on the other hand, has become distrustful of Pakistan’s sincerity in fostering regional cooperation, particularly given the lack of concrete action against anti-India terrorist groups operating from Pakistani soil. After the 2016 Uri terror attack, which India attributed to Pakistan-based militants, New Delhi withdrew from the 19th SAARC summit slated to be held in Islamabad, citing Pakistan’s role in the incident. Since then, India has sought to isolate Pakistan diplomatically and has championed sub-regional platforms like BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) to bypass Pakistan’s obstructionism. India has also made it clear that it will not re-engage in SAARC summits unless Pakistan takes demonstrable steps to combat terrorism.

This rivalry not only undermines bilateral ties but has also paralysed regional platforms like SAARC. For the smaller countries in South Asia, the dominance of India-Pakistan disputes within SAARC has rendered the organisation ineffective, leading to frustration and scepticism about its viability as a forum for regional cooperation.

Another significant impediment is the absence of a shared threat or vision. Unlike the European Union, which unified around the need for post-war reconstruction, or ASEAN, which coalesced to counter communism, South Asia lacks a shared narrative. India’s focus on countering terrorism and expanding economic influence often conflicts with the priorities of smaller nations. Bhutan and Maldives emphasise environmental sustainability, Nepal seeks infrastructure development, and Bangladesh prioritises climate adaptation. This divergence has prevented the alignment of policies and priorities necessary for regional integration.

The structural and geographical asymmetries in the region, dominated by India’s preponderance, have also not fostered a sense of security among its neighbours. India’s geographic centrality and economic dominance are both an asset and a liability. While its size makes it a natural hub for connectivity, it also creates a sense of vulnerability among its neighbours. Countries like Bhutan and Nepal, landlocked and dependent on Indian routes, perceive this dependency as a source of inequity. Such asymmetries extend to trade, where protectionist policies and high tariffs further isolate smaller economies.

Strategic and Economic Imperatives for Cooperation

The harsh reality facing South Asia is that it remains one of the world’s most underdeveloped and impoverished regions. This stark reality underscores the imperative for regional cooperation also as a means to address widespread poverty, underdevelopment, and shared challenges. With its unique geographic position and untapped potential, South Asia has the resources and opportunities to transform its socio-economic landscape. However, this potential has been persistently undermined by entrenched rivalries, divergent national priorities, institutional weaknesses, and structural deficiencies. Regional cooperation, particularly through economic integration and collective action, offers a viable pathway to overcoming these challenges. Yet, realising this vision requires addressing economic fragmentation, non-traditional security threats, and the strategic dynamics reshaping the region, including China’s growing influence.
South Asia presents a paradoxical economic landscape. Despite being home to some of the world’s fastest-growing economies, such as India and Bangladesh, it remains one of the least integrated regions globally. According to the World Bank, intra-regional trade accounts for a paltry 5% of the region’s total trade, a glaring disparity compared to 35% in East Asia and 60% in Europe. This glaring disparity highlights the untapped potential of regional economic integration.

For India, fostering deeper regional cooperation could unlock vital markets and reduce its reliance on distant trading partners. For example, Bhutan and Nepal’s substantial hydropower resources could help meet India’s growing energy demands while providing much-needed revenue for these smaller neighbours. Similarly, Bangladesh’s thriving textile industry could significantly benefit from enhanced access to Indian markets. However, structural inefficiencies, including high tariffs and inadequate transport infrastructure, continue to hinder the realisation of these opportunities. The cost of transporting goods within South Asia remains prohibitively high, further reducing regional competitiveness.

Smaller South Asian states also stand to gain significantly from greater regional trade. Landlocked countries like Bhutan and Nepal depend on India for connectivity. At the same time, Pakistan, Sri Lanka, and Bangladesh are well-positioned to leverage their strategic ports and integrate into global supply chains. However, mistrust of India’s economic dominance often drives these states to seek alternative partnerships with external powers like China. This dynamic has created a fragmented economic landscape where opportunities for collective growth are routinely squandered.

India’s approach to regional trade is often perceived as domineering. The smaller states have accused India of leveraging its economic power to impose unfavourable terms to its partners, such as maintaining trade imbalances with Bangladesh and Nepal. Furthermore, India’s preferential focus on non-SAARC trade partners, as seen through initiatives like its Look East Policy and robust trade relations with China, has diluted the potential benefits of South Asian integration.

Smaller South Asian states approach economic integration with caution, fearing that closer ties with India could result in dependency and imbalance. For instance, Bangladesh, despite its growing economic ties with India, has expressed frustration over trade imbalances and Indian tariffs on Bangladeshi textiles. Similarly, Pakistan’s long-standing refusal to grant India Most Favoured Nation (MFN) status reflects its apprehension that economic reliance on India could exacerbate its geopolitical vulnerabilities.

Beyond economic imperatives, South Asia faces pressing non-traditional security challenges that threaten the stability and livelihoods of millions. These include climate change, pollution, terrorism, and pandemics.

These challenges transcend national borders and require collective solutions, yet political rivalries have stymied regional cooperation.

Climate change is among the most pressing, with rising temperatures, glacial melting, erratic monsoons, and rising sea levels threatening millions. With its low-lying geography, Bangladesh is at the forefront of this crisis, facing annual flooding that displaces millions and threatens agricultural productivity. India, as the largest carbon emitter in the region, has a critical role in driving regional climate action. Despite these shared risks, regional efforts to address environmental challenges remain piecemeal. Efforts to establish comprehensive frameworks for water management and climate resilience, such as in the Ganges-Brahmaputra-Meghna basin, have been hampered by political disputes and mistrust. Regional frameworks like SAARC’s Environment Action Plan exist but remains largely underutilised.

Terrorism and organised crime also pose significant regional threats. South Asia is home to multiple insurgent and extremist groups that exploit porous borders and weak governance structures. Networks operating between Pakistan, Afghanistan, and India exacerbate regional instability, while trafficking in drugs, arms, and people undermines socio-political cohesion. While terrorism affects all South Asian countries to varying degrees, mistrust has hindered efforts to establish a unified counterterrorism framework. The SAARC Regional Convention on Suppression of Terrorism, established in 1987, was an attempt to create a cooperative framework but has been undermined by Pakistan’s support for extremist groups and India’s reluctance to trust Islamabad. It remains ineffective due to India-Pakistan hostilities and mutual accusations of harbouring militants. Without a unified counterterrorism strategy, South Asia remains vulnerable to extremist violence.

Public health is another area where regional cooperation is critical. The COVID-19 pandemic exposed the inadequacies of South Asia’s healthcare infrastructure, with countries struggling to contain the virus and secure vaccines. While India attempted to lead regional efforts through vaccine diplomacy, these initiatives were undermined by bilateral tensions and Pakistan’s reluctance to engage through SAARC. This disjointed response highlights the need for stronger regional health mechanisms. Greater investment in regional health mechanisms, such as a South Asian public health fund or a shared disease surveillance system, could strengthen collective resilience. With its robust pharmaceutical industry, India is well-positioned to lead such initiatives.

A new layer of complexity to regional dynamics has emerged due to China’s growing presence in South Asia, facilitated by its Belt and Road Initiative (BRI). Beijing has established itself as a dominant economic player through investments in infrastructure projects like the China-Pakistan Economic Corridor (CPEC) and Sri Lanka’s Hambantota Port. According to a Brookings Report, China has further increased its exports to SAARC countries from $1.2 billion in 1992 to $51.7 billion in 2018. For smaller South Asian states, Chinese funding offers an alternative to Indian dominance, enabling them to diversify their partnerships.

However, these relationships come with significant risks. The Hambantota Port’s transfer to Chinese control under a 99-year lease agreement due to Sri Lanka’s debt default is a stark reminder of the dangers of over-reliance on Chinese loans. Similarly, Nepal’s growing engagement with China has raised concerns about Beijing’s influence on its domestic policies.

India views China’s presence in its neighbourhood as a direct threat to its regional leadership. Beijing’s investments in Pakistan, Sri Lanka, Maldives and Nepal challenge India’s strategic interests, and projects like the Gwadar Port provide China with a foothold in the Indian Ocean. In response, India has sought to counterbalance China through sub-regional initiatives like BIMSTEC and the BBIN (Bangladesh-Bhutan-India-Nepal) corridor. However, these efforts often bypass SAARC, alienating countries like Pakistan and raising questions about India’s commitment to inclusive regionalism. Against this backdrop, India, as the region’s most influential power, finds itself navigating a challenging predicament. It has to find ways to balance its aspirations for global leadership with the pressing need to stabilise its immediate neighbourhood. It is worth reflecting on whether our neighbours are increasingly aligning with China-led initiatives as SAARC continues to languish in stagnation.

The Role of SAARC and Alternatives

Since its inception in 1985, SAARC has grappled with issues that have undermined its efficacy. Chief among these is its consensus-based decision-making process, which requires unanimous agreement for any major policy or initiative. This framework often stalls progress, as member states prioritise national interests or use their veto power to block regional initiatives. For instance, Pakistan’s refusal to sign agreements on regional connectivity during the 2014 Kathmandu summit exemplifies how bilateral disputes overshadow collective goals.

Another critical challenge is SAARC’s inability to address pressing issues like terrorism, climate change, and economic inequality. Despite adopting frameworks such as the SAARC Regional Convention on Suppression of Terrorism (1987), mistrust between member states has prevented effective implementation. Similarly, initiatives like the SAARC Food Bank have failed to deliver tangible benefits, as countries prefer bilateral arrangements over regional frameworks. The absence of enforcement mechanisms further weakens the organisation, allowing member states to bypass agreed-upon commitments without consequences.

India’s frustration with SAARC’s inefficacy has led to a pivot toward sub-regional platforms like BIMSTEC and BBIN. These initiatives have allowed India to bypass Pakistan’s obstructionism and focus on functional cooperation with willing partners. BIMSTEC, which connects South Asia with Southeast Asia, has made progress in areas like connectivity, energy, and maritime security. For instance, BIMSTEC’s efforts to enhance trade links and build regional infrastructure have attracted investment and strengthened ties among member states. Similarly, the BBIN corridor facilitates cross-border transport and trade among its four members, providing a model for pragmatic and issue-based cooperation.

Despite its shortcomings, SAARC remains the only forum encompassing all South Asian states, making it indispensable for comprehensive regional integration. Revitalising SAARC requires addressing its structural flaws and focusing on achievable goals. Narrowing its agenda to specific areas, such as trade liberalisation, climate resilience, and public health, could help rebuild trust and demonstrate the organisation’s relevance.

India, as the largest and most influential member, must take the lead in this effort. This involves fostering trust among smaller countries by addressing their concerns about asymmetry and dominance. Engaging Pakistan on targeted issues, such as trade and counterterrorism, could also serve as a confidence-building measure, paving the way for broader cooperation. By demonstrating its commitment to inclusive regionalism, India can reinvigorate SAARC and restore its credibility as a platform for collective progress.

India’s Role in Shaping the Future

India’s leadership is pivotal to shaping South Asia’s future. As the region’s largest economy and most powerful state, India bears both the responsibility and the opportunity to drive regional integration. However, its dominant position in South Asia is a double-edged sword. While its economic and strategic clout naturally positions it as a leader, it simultaneously fuels perceptions of hegemony among smaller nations. Balancing strategic aspirations with the concerns of its neighbours is essential for fostering trust and building a cooperative regional framework.

Despite numerous challenges, initiatives like the South Asian Free Trade Area (SAFTA) and the BBIN Motor Vehicles Agreement illustrate the potential for functional cooperation when political barriers are set aside. India’s leadership in these efforts, coupled with its recent strides in improving bilateral relations, reflects an understanding that its stability and prosperity are intertwined with the region’s success. The Gujral Doctrine, emphasising non-reciprocity in India’s relations with smaller neighbours, still serves as a vital blueprint for fostering trust and reducing asymmetry. Offering equitable terms in trade and infrastructure projects remains central to this effort. For instance, India could address trade imbalances with Bangladesh by reducing tariffs on Bangladeshi textiles and increasing market access. Similarly, regional infrastructure investments, such as transboundary energy grids or climate-resilient agricultural systems, would benefit all parties while easing fears of domination.

Engaging Pakistan pragmatically remains one of India’s most significant challenges. While the enduring rivalry between the two countries hinders regional progress, separating bilateral disputes from broader regional objectives can pave the way for issue-based cooperation. Targeted collaborative projects, such as joint water-sharing initiatives or public health campaigns, could serve as confidence-building measures, demonstrating tangible benefits of engagement even amid political tensions.

India’s cultural and historical ties with South Asia provide a strong foundation for fostering goodwill. People-to-people connectivity through educational exchanges, cultural programmes, and tourism initiatives can strengthen regional bonds. India’s leadership in vaccine diplomacy during the COVID-19 pandemic demonstrated its capacity for soft power, earning goodwill and highlighting the benefits of cooperative action.

Conclusion: Navigating the Path Forward

South Asia, despite its shared history, interconnected cultures, and common challenges, remains deeply fragmented. The status quo is unsustainable. The lack of integration has profound economic, security, and social costs. Intra-regional trade, comprising just 5% of total trade, represents a colossal missed opportunity for growth. The fragmented approach to shared challenges like climate change, terrorism, and public health leaves millions vulnerable to instability and poverty. A unified South Asia, leveraging collective resources and expertise, could transform these shared vulnerabilities into opportunities for growth and resilience.

India, as the largest and most influential state, holds the key to unlocking the region’s potential. Its leadership is not only a strategic necessity but also a moral imperative. By addressing the asymmetries that fuel mistrust and adopting inclusive frameworks, India can create a foundation for a united and prosperous South Asia. Revitalising SAARC is crucial to this effort. Narrowing SAARC’s focus to functional areas such as trade, public health, and climate resilience could rebuild trust and deliver tangible outcomes. Simultaneously, India’s engagement with Pakistan, while fraught with challenges, is essential. Pragmatic and issue-specific cooperation, such as joint water management or collaborative health campaigns, could lay the groundwork for broader reconciliation.

Pakistan, too, must play a constructive role. Its fixation on parity with India and its reliance on external patrons like China has isolated it within South Asia. A shift toward regional cooperation, even amid political disputes, would yield significant benefits. For SAARC to thrive, Pakistan must demonstrate a willingness to separate bilateral disputes from regional objectives, signalling its commitment to collective progress.

The role of smaller South Asian nations—Nepal, Bhutan, Sri Lanka, and Bangladesh—is equally critical. These nations must advocate for inclusive frameworks that address their specific needs while maintaining a balanced approach in their external partnerships. A regional vision that leverages both internal and external resources can ensure stability and autonomy.

While the path to regional integration in South Asia is fraught with obstacles, it is not without hope. By addressing mutual concerns, fostering trust, and embracing inclusive approaches, South Asia can unlock its immense potential. For India, leading this transformation is both a regional and global imperative. Its aspirations for major power status hinge on its ability to guide South Asia into a new era of stability and prosperity.