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India's New Neighbourhood Policy and Regional Trade
Recent political changes in South Asia offer India a fresh chance to reset its neighbourhood policy. New governments in Bangladesh, Nepal, and Sri Lanka signal a shift towards pragmatic and interest-based relations. This evolving landscape requires India to rethink its approach, especially in trade and connectivity, to encourage mutual growth and stability.Political Shifts in South Asia Bangladesh’s recent election gave a strong mandate to Tarique Rahman and the Bangladesh Nationalist Party. Rahman’s Bangladesh First stance opens doors for a practical partnership with India. Nepal witnessed a generational change with the rise of the Rastriya Swatantra Party and Balendra Shah, ending cycles of distrust. Sri Lanka, under new leadership since 2024, is moving towards pragmatic ties with India, leaving behind historical animosities. These changes create an opportunity for India to engage as an equal partner respecting sovereignty.Trade and Economic Interdependence India’s regional trade policy has been protectionist, limiting benefits despite geographic proximity. Bangladesh and Sri Lanka mainly export to the West, while China dominates imports. India remains Nepal’s largest trading partner but with limited growth due to infrastructure and trade barriers. India runs trade surpluses with neighbours but faces deficits with China. The solution lies in importing more from neighbours, improving investment, and modernising borders to boost regional trade.Connectivity and Regional Cooperation Better connectivity between India, Bangladesh, and Nepal can uplift the eastern Subcontinent’s poorest regions. This requires infrastructure upgrades, simplified customs, and agreed rules of origin. Cooperation on economic and energy security with Bangladesh, Bhutan, Nepal, Sri Lanka, and the Maldives is essential amid global uncertainties and Gulf region instability. Progress needs political will and innovative policies rather than new regional forums like SAARC.Changing Mindsets for Partnership India’s past neighbourhood policy assumed smaller neighbours should be grateful for Indian favours. This bred resentment and political friction. New governments seek partnership, not patronage. Agreements must deliver clear benefits such as jobs, exports, and growth. India must move beyond rhetoric and protectionism to build genuine, mutually beneficial ties in South Asia.Topics for Prelims:Bangladesh Nationalist Party (BNP)Founded in 1978 by Ziaur Rahman.Key opposition party in Banglade...
Unlocking Sri Lanka's economic success: Harnessing the power of ...
Opinion By Dr. Ravinthirakumaran Navaratnam The economic success or stagnation of a country depends on factors such as strong institutions, effective governance, economic policies, education, infrastructure, and resource management. Geography plays a role, with resource-rich nations having an advantage, but mismanagement can lead to stagnation. Education and skill development create a productive workforce, while modern infrastructure and technology drive economic efficiency. Political stability and investor-friendly policies attract growth, whereas corruption and instability hinder progress. Colonial history also influences development, with some nations overcoming past disadvantages while others struggle with lingering economic disparities. Sri Lanka’s economy has been facing severe challenges, including a high debt burden, foreign exchange shortages, inflation, slow economic growth, and rising unemployment. The country’s debt crisis led to a sovereign default in 2022, making debt restructuring a top priority. Foreign reserves remain low, limiting the ability to import essential goods such as food, fuel, and medicine. Inflation, although moderating, continues to impact the cost of living, reducing the purchasing power of ordinary citizens. Economic growth has been sluggish, with contractions in key sectors such as tourism, manufacturing, and agriculture. Additionally, structural weaknesses, including an oversized public sector and inefficient state-owned enterprises, have contributed to fiscal instability. Political and social unrest have further weakened investor confidence, making economic recovery even more challenging. As of March 17, 2025, Sri Lanka is experiencing a period of economic stabilisation and growth following the severe crisis of 2022. The government has implemented significant reforms, leading to budgetary discipline, a bullish stock market, and improved credit conditions. The economy is projected to grow by 5% in 2025, with a primary budget surplus of 2.3% of GDP, aligning with International Monetary Fund (IMF) programme targets. Tourism has seen a resurgence, contributing to economic recovery. The government is also focusing on digital transformation, allocating LKR 3 billion towards digital investments and aiming to generate US $15 billion in revenue through the digital economy by 2030. However, challenges remain, including the need to boost tax compliance, better target social welfare, and manage capital spending to maintain fisca...
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WTO | Regional trade agreements
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