The political economy of regionalism in South Asia

This paper discusses the prospect of the formation of a discriminatory trading area in South Asia from a political economy perspective. It is generally believed that the existence of political rivalry and economic asymmetry in the region acts as a deterrence to the formation of such a trading bloc. This paper argues that the politico-economic imperatives of the changed fundamentals of international political relations and trade would bring the countries of South Asia closer to settling the conflicts. We further argue that the economic asymmetry in this region would not preclude economic cooperation. Rather, a trading bloc involving geographically-large India and its small neighbours would lead to a significant increase in intra-regional trade. This paper concludes that the South Asian countries would gain substantially by acting in concert