GROWTH HISTORY OF INDIA AND OTHER SAARC NATIONS

(ADDITIONAL RESEARCH TOPIC: CHINA'S INFLUENCE ON SAARC

SUB-TOPICS
1. Introduction

➢ History & origin of SAARC

2. Objective of the study

3. Hypothesis

4. Methodology

5. Review of literature

Research work
• Growth & Development analysis of all 8 MEMBER NATIONS
• (India, Pakistan, Afghanistan, Bhutan, Bangladesh, Nepal, Sri Lanka, Maldives) in terms of
o Economic Growth
o Structural Composition & Transformation
o Employment Trends;
o Human Development Indices;
o Trade & Investment;
o Demographic profile
• Strengths and comparative advantages of these economies

• Growth and Development Analysis of China - one of the dominant observer in SAARC
region
• China's relation with SAARC Nations
• Is China a threat to SAARC Nations specifically India?
• Recent political changes in Afghanistan and its impact on neighbouring nations

6. Conclusion

7. Bibliography

1
INTRODUCTION:
This project aims to analyse the growth story and structural changes in the SAARC countries
(Afghanistan, Pakistan, India, Nepal, Bhutan, Bangladesh, Sri Lanka, and Maldives) in the last
decades. It throws light on the growth history of SAARC nations, by thus it facilitates a
comparative study of these nations in terms of different parameters taken into account. The
evolution and objectives of SAARC will help us to understand and analyse the growth path of
these nations.

The South Asian Association for Regional Cooperation was formed under Article 52 of the United
Nations’ Charter providing existence of regional arrangements or agencies for dealing with such
matters, relating to the maintenance of international peace and security with the purpose and
principles of UN charter. 1 It was established on 8th December, 1985 after about four and half
years of its preparation. The basic aim of the Association is to accelerate the process of economic
and social development in member countries through joint action in the agreed areas of
cooperation.

The idea of regional cooperation in South Asia was first initiated by late President Zia- Ur-
Rehman of Bangladesh who visited Nepal, India, Pakistan and Sri Lanka during 1977- 78 to
explore the possibilities of regional economic cooperation among the SAARC Countries. He
proposed for the collective self- reliance in a common quest for peace and development of all
these countries. In May 1980, he issued a formal call for SAARC Regional Cooperation. His call
received a positive response from all the SAARC countries.

The first meeting of the foreign secretaries of the seven countries, viz., Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan and Sri Lanka was held in Colombo (Sri Lanka) in April 1981 for
regional cooperation. It was agreed that regional cooperation should be based on mutual trust,
understanding and sympathetic appreciation of the national aspirations of all the countries of
the SAARC region. It led to the identification of five broad areas, for regional cooperation viz.,
Agriculture, Rural Development, Telecommunications, Meteorology, and Health and population
activities

Objectives The objectives, principles and general provisions, as mentioned in the SAARC Charter,
are as follows:
i. To promote the welfare of the peoples of South Asia and to improve their quality of life;
ii. To accelerate economic growth, social progress and cultural development in the region and to
provide all individuals the opportunity to live in dignity and to realise their full potentials;
iii. To promote and strengthen collective self-reliance among the countries of South Asia;
iv. To contribute to mutual trust, understanding and appreciation of one another's problems;
v. To promote active collaboration and mutual assistance in the economic, social, cultural,
technical and scientific fields;
vi. To strengthen cooperation with other developing countries;
vii. To strengthen cooperation among themselves in international forums on matters of common
interests; and
viii. To cooperate with international and regional organizations with similar aims and purposes.

2
NATIONS TO BE ANALYSED IN THE PROJECT:

All member nations and China from the observer nations

Afghanistan

Bangladesh

Bhutan

India

Maldives

Nepal

Pakistan

Sri Lanka

3
OBSERVER NATIONS:
1. Australia
2. China
3. The European Union
4. Iran
5. Japan
6. Mauritius
7. Myanmar
8. South Korea
9. The United States

POTENTIAL FUTURE MEMBERS:

❖ Myanmar has expressed interest in upgrading its status from an observer to a full
member of the SAARC.
❖ China has requested joining SAARC.
❖ Russia has applied for observer status membership of SAARC
❖ Turkey applied for observer status membership of SAARC in 2012.
❖ South Africa has participated in meetings.
❖ Indonesia, Jordan, and Yemen have expressed interest

Great Potential for Cooperation:

❖ The best way for the SAARC countries to cooperate would be when intra-regional trade
increases through providing facilities to one another. India and Bangladesh could make
an example to consider signing a bilateral agreement for free movement of commercial
vehicles, and use of southern Chittagong port as transit for ferrying goods to north
eastern India to reduce the Indo-Bangladesh trade imbalance.
❖ Indo-Sri Lanka could also increase various commodities like tea and rubber. There is a
great scope for development within South Asian nations, telecommunication, roads,
transport, energy and other infrastructural facilities can easily be developed through
mutual cooperation.
❖ India, Bangladesh and Pakistan, Nepal and Bhutan can easily be developed through rail
and road transport.
❖ In addition, Bhutan and Nepal have hydroelectric power potentials which can easily be
exported by India.
❖ Like the river valley projects on the river water flowing between India and Bangladesh,
India and Pakistan, India and Nepal, Bhutan and India, Bhutan and Nepal can be
developed in mutual interest as well as mutual benefit.
❖ Moreover, by proper management of water resources, floods and droughts can be
minimized for the benefit of their agriculture. Development of common
telecommunication services can help in monitoring weather reports, international
market fluctuations in prices and products, exchange of scientific information and also
regarding the spread of pests and diseases in particular.

4
OBJECTIVES OF THE STUDY:
➢ This project aims to analyse the growth story and structural changes in the SAARC
countries (Afghanistan, Pakistan, India, Nepal, Bhutan, Bangladesh, Sri Lanka, and
Maldives) in the last decades.

➢ To analyse the momentum of economic growth in India and other South Asian economies
in the project based on stylized facts of these economies along with trends of their
- Economic growth;
- Structural composition & transformation;
- Employment trends
- Human Development Indices;
- Trade & investment;
- Demographic profile

➢ To understand the systematic and scientific analysis of potentials, existing strengths and
comparative advantages of these economies will give a clear picture of growth of South
Asian region in the upcoming years.

➢ To analyse the role of the observer nation China and its impact on member countries.

➢ In recent years, guided by its ‘good-neighbour policy’, China has established good contact
with all SAARC members. Since it borders five of the eight member states of the SAARC,
its influence in South Asia continues to grow. At the 2005 Dhaka summit China was given
the observer status. India’s small neighbours want to see China playing a larger role in
the economic development of the region and the SAARC process, whereas India is very
sceptical towards China’s affiliation to SAARC and perceives China’s South Asia
networking as yet another form of Sino-Indian rivalry on the sub-continent. The project
will examine China’s role in SAARC, its practices of multilateralism in the context of
existing power dynamics and discuss the prospects for SAARC with China as an extra-
regional power, also with regard to its potential for stability in the region, and SAARC’s
institutional development.

➢ To evaluate the presence & hindrance of China’s policies on India’s growth and
development.

➢ To evaluate the recent political changes in Afghanistan and questioning its mutual
cooperation in all spheres with the member nations.

➢ This project aims to forecast the future economic growth of member nations, considering
the challenges ahead of them.

5
HYPOTHESIS:

❖ If there was no Covid disruption and India grew by even 6% in both these
years, the total GDP would have reached the level of Rs 164 trillion.

In 2019-20, India’s GDP was Rs 146 trillion. In other words, India had produced goods and
services worth Rs 146 trillion that year. Then, in the last financial year — that is, in 2020-21 — it
fell to Rs 135 trillion. That’s the fall of minus 7.3% we were talking about earlier.

In the current financial year — that is, in 2021-22 — the GDP is expected to grow back to Rs 146
trillion after registering a growth of 8.3%. This would mean that, in terms of overall economic
production, India would have lost two full years of growth. For instance, if there was no Covid
disruption and India grew by even 6% in both these years, the total GDP would have reached the
level of Rs 164 trillion — that is, Rs 18 trillion more than where India is likely to end up now.

❖ Pakistan must focus its attention on resolving its economic woes before it
finds itself on the shores of bankruptcy.

Pakistan’s economic woes – dwindling foreign exchange reserves, low exports, high inflation,
growing fiscal deficit, and current account deficit –once again, the country finds itself knocking
on the doors of the International Monetary Fund (IMF) for what will be its 22nd loan.
Pakistan already owes the IMF billionsfrom previous programs. Indeed, 30.7 percent of
Pakistan’s government expenditure is earmarked for debt servicing, which cannot be supported
by its decreasing revenues. Pakistan must focus its attention on resolving its economic woes
before it finds itself on the shores of bankruptcy.

6
 ❖ China will continue to lead the global economic recovery but also face a
number of challenges in sustaining growth.
Overall, China’s GDP increased by 12.7 percent through the first half of 2021, putting the country
on track to meet its growth target of “over 6 percent”. Last year, China’s economy grew by 2.3
percent, making it one of the few major economies to register positive growth amid the
pandemic.

Quarterly GDP growth in China during the pandemic

• Q1 2020: -6.8%
• Q2 2020: 3.2%
• Q3 2020: 4.9%
• Q4 2020: 6.5%
• Q1 2021: 18.3%
• Q2 2021: 7.9%

China’s GDP growth suggests that the country has rebounded well from the pandemic-induced
disruption, but is not yet firing on all cylinders. Although China’s economy faces headwinds in the
second half of the year, it appears on track to maintain its moderate level of growth. The World Bank
released an estimate in June projecting China’s GDP growth to hit 8.5 percent for 2021, before slowing
to 5.4 percent in 2022.

China’s growth outlook for the remainder of 2021 therefore appears cautiously optimistic, as China will
continue to lead the global economic recovery but also face a number of challenges in sustaining
growth.

❖ If Bangladesh grow as per the current trend, this will be a South Asia’s
standout star.

The GDP per capita of Bangladesh had grown by 9% over the past year, rising to $2,227.
Pakistan’s per capita income, meanwhile, is $1,543. In 1971, Pakistan was 70% richer than
Pakistan; today, Bangladesh is 45% richer than Pakistan.

India--eternally confident about being the only South Asian economy that matters--now must
grapple with the fact that it, too, is poorer than Bangladesh in per capita terms. India’s per
capita income in 2020-21 was a mere $1,947.

❖ If Human Development Index is considered as a development criteria, Sri

7
METHODOLOGY:
RESEARCH DESIGN:

This study descriptive design describes the characteristics of nations to be studied, researched,
compared and analysed. This project aims to do an analytical comparative study of the nations
as members and observers within the format of the South Asian Association for Regional
Cooperation, an economic and geopolitical organization that was established to promote socio-
economic development, stability, and welfare economics, and collective self-reliance within its
member nations.

AREA OF STUDY:
The momentum of economic growth in India and other South Asian economies will be
studied in the project based on stylized facts and data of these economies along with
trends of their
- Economic growth;
- Structural composition & transformation;
- Employment trends
- Human Development Indices;
- Trade & investment;
- Demographic profile

RESEARCH APPROACH / STRATEGY:

TYPE AND SOURCE OF DATA:

Secondary data has been used in this research work. The data and graphs from above mentioned
areas of study have been collected from different links. The sources of data has been mentioned
in the bibliography at the end of the project.
The reliability and validity of data have been taken care by checking the authenticity of the
sources.

8
REVIEW OF LITERATURE:
Each every nation has come a long way with the history of reforms and economic policies. After 2015,
the South Asian nations have stated showing progress by overcoming challenges.

The pandemic and the global economic crisis have consequently left deep marks on South Asia,
turning this former growth champion into the worst performing region in 2020. Regional
economic growth fell dramatically from 3.1 per cent in 2019 to -8.6 per cent in 2020, a far cry
from the 5.1 per cent growth predicted in 2019. Without exception, all economies in the region
have been badly hit by the crisis, whose impacts have been amplified and accelerated by existing
vulnerabilities. Poorly organized labour markets and the absence of a reliable social safety net
prevented Governments from implementing the effective restrictions needed to contain the
spread of the pandemic, while fiscal constraints and limited economic diversification restricted
Governments’ manoeuvring space. In this regard, countries of the region compare unfavourably
with other developing countries in Asia. Higher price inflation due to COVID-19-induced supply
constraints limited the space required for monetary policy to make up for the shortfall.
India’s economic growth has fallen from 4.7 per cent in 2019 to -9.6 per cent in 2020, as
lockdowns and other containment efforts slashed domestic consumption without halting the
spread of the disease, despite drastic fiscal and monetary stimulus. The Islamic Republic of Iran
has suffered triply-from global sanctions, the sharp drop in oil prices and a fall in domestic
consumption-which has deepened its already severe recession as evidenced by a growth
contraction from -7.0 in 2019 to -13.3 per cent in 2020. Economic growth in Pakistan, which was
already in the grip of an ongoing twin fiscal and balance-of-payments crisis, has fallen from 0.3
per cent in 2019 to -2.7 per cent in 2020. Maldives, meanwhile, took a brutal hit from the near
standstill in international tourism, erasing more than a fifth of its output in 2020 compared with
the previous year. Even Bangladesh, the fastest growing economy in the region, has seen
economic growth fall, from 8.4 per cent in 2019 to 0.5 per cent in 2020, although this was
cushioned somewhat by a recovery in trade and remittances in the second half of the year. As
the population continued to grow in 2020, GDP per capita fell by nearly 10 per cent. Poverty is
rising sharply and existing inequalities are widening. Nearly two out of five of 2020’s new global
poor are in South Asia.
Economic growth in South Asia in 2021 will be insufficient, at 6.9 per cent, to make up for the
losses of 2020, as pandemic hotspots re-emerge and, increasingly, the ability of Governments to
deal with the multitude of challenges becomes exhausted. While trade, remittances and
investment are expected to pick up in 2021, as much of the global economy moves towards
recovery from the widespread lockdown, investment and domestic consumption in many South
Asian countries will nevertheless remain subdued owing to the continuing threat of the
pandemic and the scarring effects of the crisis. Regional economic growth for 2022 is forecast at
5.3 per cent, which would allow South Asia to finally exceed its 2019 economic output, albeit
only marginally. On the other hand, South Asian countries that are relatively more exposed to
global economic conditions, such as Bangladesh and Maldives with their high share of foreign
trade and Nepal with its dependence on tourism and remittances, will enjoy a stronger rebound,
of about 10 per cent growth in 2021. Other countries in the region will experience economic
growth ranging from 3.1 per cent (Sri Lanka) to 7.3 per cent (India).

9
East Asia’s growth outlook for 2021 is raised to 7.5%, from 7.4% in April, amid a stronger-than-
expected recovery by the newly industrialized economies of Hong Kong, China; the Republic of
Korea; and Taipei, China. The sub-regional growth forecast for 2022 is retained at 5.1%. The
growth outlook for the People’s Republic of China is likewise maintained at 8.1% this year and
5.5% in 2022, amid steady performances by industry, exports, and services.
In the upcoming research work, the growth history of the SAARC nations will be discussed along
with their performance in the areas of study taken, which will facilitate a comparison of their
strengths and weaknesses, and achievements and challenges. It will further throw light on the
roadmap of these economies and their future lies ahead.

10