Till recently, India's economic neighbourhood of South Asia had not provided a competitive trading environment for its companies or even the government. Unlike China, which has lived in a highly competitive economic zone, ringed by countries like Japan and South Korea, India has mostly looked far beyond its borders to engage in competitive trade. This is a key reason why manufacturing in India has benefited less from liberalisation than the services sector. The forging of deeper economic relations with ASEAN can change this pattern for good.
The Regional Comprehensive Economic Partnership, negotiations on which have begun this week in Cambodia, could be a turning point in this context. But it will come up against the US inspired Trans-Pacific Partnership, through which Washington is trying to draw the ASEAN into closer ties with the western hemisphere. For the group that succeeds, the prize is huge. The region, as the OECD report released this week shows, is expected to grow at an annual rate of 6.4 per cent for the next five years, higher than any other geographical region. Since some of the countries here are already in the middle income zone, the impact of further rapid growth stands out in a slowing global economy. To give itself a better chance in the economic partnership plan, India has teamed up with China, but this means issues like the exploitation of the South China Sea, where the two countries faced off on drilling for oil, will have to be kept pending.
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