To bypass China, India should try a 'costless trick'

INDIA'S economic policy elite has been oscillating in its recommendations of doing business with China, from denying Chinese companies the big-ticket contracts to avoiding a trade boycott, which would hurt India more. There is a third option that Prime Minister Narendra Modi would be well advised to consider: for New Delhi to strengthen itself by focusing more on trade with South Asia and to diversify its commerce beyond China.

This point was made effectively by Sanjay Kathuria, a senior visiting fellow at the Centre for Policy Research in New Delhi and former lead economist at the World Bank. He argued that at this critical moment when New Delhi "is increasingly worried about growing Chinese economic and strategic relationships in the region, India is missing a costless trick". He believes that India can trade much more within the South Asia region.

Behaving fittingly as the larger and more sophisticated economy, India had opened its market ahead of its smaller and less industrialised trading partners. In these ways, India provided the smaller countries with an "early harvest" by accepting such "asymmetric" liberalisation. In 2012, New Delhi provided unilateral duty-free access to its market for the least developed countries of South Asia - Afghanistan, Bangladesh, Bhutan, Maldives and Nepal.