Indo-Nepal Economic Cooperation through Bihar

The renewed policy thrust on India’s relationship with her immediate neighbours presents an apt context to revisit the nature and forms of cross-border economic engagements. Regional trade and economic cooperation within the South Asian region remains among the lowest in world despite several initiatives in the form of treaties and agreements, including the much talked about South Asian Free Trade Area (SAFTA). Most of these initiatives have adopted a bilateral or multilateral approach, wherein the perspective from the bordering regions has largely been ignored. One aspect that could stimulate cooperation between the countries of South Asia, but remains relatively unexplored, is the identification and promotion of potential economic cooperation across bordering regions on both sides, which in turn can be linked further to enhance regional integration. This could have particular spillover effects in case of geographically large countries such as India, where the federal structure provides adequate space to its provinces to engage in cross-border activities within the formal bilateral framework.

However, there is little evidence or projection of the ways and means as well as gains that such an exercise may invoke. Though regional trade in South Asia in general, and between India and Nepal in particular, has received enriching research contribution (Shrestha 2013; Taneja and Choudhary 2011; Rajkarnikar 2011; Sharan 2010; Pandey 2010), subregional perspectives have not got the attention they deserve. Studies on bordering states (Chanda 2013; Kansakar 2012; Pohit and Taneja 2000) have primarily captured the dynamics of cross-border informal trade rather than exploring the potential in these regions for catalysing cooperation.