India BIMSTEC Economic Cooperation: Potential and Prospects

Abstract

The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) was established in 1997 is a unique sub-regional initiative in Asia. It combines the south and South-Eas tAsia with five countries of SAARC and two countries of ASEAN. BIMSTEC is a sector-driven cooperative organisation with key areas of economic cooperation include trade, investment, regional value chains, energy, connectivity, technology, management and capacity building, people to people contact, among others. Even after two decades of existence, BIMSTEC achieved limited progress as India the largest member of the group showed little interest in it. But the failure of SAARC as an effective sub-regional economic integration in Asia and the incorrigible differences between India and Pakistan, the two largest economies of SAARC led to the rethinking and resurrection of BIMSTEC in the recent past. India's strategic interests in the Himalayan, Bay of Bengal and Mekong sub-regions have grown over the years and the expansionist tendencies of China in these regions led to India's renewed engagements with BIMSTEC. In this context, the paper looks into the trade relation between India and BIMSTEC countries and identified the unexplored trade potential and possible areas of cooperation between India and BIMSTEC countries. The trade impact of the likely India BIMSTEC Regional TradeAgreement (RTA) is ascertained using partial equilibrium simulation model. Indicators such as Trade Intensity Index (TII) and Revealed Comparative Advantage (RCA) showed that there is trade complementary existing between India and BIMSTEC countries and the possibility of enhanced economic cooperation between them. The SMART simulation showed that there is trade creation from a potential India BIMSTEC FTA for the participating countries. The simulation analysis also revealed that the total trade effect of India BIMSTEC RTA was 2.369 billion US dollars, total welfare was 267.044 million dollars and the trade creation was 412.2 thousand US dollars.