ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Cross-border Trade and Economic Development in the Border States of India

This study attempts to evaluate how the border states in India are actively engaging in cross-border trade, examines the role of central and state governments in strengthening the infrastructure developmental activities and identifies the challenges and opportunities for it. The study found that border states that are actively engaging in cross-border trade have received better funding from the centre and have also recorded a higher growth rate of state gross domestic products compared to other border states. Although the cross-border trade with countries such as Bangladesh, Nepal, and Bhutan is flourishing, there is a huge scope for expanding it with Myanmar and Pakistan.

Studies found that cross-border cooperation is very essential to promote territorial integration by exploring the trade and investment opportunities with the neighbouring countries (Van Houtum 2000; Knippschild 2011). It provides a huge scope of spillover effect for increasing the economic activity across the bordering states, particularly benefiting the micro, small and medium enterprises (MSMEs) engaged in agriculture and allied activities. For instance, cross-border intra-regional trade is one of the major driving factors for most of the Southeast and East Asian countries for successful engagement in the global value chain (GVC). Despite India sharing its border with seven countries—Bangladesh, Bhutan, Nepal, Myanmar, Pakistan, Afghanistan, and China—more than 73% of India’s exports to South Asian1 countries are through land routes (60% through road and 13% by rail).2

On the one side, countries sharing a border have the potential to leverage cultural and ethnic similarities with the neighbouring countries, which will strengthen diplomatic relations. On the other, it can align their trade activity to meet the import demand. Given the locational advantage, India has huge untapped intra-regional trade potential. However, out of the 17 border states in India, only nine are actively engaged in cross-border trade due to political and security reasons, difficult geographical terrain for connectivity, and open borders in most of the regions leveraging informal trade. To promote cross-border trade and develop the border regions, both the central and state governments have been taking many developments and infrastructure initiatives, such as Bharatmala for intranational transport networks to strengthen land route connection with the neighbouring countries.3 Additionally, initiatives such as Vibrant Villages Programme (VVP), which was announced in the budget 2022–23, aim to promote cross-border trade through cultural and ethnic linkages in Arunachal Pradesh, Himachal Pradesh (HP), and Uttarakhand.

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Updated On : 24th Apr, 2023
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