South Asia is the fastest growing region in the world. The combined economy of the South Asian Association for Regional Cooperation (SAARC) is the third largest in the world in Sterms of GDP (PPP), with US and China ahead. SAARC countries make up around 21 percent of the total world population with around 1.7 billion people. India makes up for the majority of this region’s area and population.

According to the South Asia Economic Focus report brought out by World Bank, regional growth is projected to increase from 7 percent in 2015 to 7.6 percent by 2017 with the increase in investments and steady rise in consumption patterns.  However, South Asia still remains one of the least integrated regions in the world: Intra-Regional Trade is dismally low compared to other regional trade blocs that are seeing fast growing trade. The South Asian Free Trade Area (SAFTA) was envisaged as the first step towards a Free Trade Area which would eventually lead towards a Customs Union, Common Market and Economic Union.

Membership of SAARC has not made any significant difference to the lives of people in the region over the years, a fact even acknowledged by the leaders of the member countries. This has been primarily due to bilateral differences between members of the group. Consequently, sub-regional cooperation among some of the SAARC countries is on the rise. One sub-grouping that has gained prominence and traction in recent times is Bangladesh-Bhutan-India-Nepal (BBIN). These countries have decided to move ahead, improve connectivity and boost intra-regional trade.

Sub-regional cooperation among BBIN countries, particularly in the area of transport infrastructure, is crucial for providing impetus to trade and other economic activities. The SAARC Charter promotes the idea of sub-regionalism in Article VII which states, “The Standing Committee may set up Action Committees comprising Member States concerned with implementation of projects involving more than two but not all Member States”. Article I (h) of the Charter, emphasising trans-regional cooperation, states that member countries can “cooperate with international and regional organisations with similar aims and purposes”.

At the 18th SAARC summit in Kathmandu, Indian Prime Minister Narendra Modi stated that regional integration in South Asia would go ahead “through SAARC or outside it, among all of us or some of us.” Thus, India has now embarked on a strategy to build seamless sub-regional transit corridors of which BBIN is a crucial component.

This Issue Brief focuses on the reasons for the need to have sub-regional integration and cooperation between the four South Asian countries—Bangladesh, Bhutan, India and Nepal. It also looks at previous attempts made at sub-regional cooperation by countries in the region and the areas
of potential cooperation.