The pandemic propelled perspective: India and the SAARC

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Pak seeking to block India's COVID-19 initiatives by bringing ...

by Apurbaa Sengupta and Tanistha Bhagawati

22 June 2020

The unprecedented COVID-19 pandemic that has wreaked havoc across geographies has exposed frailties of various countries as well as regional or international blocs to cope with the threat. The pandemic has established the fact that multilateral cooperation and regional stability at this hour is a desideratum. As the unfortunate crisis unfolded along the borders of the South Asian Association for Regional Cooperation (SAARC) countries, in a bid to curb the fatal infection, countries adopted travel bans, closed borders and implemented strict lockdown strategies.

SAARC nations are facing what the World Bank says is the worst crisis to hit South Asia in the last 40 years. The component countries are liberalised economies that function under strict scrutiny. Under the threat of the Coronavirus pandemic, state-imposed lockdowns and travel bans have considerably hurt the national economies with decreased economic activities. Imports and exports have been reduced with foreign investors hesitating to invest and pulling out of economies- a condition that had sent the economy downward spiralling, resulting in the East Asian Crisis in 1997. The recession-like condition demands extensive fiscal and monetary support by both governments and international financial institutions to be able to induce cash flow to be able to convert the suboptimal conditions to somewhat stabilise.

At a time when most countries were sceptical about the revival of the South Asian bloc, Indian Prime Minister Narendra Modi played the COVID card for consolidation of the regional bloc by calling for a virtual summit of member-states on 15th March, 2020. Established in 1985, the SAARC institutes the regional union of eight countries of South Asia- Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka. The meeting was conducted with the objective of scrutinising the gravity of the crisis and bringing together the states to finalise steps to recover from it. With India leading the summit, PM Modi expressed his desire to call the member-states and chalk out a strong strategy to fight the Coronavirus.

The meeting was quite fundamental with South Asian countries thinking in terms of a collective strategy for health diplomacy. Moreover, this was the first time in four years that India had agreed to be a part of the summit. In the aftermath of the Uri attack in 2016, India had abandoned the Islamabad summit citing perpetual instances of Pakistani terrorism. Throughout South Asia, the response of the member-states (of the SAARC) resonates with the fundamental. India has pledged $10 million towards creating a Joint SAARC Emergency Relief Fund, which presently stands at $21.8 million as an effort of all South-Asian nations. PM Modi’s renewed attempts at uniting the bloc resonates with his Neighbourhood First Policy. Apart from setting up an Emergency Fund, India has also not only provided medical assistance by sending doctors to the neighbourhood, but also managed to ensure smooth supply of essential hydroxychloroquine and paracetamol to aid the treatment of COVID patients.

India, at $2.9 trillion, is the biggest economy of the 8-member group. It has unveiled an INR 1.7 lakh crore (422.6 billion) stimulus plans, directing direct cash transfer to poor senior citizens and women with free food grain and gas. The Central Bank has cut interest rates by 75 basis points to encourage loans and provided INR 1 lakh crore liquidity in the market. The government has suspended the Insolvency and Bankruptcy Code for 6 to 12 months to provide relief to businesses.

Its counterparts in Pakistan and Bangladesh has followed suit with Pakistan allocating a Rupees 1.2 lakh crore rescue package and an additional 7,500 crore for small and medium size businesses. Central Banks have reduced interest on loans from 13.25% to 9% with concession loans as far as 4-5%. The Bangladesh Garments Manufacturers and Exporters have reported orders worth $3.2 billion being cancelled; prompting a package of $11.6 billion to support manufacturing and service sectors and provide a social safety net. Countries like Nepal and Maldives that thrive on tourism has been badly hit with Nepal making losses up to $1.25 billion prompting relief package with 25% discount on electricity. Maldives meanwhile is providing $161.8 million stimulus packages for local businesses and a $100 Million in emergency loans and a $2 million short-term financing facility for tourism. Sri Lanka has induced $250 million refinancing facility for banks to expand its lending capacity to Rupees 40,000 crores. Bhutan’s GDP is on a rapid decline at 1-2% depending on the Pandemic’s duration, however they want to continue with construction of hydropower projects to minimise Covid-19’s impact and retrieve the economy (electricity contributing to 13% GDP). Afghanistan is harrowed by the pandemic given it is a heavily aid-reliant and import-dependent country. The Government has allocated $25 million with the World Bank approving an additional $100.4 million grant[1].

India’s effort of ensuring a smooth regional integration is crucial to not only defeat a global threat but also enhance India’s ambitions of an effective South Asian leadership. While China has attracted massive global attention, which traces to the release of the virus from its wet market in Wuhan, Modi has been prepared to utilise SAARC diplomacy to counter Chinese ambitions by maintaining Indian leadership as well as taking a jibe at China’s extravagant million dollars’ BRI project. In an unprecedented global catastrophe such as this, where institutions are beginning to crumble under their own contradictions with the global order fragmented, India must not only extend its hand to global solidarity but also minimise the Covid created externalities within the country.

Authors:

Apurbaa Sengupta and Tanistha Bhagawati

Apurbaa Sengupta is currently in her final year of pursuing a Bachelor’s Degree in Political Science from the Department of International Relations, Jadavpur University. She holds a keen interest in research, primarily in the fields of Foreign Policy, International Relations, Neighbourhood Studies and Diplomacy.

Tanistha Bhagawati is currently in her final year of pursuing a Bachelor’s Degree in Political Science from the Department of International Relation, Jadavpur University. Her area of interest includes International Relations with an emphasis on international market and diplomacy.


[1] https://www.thehindu.com/business/saarc-nations-emergency-stimulus-packages-to-tackle-covid-19-economic-fallout/article31437445.ece