South Asia is one of the most dynamic regions in the world, but it is also one of the least integrated. While trade within South Asia has been growing, it has grown more slowly than trade with countries outside the region. The gains from greater integration through commerce, power trade, and river basin management could be enormous. Economic integration has also been shown to be a driver of economic convergence across states and countries. And by building a common interest across borders, it could provide a potential foundation for peace in one of the most volatile regions in the world. But the gains are asymmetric and the current obstacles to greater integration in South Asia are multiple. Tariff - and especially non-tariff - barriers undermine trade in goods and services. Poor infrastructure connectivity and institutionally weak power sector agencies prevent the flow of electricity across borders.

This book examines why the barriers to regional trade and cooperation have been so difficult to overcome, evaluates the potential economic and poverty reduction gains for greater regional integration, and proposes concrete policies, institutional strengthening measures, and investments that South Asian countries may pursue to tap into these unexploited benefits. Complementary avenues to regional integration include: collective action by businesses, especially in smaller countries, strengthening of supra-national institutions, and regional leadership by India.