Revisiting South Asian Integration: Trade Flows and Implied Distances Between Members

The paper undertakes the estimation of two alternative indicators of integration—potential trade and trade distance—by estimating the Global Gravity Model, consisting a panel data of nearly 100 largest trading partners of the world and 12–years period during 2002–13. Empirical results show that South Asia utilizes only 14 per cent of its intra-regional trade potential. Considering the global experience, this would indicate that implied average distance between South Asian trading pairs is 3,240 km, significantly higher than the actual geographical weighted distance of 1,872 km. Two pairs—India-Pakistan and India-Bangladesh—are found to be majorly responsible for low integration in South Asia.