Rebuilding a regional architecture

The much delayed South Asian Association for Regional Cooperation (SAARC) summit in Kathmandu, on November 26-27, exactly six months to the date from Prime Minister Narendra Modi’s swearing-in ceremony, affords him an opportunity to reconnect with India’s neighbours, this time inventively to revive moribund regional cooperation in South Asia. When SAARC was constituted three decades ago, India was hampered by limited resources for financing partnerships and investments in the region. This now is no longer the case.

Good relations with neighbours is a priority for India. But for this, India has to commit to and accelerate its efforts towards forging closer bilateral and regional partnerships and economic integration within the subcontinent and beyond.

India accounts for well over two-thirds of SAARC’s area, three quarters of its population, and nearly four-fifths of its GDP. More than its relative size, population and resources, it is India’s ongoing social and economic transformation that makes it the natural fulcrum of cooperation in the region.

A sombre outlook

India will have to underwrite the creation of regional public goods for South Asians to integrate. It can do so by facilitating optimal utilisation of the region’s natural resources, building regional infrastructure, creating connectivity within the region and with the world — with energy grids, cross-border transport networks, coastal shipping, air links, roads, railways and waterways, besides flood and other natural disaster mitigation and prevention measures. It can implement trade facilitation measures, thereby lowering transaction costs and generating greater regional investment and employment.

South Asian cooperation faces multiple challenges. With about a quarter of the world’s population spread over four per cent of the global surface, South Asia constitutes the world’s second least developed region after Sub-Saharan Africa. Its per capita GDP, in terms of purchasing power parity, is three times below the global average. It has more poor people than the rest of the world. There is a dramatic disproportion between its population and share in global output and trade.

While the contiguity of countries constituting SAARC is complemented by cultural commonalities and common terrain, temperament, and civilisational space, these were fractured by the borders created in 1947, and poor political relationships thereafter. The advantages of their cultural congruence and shared history and geography were soon dissipated. SAARC has remained saddled with this legacy, and India is viewed with angst by many in its neighbourhood.

Sixteen years ago, the SAARC Group of Eminent Persons had charted an ambitious, three-stage road map for South Asia: a South Asia Free Trade Area, followed by a Customs Union and a broader Economic Union by the year 2020. Mr. Atal Bihari Vajpayee lent his support for the creation of a South Asian Economic Union at the previous summit in Kathmandu in 2002. The 2004 Islamabad Summit called for South Asian energy cooperation and strengthened transportation, transit and communications links across the region. These good resolutions have not been realised. Intra-regional trade and investment remain well below double digit figures, making South Asia the least economically integrated area in the world. South Asian States are connected more to the outside world than to each other.

Why regional cooperation matters

Unhindered regional linkages can help in improving the living conditions of people, especially the most impoverished among them, which is no doubt the most important goal for all South Asian governments. The negative opportunity cost for non-integration of South Asian economies amounts to losing an estimated two per cent of additional GDP growth annually. Integration and connectivity, by permitting economies of scale, have attendant social benefits by promoting growth, and improving public health and environment management. Per capita incomes rise in all integrating regional groupings and SAARC should not have a dissimilar experience.

Regional cooperation can also attenuate inter-state conflicts and raise the threshold below which bilateral relations will not fall. Increasing integration, entailing interweaving interactions and interdependence, based on mutual benefit, will reduce regional tensions, augment India’s leverage vis-à-vis the great powers, and stabilise the region by raising the costs of non-cooperative behaviour.

Initially, SAARC had lukewarm political support and lacked dynamic leadership. Notwithstanding its positive vision, India remained timid in the scope of its ambition and commitments. Progress was achieved in fits and starts, not dissimilar to other similar bodies, in part because regional cooperation, inherently, is a difficult exercise.

The single market in the European Union (EU), was created after a 30-year effort in 1992, when internal barriers to the movement of goods were dismantled and external tariffs were harmonised. The EU is still working on a single market for services and energy, and labour mobility and social welfare payouts for non-nationals are becoming contentious. Within SAARC, the South Asia Free Trade Agreement has an accord on tariffs but the negative lists cover almost half the goods of export interest. Its march towards a customs union might be even more grudging.

The absence of connectivity is another impediment. India and Bangladesh share a land boundary over 4,000 kilometres long, but their trade is mainly conducted by sea. South Asia has no regional production chains, as logistics related trade costs are inordinately high.

The leaders of SAARC must concentrate their efforts on its strategic priorities, instead of spreading cooperation across every aspect of South Asian culture, society and economy. Without losing sight of the longer term goal of achieving a South Asian Union, their focus should be on selecting activities that have the most optimal results in terms of readily accruable mutual benefits. The two core objectives, with significant synergy between them, are promoting freer and more trade and investment, and building connectivity and infrastructure.

What India must do

India must invest in SAARC as Germany did in the EU, through structural funding for infrastructure, and social investment through the Cohesion Fund in order to reduce regional disparities. The distributive element, entailing a larger, immediate pay-off for the weaker economies, would speed integration, in turn adding to regional growth, inward investments and rising incomes and welfare.

Besides these, India-led unilateral, bilateral and sub-regional initiatives could significantly spur regional cooperation. The illustrative examples below could easily be multiplied:

Mr. Modi could build on his resolve, articulated during his last visit to Nepal, to turn the border into a bridge, not a barrier. India could speed initiatives to build gateways for freer movement of goods and peoples.

On hydropower, Nepal declared in 1983 that water resources in the Himalayan watershed “represents one of the world’s last great frontiers of development.” India could take the lead in developing South Asian power trade, which could alter the social and fiscal dynamics of Nepal and contribute to the region’s welfare, besides helping reduce greenhouse gases emissions damaging the Himalayan ecosystem.

If Nepal were to build the Kosi high dam ensuring availability of navigable waters in the channels connecting Nepal to India, India could help unlock Nepal from its landlocked status by gaining access to the Bay of Bengal through India’s national waterway on the Ganga.

India and Bangladesh have agreed already on further measures to facilitate bilateral and third country trade between Bangladesh and Nepal and Bhutan, respectively. India will have to hasten infrastructure building in Bangladesh, focussing on improved energy and transportation connectivity with India.

Afghanistan joined SAARC in 2007 in the hope of becoming a land bridge between Central Asia, South Asia, and the Middle East and a trade, transportation, energy and minerals hub in the region. This idea must be pursued, howsoever difficult it might appear at present.

The shared inheritance of South Asia provides an instinct for comfort and ease of interaction, important but not sufficient factors for promoting regional cooperation. Positive relationships among States require trade and investment, educational, scientific and cultural exchanges, and people-to-people contacts. Since politics cannot really be taken out of any venture between States, they also need an innovative use of diplomacy and statecraft.

India must lift its game for SAARC’s rescue and resuscitation. It must lead by example, building trust with its neighbours, showing solidarity, and forging with them a habit of cooperation. India has the strength to shape regional partnerships that lift neighbouring economies along with its own, not as a symbol of Indian altruism but of its enlightened self-interest. It must help build a regional architecture that creates a congenial space for all its members.

Such a transformation cannot come quickly. It will be conditioned by India’s own growth prospects, and unpredictable circumstances can derail the momentum. It is time, however, for India to take the first determined steps in Kathmandu in the next few days.

Against insider trading

The Securities and Exchange Board of India (Sebi), the capital markets regulator, made a series of far-reaching changes to its regulations in a meeting last week. Some of the major changes pertain to insider trading regulations. There are also big changes in listing and delisting norms and some changes to the consent order regime. Taken together, these should lead to better corporate governance and help align Indiancapital market standards more closely to international practices.

The regulator adopted most of the suggestions of the judge Sodhi committee, which had examined the Sebi (Prohibition of Insider Trading) Regulations (1992). The new Prohibition of Insider Trading Regulations (2014) updates and broadens the 1992 regulations. The new definition of an "insider" is broader, including within its ambit any "connected person" with access to "unpublished price sensitive information" (UPSI). This includes relatives of directors, employees and of other persons covered under the earlier definition of an insider. If such connected persons trade, the onus will be on them to prove that they were not in possession of theUPSI at the time of trade. The UPSI and the norms under which the UPSI can be communicated have also been defined more clearly. Third-party connected persons may be asked to declare any holdings in the company in question. Connected persons and insiders who wish to trade a stock may do so only by disclosing trading plans in advance to the stock exchange. For instance, such a pre-declared plan would enable employees with vested stock options to book profits. The UPSI would have to be communicated at least two days in advance of a trade.

Until case law develops, it would be difficult to see how the new regulations work in practice. But on the face of it, the new regulations should reduce rampant insider trading. In particular, it would be difficult for a connected person as defined under the new regulations to prove that he or she did not possess the UPSI. Of course, that disincentive could help curb insider trading, but it could also prove to be a barrier against legitimate trading.

Sebi's decision to transform the erstwhile Listing Agreement into new Listing Regulations, along with some changes, is designed to impart the force of law to what used to be a bipartite private agreement between a stock exchange and a company. Listing obligations and disclosures will now have to be adhered to closely since mandatory disclosures, compliance, etc, become strictly enforceable. The time period for compliance in delisting processes has been reduced to 76 working days from the earlier 137 calendar days. All delisting, takeover and buyback offers must come through stock exchanges. The changes in the delisting regulations do contain at least one provision that will be difficult to comply with. At least 25 per cent of the public shareholders as of the date of the board meeting that approves the delisting proposal must tender in the reverse book building process. This last requirement may be hard to comply with, especially for companies with widely dispersed shareholding patterns.

Apart from these key changes, Sebi has also aligned its regulations in line with the Reserve Bank of India's "wilful defaulter" norms, by blocking defaulters from raising money via the capital markets. It has relaxed its norms for consent regulations allowing "minor offences" to be settled this way. Small mutual funds will be allowed to run two schemes even before hitting the stipulated Rs 50 crore in net worth. Procedurally speaking, electronic initial public offerings should also ease the burden of paperwork and accelerate processes. Theoretically at least, the new provisions do seem to strengthen the legal and enforcement framework as Sebi claims.

Stepping out of the shadow

It is rare that a single bilateral invitation conveys as much as Prime Minister Modi’s invitation to U.S. President Obama to be the chief guest at the Republic Day parade does. To begin with, the invitation corrects an anomaly, that has meant that America is the only world power never to have had a dignitary grace the occasion that Russian and Soviet leaders, as well as leaders of France, the U.K., Japan and China have, over 64 years. Secondly, the invitation signals that the India-U.S. relationship is now stepping out of the shadows on all aspects of bilateral relations: economic, political and military. In the past 23 years since India opened up its economy, trade with the U.S. has grown by 1000 per cent, and according to figures given by the Defence Minister in Parliament this August, the U.S. is now India’s biggest defence supplier. Add to this the deep people-to-people ties, built mainly by the more than three million Indian-Americans in the U.S., and thousands of students who graduate from American universities, and the visit will be what one diplomat described as an “open and honest acknowledgement of the relationship’s reality”.

Thirdly, the invitation, and its acceptance by the White House, signifies a much larger move on the world stage, a “coming out” of India and the U.S. with the ties they now share. For the past few months, Mr. Modi’s travels and public speeches have indicated a primacy to the United States that previous governments had stopped shy of giving. Some of the hesitation was owed to an unspoken suspicion of the U.S. felt in India’s establishment. It was this feeling of mistrust that guided much of the criticism of Mr. Manmohan Singh’s tenure during negotiations over the India-U.S. civilian nuclear deal, and spills over into issues of WTO and agricultural subsidies, as well as intellectual property rights. The concerns are also influenced by historical relations: the U.S.’s support to Pakistan during the Bangladesh war, its support of the Mujahideen and then the Taliban to defeat the Soviet Union in the Afghanistan war, and its refusal to take a position during the Kargil war. It would seem both levels of concerns are now in the past, and put aside by the Modi government as it embarks on a new course of relations with the U.S., including engagements with its strategic allies in the region, Japan and Australia. It may be in reaction to these developments that two other significant moves have been seen in India’s neighbourhood — the recent reachout by China to Sri Lanka, the Maldives and Afghanistan, and by Russia to Pakistan with a new defence cooperation agreement. Even as India now prepares to celebrate its shared values with the U.S., the larger meaning of President Obama’s forthcoming visit has clearly not gone unnoticed.

Diagnosis in ‘Digital India’

he diagnosis of the first patient with Ebola in the U.S. was initially missed in an emergency room late night on September 25. Thomas Duncan, a Liberian national visiting Dallas, Texas, complained of flu-like symptoms and fever, but after lab work and CT scans, was given antibiotics and discharged with presumed sinusitis. The opportunity to diagnose Ebola correctly was missed. But there are several lessons to be learnt, many of which are relevant for ‘Digital India’.

Duncan informed a nurse about his travel history from West Africa. She documented this in the electronic health record (EHR). However, this did not set alarm bells ringing despite Ebola awareness preparation preceding this event. And then the hospital fumbled on its explanation, first blaming the nurse saying she did not tell the doctors about the travel history and then blaming a glitch in the EHR saying that because the nurse’s workflow (where the travel history was recorded) was not aligned with the doctor’s workflow, the doctor did not have access to the nurse’s notes. The next day it backtracked saying the EHR system worked just fine. At a U.S. Congressional hearing three weeks later, the hospital finally admitted misdiagnosis. This was from a hospital that was personally chosen by none less than former U.S. President George Bush for a cardiac stent procedure last year.

Missing critical information

Digitisation is aimed at improving health care delivery, quality and safety, and also facilitating the measurement of quality and safety metrics. While there was no computer glitch, the timeline released by the hospital suggested that the doctor spent more time with the computer than with the patient. Doctors in the U.S. now routinely use templates and pick-lists to help them navigate the complexities of medical documentation, billing and quality reporting requirements. But complex human-computer interactions in busy and chaotic clinical settings can also lead doctors to miss critical information. Humans become more reliant on technology and less likely to communicate face-to-face. In this case, the nurse ideally should have let the doctor know verbally about the travel history. Large amounts of data in the EHR can lead one to miss critical “signal” information versus the “noise.” We do know that basic clinical interactions with patients often suffer when attention is diverted to the computer so much.

This case is a perfect prototype for one of the biggest vulnerabilities of medicine — misdiagnosis. In the U.S. alone, 1 in 20 adults are estimated to be misdiagnosed annually in outpatient settings. The numbers are likely to be higher in India. Errors in diagnosis of several common diseases have been well described. Many of these diseases are common in India, including infections, cancers and cardiovascular conditions. Both problems in clinical judgment such as failing to gather or synthesise history, a physical exam or test data appropriately, as well as healthcare system flaws such as a lack of record or data availability, problems with communication or coordinating care, and insufficient access to specialists, can all contribute to misdiagnosis.

Reducing misdiagnosis in the future ‘Digital India’ will remain a challenge without a national body or movement to coordinate patient safety initiatives related to misdiagnosis and strengthening the overall health system. Amid antiquated manual record-keeping systems, there is limited access to diagnostic testing resources and a severe paucity of qualified primary-care providers and specialists. Layering technology on top of these problems won’t produce better patient outcomes unless we address the underlying fundamental problems related to workflow and processes.

Indian medical training traditionally lays greater emphasis on basic clinical examination and history-taking skills, but this might change with digitisation. To maintain physician skill levels, we must use technology to create a learning system where we learn from our mistakes. For example, a general lack of insight into their own diagnosis errors and overconfidence is common among physicians. Currently, there is an absence of effective feedback mechanisms on diagnosis-related performance from hospitals, colleagues or patients. We don’t have a culture of transparency and learning to reduce misdiagnosis, an area in which even U.S. hospitals lag behind. Technology can make things more transparent as long we are prepared to handle this transparency.

The path forward

So what else is needed in the path forward to reduce misdiagnosis in ‘Digital India’? As measurement is the first step to improvement, we must raise awareness of this problem and support health systems research to measure and understand misdiagnosis. We could leverage technology to enable better measurement if we build a culture of transparency and learning. This groundwork could help develop effective strategies to address doctors’ thinking and behaviours as well as address health system flaws, some of which we already know. We could prioritise high-risk areas that can be improved with relatively minor investments, including strengthening primary and emergency care systems. We will need a lot more than 4.1 per cent of GDP to be spent on health care to do that.

The vision of ‘Digital India’ by the current government is inspiring but in a resource-starved setting, setting up a robust and reliable health information technology can be challenging. Policy agenda should first focus on developing and implementing safe and reliable information technology that works all the time. Second, India must develop the workforce and clinical practices required to use this technology correctly and completely. Other countries offer several examples of successes and failures in health IT; we must learn from them rather than reinvent the wheel. Finally, India must leverage technology to improve safety of the health-care system, rather than allowing it to become a distraction, as it happened in Dallas. Multi-disciplinary teamwork is needed with health-care professionals foregoing turf battles and agreeing to work along with experts from policy, IT and patient safety. With a new government working on a new national health policy and a health innovation fund, it must recognise the role low-cost health IT innovations could play in improving diagnostic accuracy, including many that would be useful for rural India.

Misdiagnosis is likely to be one of the bigger health-care safety challenges facing India and solutions are not simple or obvious. While resource-rich nations are still evaluating how to reduce misdiagnosis, we need to start the conversation here and prepare doctors and the health-care policymakers of tomorrow. As we have learnt, even a single misdiagnosis — such as the one in Dallas — can have widespread public health consequences.

GST may subsume all entry taxes

In a move that is likely to draw opposition from some states, the Centre is going to propose subsuming in the proposed goods & services tax (GST) all types of entry tax, including the one for local bodies, when it tables the Constitution Amendment Bill in Parliament. The Bill also seeks to subsume petroleum products in GST but keep alcohol out of it.

The Constitution Amendment Bill tabled in the 15th Lok Sabha by the United Progressive Alliance government had proposed to subsume in GST only the general entry tax - those on import of goods in a state - while keeping entry tax in lieu of octroi (Etiloo, levied by municipal bodies on goods entering a local area) outside its purview.

States had argued, after introduction of GST, they should be empowered to collect entry tax for distribution to local bodies, instead of local bodies collecting those, to avoid harassment of traders at check posts. At present, Etiloo is collected by the state administration in most states and devolved to local bodies. In the case of Maharashtra, though, it is levied by local bodies. The Centre has decided to completely do away with the tax, regardless of whether it is levied by the state concerned or a local body.

"Any kind of entry tax will restrict free flow of goods and services and defeat the purpose of making India a common market. It is a cause for protracted litigation," said a finance ministry official asking not to be identified.

At about Rs 50,000 crore, entry taxes account for 14 per cent of states' total tax collection of about Rs 3,50,000 crore. According to experts, most entry taxes are in the nature if Etiloo and account for the bulk of this revenue.

 

 

 

The rate of entry tax varies from state to state. West Bengal, for example, levies a flat rate of one per cent but the tax paid does not qualify for a set-off against value-added tax. Bihar levies it on 35 goods at rates between two per cent and 16 per cent; petroleum products and alcohol at the highest rates. Uttar Pradesh follows a similar pattern. The rate in Madhya Pradesh is five-six per cent on most items. Select goods are taxed at only one per cent and, in such cases, a set-off is not allowed. The average rate in Maharashtra is five per cent.

If Etiloo is subsumed in GST, Maharashtra will incur the biggest loss, of over Rs 16,000 crore. The state had opposed the proposed move, which was supported by West Bengal, Odisha, Tamil Nadu, Kerala, and Uttar Pradesh. However, with the Bharatiya Janata Party part of the state government now, there might not be much resistance from Maharashtra.

According to sources in state governments, Karnataka, which might lose about Rs 8,000 crore if Etiloo is not retained, has supported the proposal. So have Gujarat and Bihar, because if Etiloo is kept outside the ambit of GST, it would not be possible for taxpayers to claim the credit for payment of entry tax in their returns.

"We are in favour of doing away with the entry tax. It puts a huge compliance burden on taxpayers and increases administrative costs for the state machinery," said a state government official who did not wish to be named.

The flip side of removing entry tax is that the compensation to be paid to states for any possible losses on account of switching to GST will increase; or, the revenue-neutral rate (RNR) that has already been estimated to be very high (at 27 per cent) by a sub-committee of Centre and state government officials, will further go up.

"If all entry taxes, including those levied by states in lieu of octroi, are included in GST, it will be difficult to give a uniform benefit across states. The RNR calculation will be difficult," said EY tax partner Bipin Sapra.

Article 301 of the Constitution precludes states from taxing inter-state transactions. This is meant to prevent barriers to inter-state trade. Article 304 allows a state to impose tax on goods imported from other states in line with the tax imposed on similar goods produced in that state, to avoid any discrimination between the two.

"The continuation of entry tax outside GST would perpetuate such complexities and litigation and impose barriers to trade," industry body CII had told Parliament's standing committee on finance.

Before taking the Bill to Parliament, the Centre is likely to discuss the draft Constitution Amendment Bill with the empowered committee of state finance ministers, at their meeting, likely in the first week of December.

While the Centre will also seek to subsume petroleum products in GST, it has agreed to keep alcohol, another major revenue for states, constitutionally out of GST.

"At a meeting with the 14th Finance Commission in July, the empowered committee had conveyed that most issues had been settled, except entry tax, compensation, petroleum and tax on inter-state movement of goods," added the state government official.

The Centre is not willing to concede on states' demand to provide for GST compensation in the Constitution, but it is working on a legal mechanism to address their concerns. The 14th Finance Commission will suggest the compensation mechanism for states in its report, likely to be given to the government next month.

"If they ensure compensation through a legal mechanism, we will support the Bill. But the Centre's suggestion to keep petroleum products under GST and make it zero-rated might not work," the official said.

Once a broad understanding is reached with states, the finance ministry will table the Bill in the Lok Sabha before the end of the winter session on December 23. The government is trying to meet the April 2016 deadline for introduction of GST.

Merit-based civil service will boost growth’

Investment bank Goldman Sachs has estimated that civil service reforms that include a bureaucracy that is merit-based rather than seniority-based, could add nearly a percentage point annually to India’s per capita growth, which stood at 3.4 per cent last year.

The report reiterates recommendations from the Administrative Reforms Commission (ARC) such as reduction in the age for entry and the number of attempts allowed for civil service aspirants, and encouraging lateral entry of technocrats from the private sector. “We estimate that if India were to pursue civil service reforms and reach the Asian average on government effectiveness, it could add 0.9 percentage points annually to per capita GDP... Institutional quality is a crucial driver of economic performance.”

It will take India a decade to reach the Asian average on government effectiveness, it estimates.

To achieve this, the report said: “As previous reform commissions have argued, the structure of the civil service, which is largely unchanged since Independence, might benefit from a greater focus on merit rather than seniority for promotions and incentives for good performance.”

The report suggests two reviews – after the seventh year and the 15th year of service – to determine if the civil servant should continue in service following the second evaluation.

It will take India a decade to reach Asian average on govt. effectiveness: Goldman Sachs report

Saarc without a backbone

Despite his commitment to greater regional cooperation, Prime Minister Narendra Modi will have his work cut out for him at the Saarc summit in Kathmandu. Saarc declarations have made considerable progress on a range of issues, from trade and connectivity to ecology. But these declarations only serve to highlight that Saarc has near zero credibility. Can Modi convert a traditionally bureaucratic exercise, at the margins of our political imagination, into an ambitious political gambit with more meaningful outcomes?

There is some hope. The normative discourse on greater connectivity in the region has shifted. There are many projects already on the ground, ranging from grid connectivity with Bangladesh to power agreements with Nepal. These are very modest beginnings. Only in a culture that sets the bar as low as South Asia can these be regarded as progress. They are a far cry from the need to think of South Asia as shared ecological space, a connected energy market, a free-trade area, a zone of freer movement of people, a unified transport area, and more ambitiously, a zone of free, self-confident democracies. Contrary to our traditional fears, greater regional cooperation strengthens individual nations in Saarc rather than weakening them.

Saarc was always hostage to the India-Pakistan relationship: India always feared it being used as a forum for bilateral one-upmanship by our neighbours. This fear has diminished considerably. That is because some of India’s bilaterals have improved, making it harder for all countries to gang up, as it were. There is also the view that regional cooperation can proceed at a different pace with different countries. And finally, at this point, the momentum of India-Pakistan relations has very little to do with India’s actions. Pakistan needs to sort out what kind of national and regional player it wants to become: Indian conduct is, both for the Pakistani military and its Western supporters, largely an alibi for not facing up to its internal problems. Its human costs are high. But the only thing India can do is signal powerfully that there is a new regional imagination taking shape. This imagination has a lot of potential, and Pakistan can join the party if it wants to. The Pakistan factor is more reason to strengthen Saarc, not weaken it.

But there are serious obstacles. Regional institutions seldom overcome the pathologies of the bureaucracies of individual states. The importance of the credibility gap cannot be overestimated. Saarc would initiate a healthy precedent if, instead of making a lot of new pronouncements for the future, it began with an honest report card on how much delivery has fallen short of declarations. You can judge how serious an organisation is not by the scale of its promises, but whether it has an effective monitoring mechanism for implementation. The already agreed to Saarc roadmap for a transition from the Safta to a customs union would warm anyone’s heart; the pace of implementation would drive anyone to despair. Even projects that have got off the ground, like the Saarc University, invite more scepticism than admiration. And Saarc institutions are pathetic both in capacity and in prestige.

India has to shoulder some of the blame. It is a tall order to expect India to do well in the region what it does only in fits and starts at home: build top-class infrastructure. But whether we like it or not, infrastructure is the most potent tool of security, connectivity and diplomacy. India is not even off the starting block on this. We have rejected many infrastructure projects offered to us. Our execution does not command respect. It is also an open question whether the scale of financially viable projects is enough to add up to an infrastructure revolution in the region that has real political bite. But infrastructure is the backbone of regional cooperation. Right now, Saarc is a project without a backbone. The truth is that unless India shows exemplary execution capabilities in this area, the esteem it commands will be limited. And much of our neighbours’ interest in us will depend on how well our economy does in the next decade.

Politicians in the region tend to be risk averse. In private, their normative and intellectual commitments are all for greater cooperation. In public, they face three obstacles. In some of the smaller countries, they fear being outflanked by their rivals, who are all too ready to use an anti-India card. Our neighbours are not alarmed by trade deficits with China, but the slightest spectre of a trade deficit with India is a political issue. These fears are exaggerated. But they have palpable effects.

Much of the discourse of regional cooperation is couched in very abstract terms and speaks of aggregate benefits to the countries involved. But aggregate benefits are seldom strong enough to override the opposition of entrenched interest groups which fear immediate distributive consequences. Moreover, the local communities where projects are going to be sited are often given little stake in them. Quite the contrary: they often fear that they will be used merely as way stations to seemingly lofty goals, without benefits flowing to them. None of these are insurmountable obstacles. But the form of local political advocacy needed to get projects off the ground still does not exist to a sufficient degree.

Finally, the domestic political cycles for many of our neighbours have to be taken into account. Nepal still has a political stalemate of sorts. Bangladesh is doing well, but the window of opportunity before the legitimacy crisis for the current government enlarges is small. Sri Lanka now has a cussedness about regional cooperation, largely buttressed by the view that China can sustain it. And it is unclear what compromises the new government in Afghanistan will make and what this entails for India. But the lesson is this: whenever there is a small window of opportunity, it is important to make maximum use of it, to deliver and execute projects that can endure the surface movements of politics. For example, coming good on all our commitments to Bangladesh is of such vital importance because if this moment is not used, the consequences will be serious.

Modi has a political opportunity. He can put an unprecedented political imprimatur on a usually moribund summit. It is a chance to boldly sketch what a new regional imagination, one that is vibrant and meaningful yet reassuring to all our neighbours, would look like. In many ways, this project is far more consequential, even for the future of secularism in the region, than we usually recognise. But he will also have to work hard to overcome the scepticism that big dreams usually incite in South Asia.