While during the past two decades, India’s weight in the world economy and on the world stage has grown considerably, the country has not really proved itself capable of catching up with the economic miracle of our times, China. Whatever indicator of economic success one chooses, China continues to be far ahead of India, be it in the total gross domestic product (GDP), in the per capita income, in the share of world trade or in foreign investment. While a number of serious impediments to India’s economic progress are homemade, significant constraints emerge from the environments in which India has to operate.

The geopolitical and geographic location of India is a massive handicap. The wealth gap between South Asia and East Asia is gigantic. If one considers Northeast Asia and Southeast Asia, the combined GDP reaches almost $15 trillion. South Asia produces hardly $2 trillion. Japan, Ch­ina and South Korea are the three East Asian economies that belong to the exclusive “trillion club”. China with a GDP of $5.8 trillion has clearly surpassed Japan with $5.4 trillion. In South Asia, on the other hand, the only significant economy is India with a GDP of some $1.6 trillion. Pakistan ranks second, but, its GDP is a measly $180 billion. Even the small city-state of Singapore has a GDP of $220 billion.

For a long time, it looked as if East Asia would remain divided. After all, World War II and the Cold War had left deep scars in this part of the world. China and Korea had suffered enormously under Japanese occupation and even decades after the Japanese capitulation, there were many open wounds. In Southeast Asia too there were bitter memories about World War II. Nobody saw the imperial army of emperor Hirohito as the selfless liberator from western colonialism. Most people saw Japan, named “Greater East Asia Co-Prosperity Sphere”, just as a coverup for exploitation. The Cold War turned into “hot wars” on the Korean peninsula and in Indochina and the conflict between mainland China and Taiwan became a running sore. On the whole, East Asia was destined to remain deeply divided and a place with many open as well as hidden conflicts.

However, things have ch­anged. After the “Asian crisis” of 1997/98 and in the wake of the recent global financial crisis emanating from Wall Street, governments in East Asia have directed their focus on stimulating domestic consumption to make up for declining exports to the European and American markets. They have also recognised that regional trade can bring welcome relief from overdependence on markets in the industrialised west. Today, intra-Asian trade records the highest growth of any international trade in the world.

The massive growth in trade between the major East Asian economies is not only a result of the need to reduce dependence on outside markets. It is also the logical and pragmatic consequence of ec­onomic development in each of these countries. As the ec­onomies in East Asia have reached different stages of development, they have become more complementary. Today, Japan is the biggest trading partner of China and vice versa. Recently, when Japanese prime minister Yoshihiko Noda and his trade and industry minister Yukio Edano visited India, the Japanese media compared the relevance of China and India. The gaps are enormous! Some 820 Japanese firms have set up business in India, while 22,300 Japanese companies have business bases in China. According to the latest Japanese trade statistics, by the end of last November, the accrued 2011 volume of bilateral trade between Japan and China reached over $310 billion, while at the same point of time, the bilateral trade volume between India and Japan stood at a modest $16 billion. Even this was a substantial improvement over former times.

Of course, given the present state of the economic ties between India and Japan, one can assume that there is room for massive improvement. Clearly, this would be in the interest of both countries because they have to survive under the long shadow of the “Middle Kingdom”. However, given the scale of economic power and the speed of development, it is evident that East Asia will continue to be far ahead of South Asia. The gap will even get bigger because East Asia is on a firm track for closer economic cooperation. Vietnam, a late adherent to economic reforms, has become a dynamo within Asean countries. Economically, Taiwan and China are on the best of terms. In the Far East, South Korea, China and Ja­pan have steadily moved more closer. There may still be the occasional political friction, but, the three countries have realised that they have a lot of lucrative synergies. The financial crisis of 2008 and the present crisis afflicting the euro zone have helped bring these countries together. Th­eir national banks have started to cooperate. While a common currency is still a distant dream, the dependence on the dollar as a currency in East Asian trade has declined substantially and has made the region less vulnerable to turbulence emerging from western financial markets.

(The writer is the Far East correspondent of Swiss daily Neue Zurcher Zeitung)