A report just published by Chatham House, in association with International Alert, states that India’s long-term prosperity depends on peace between South Asian nations and increased levels of economic integration in the region.

India recognizes that its political capital is dwindling fast among its neighbours, and trade agreements, whether bilateral or regional, do not seem to have had any positive influence in reducing conflict in South Asia the report argues.

To date, India’s economic growth has been crucial in shifting mindsets to viewing neighbouring countries as essential arteries for regional trade rather than as security threats. Yet despite some successes, India’s economic engagement with its neighbours continues to be crippled by deep-rooted political tensions.

Bilateral relations with Pakistan, Nepal and Bangladesh remain tense and India is also reluctant to play a more politically active role in resolving the ongoing conflict in Sri Lanka.

The report suggests that in the future, business communities will play an increasingly important role in peace-building initiatives in the region. It goes on to state that, while neighbourly relations are important, the biggest challenge to India’s economic development remains the reality of the ‘other’ India – over 300 million Indians still live in abject poverty, and another 300 million hover above the poverty line.

Read the report here.