UNIVERSITY OF MUMBAI

PROJECT REPORT ON

INDIA AND SAARC

(ECONOMICS OF GLOBAL TRADE & FINANCE)

MASTERS OF COMMERCE
(BANKING AND FINANCE)
SEMESTER 1
2014-15

SUBMITTED BY
Miss. VISHAKHA HARISH MARU
ROLL NO.:31

PROJECT GUIDE
Ms. Mrunalini Ravalekar

K.P.B HINDUJA COLLEGE OF COMMERCE

315, NEW CHARNI ROAD, MUMBAI-400 004

M.Com (Banking and Finance)

1st SEMESTER

INDIA AND SAARC

SUBMITTED BY
Miss. VISHAKHA HARISH MARU
ROLL NO: 31

CERTIFICATE

This is to certify that Ms. MARU VISHAKHA HARISH of M.Com

BANKING AND FINANCE Semester- 1 [2014-2015] has successfully
completed the Project on INDIA AND SAARC under the guidance of Ms.
Mrunalini Ravalekar

Project Guide

________________

Course Coordinator

________________

Internal Examiner

________________

External Examiner

________________

Principal

________________

Date: ______
Place: Mumbai

DECLARATION

I, Ms. VISHAKHA HARISH MARU student of M.Com-Banking and

Finance, semester- 1 (2014-2015), hereby declare that I have completed the
project on INDIA AND SAARC
The information submitted is true and original copy to the best of my
knowledge.

VISHAKHA MARU

ACKNOWLEDGEMENT

I owe my special thanks to the Principle Dr. Chitra Natrajan and the Cocoordinator of M.com Dr. (Ms) Minu Madlani for giving me an opportunity for
this project work. I would like to give my thanks to the Project Guide Ms.
Mrunalini Ravalekar

for her guidance and kind assessment that she has

provided me and the inspiration in valued guidance and ideas throughout the
project. I am also thankful to the library staff of K. P. B. Hinduja College Of
Commerce who co-operated with me and even all those seen and unseen hands
and heads which helped me in he completion of this project.

INDEX
CHAPTER

PAGE
TOPICS

NO.

NO.

2
2.1
2.2
2.3

INTRODUCTION
OBJECTIVE OF STUDY
SCOPE
METHODS OD DATA COLLECTION
LIMITATION
CHAPTER SCHEME
INTRODUCTION TO SAARC
OBJECTIVE OF SAARC
HISTORY OF SAARC
PRINCIPLE OF SAARC
TRADE RELATION OF INDIA WITH OTHER SAARC

9-17

4
4.1
4.2
4.3
4.4
5
6

1
2
4
4
4
5
6
7
8
8-9

COUNTRIES
INDIA AND SAARC
INDIA CONTRIBUTION TOWARD SAARC
EFFECS ON INDO PAK RELATION
SAARC : A FAILATURE FOR INDIA
CO OPERATION TROUBLE BETWEEN INDIA &
SAARC MEMBER
CONCLUSION
BIBLOGRHAPHY

18
19
20
21
22-25
26
27

Chapter-1
Introduction

The South Asian Assoiciation for Regional Coorperation (SAARC)

comprises of Bangaladesh, Bhutan,India,TheMaldives, Nepal, Pakistan and Sri Lanka. The
basic aim of the organisation is to accelerate the process economic and social development in
Member States through joint action in the agreed areas of co-operation.
The idea of regional cooperation in South Asia was first mooted in November
1980. After consultations, the foreign secretaries of the seven countries met for first time in

Colombo in April 1981. A few month later this was followed by another meetings, which
identified five broad areas for regional cooperation. The Foreign Minister at their first
meeting in new Delhi in August 1983, adopted the Declaration on South Asian Regional
Cooperation(SAARC) and formally launched its Integrated Programme of Action(IPN).
The Heads of State these countries at their first historical summit held in Dhaka
on 7th and 8th December,1985 adopted the Charter formally establishing the South Asian
Assoiciation for Regional Coorperation (SAARC).

Objectives of Study

1. To study the role and objectives of SAARC.

2. To study the trade relation of India with other SAARC countries

3. To analyse role of India with SAARC

Methods of research
This data has been taken by secondary source and has been taken from different web site
and reference book.

Significance of study
The project represent the basic objectives of SAARC. And various relation
between India and SAARC

Limitation of the study

The study has been undertaken only on relation between India and SAARC. The
implementation of its on other developing countries is and least developing countries is not
taken into consideration and thats the major constraint

Chapter scheme
This project consist of following chapters:
1. Introduction to SAARC

2. Trade relation of India with other SAARC countries

3. India and SAARC

Chapter 2

Introduction to SAARC

South Asian Association for Regional Cooperation (SAARC)

Headquarters Kathmandu- Nepal
Official languages- English
Chairman -Mahinda Rajapaksa
Secretary General -Fathimath Dhiyana Saeed
Total Area 5,130,746 km2 (1,980,992 sq mi)

SAARC

The South Asian Association for Regional Cooperation (SAARC) is an organization

of
South Asian nations, founded in 1985 and dedicated to economic, technological, social, and
cultural development emphasizing collective self-reliance. Its seven founding members are
Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka. Afghanistan joined
the organization in 2007. Meetings of heads of state are usually scheduled annually; meetings
of foreign secretaries, twice annually. Headquarters are in Kathmandu, Nepal.

HISTORY OF SAARC
The South Asian Association for Regional Cooperation (SAARC) is an economic and
political organization of eight countries in Southern Asia. In terms of population, its sphere
of influence is the largest of any regional organization: almost 1.5 billion people, the
combined population of its member states. In the late 1970s, Bangladesh President Ziaur
Rahman proposed the creation of a trade blocconsisting of South Asian countries. The
Bangladeshi proposal was accepted by India, Pakistan and Sri Lanka during a meeting held in
Colombo in 1981. In August 1983, the leaders adopted the Declaration on South Asian
Regional Cooperation during a summit which was held in New Delhi. The seven South Asian
countries, which also included Nepal, Maldives and Bhutan, agreed on five areas of
cooperation. Afghanistan was added to the regional grouping at the behest of India on
November 13, 2005, With the addition of Afghanistan, the total number of member states
were raised to eight.

OBJECTIVES OF SAARC
1.

To improve the quality of life and welfare of people of the SAARC member

countries.
2. To develop the region economically, socially and culturally.
3. To provide the opportunity to the people of the region to live in dignity and to exploit
their potentialities.
4. To enhance the self-reliance of the member countries jointly.
5. To provide conductive climate for creating and enhancing mutual trust, understanding
6.
7.

and application of one anothers issues.

To enhance the cooperation with other developing economies.
To enhance the mutual assistance among the member countries in the areas of

8.

economic, social, cultural, scientific and technical fields.

To have unity among the member countries regarding the issues of common interest

in the international forums.

9. To extend cooperation to other trade blocks.
10. To have unity among member countries.
11. Acceleration of economic growth,
12. Social progress and cultural development in the region,
13. Promotion of active collaboration and mutual assistance in the economic, social
cultural, technical and scientific fields and
14. Strengthening of cooperation among the Member States in international forum on
matters of common interest.

PRINCIPLES OF SAARC
1. Co-operation within the framework of the Association is based on respect
for the principles of sovereign equality, territorial integrity, political
2. independence, non-interference in the internal affairs of other States and
mutual benefit.
3. Such co-operation is to complement and not to substitute bilateral or
multilateral co-operation.
4. Such co-operation should be consistent with bilateral and multilateral
obligations of Member States.

Chapter 3

Trade relations of India with other SAARC countries

TRADE RELATION BETWENN INDIA AND BHUTAN

One of Bhutans main trade partners is India. A free trade system runs between
India and Bhutan. The India-Bhutan Trade and Commerce Agreement have also
been renewed for a period of further 10 years as it has expired on March, 2005.

The major items exported from Bhutan to India are electricity (from Tala,
Chukha and Kurichhu Hydroelectric Project), cement, timber and wood products,
minerals, cardamom, fruit products, potatoes, oranges and apples, raw silk and
alcoholic beverages.

Major items exported to Bhutan from India exports are petroleum products,
rice, automobiles & spares, machinery and fabrics.

As of 2009, imports from India reached Rs. 23.3 billion and it comprised 80%
of Bhutans total imports. While Bhutans exports to India accounted to Rs. 20.5
billion and it resulted to 94% of its total exports.

TRADE RELATION BETWEEN INDIA AND NEPAL

Economic relationship between India and Nepal has its own distinctive attribute due
to the geographical, social, ethical links between the natives of both the countries. The socioethical customs and ideals of the two nations greatly influence the trade relations between
them.

Trade Policy of Nepal The Trade Policy of Nepal seeks to diversify trade by adhering to the
following policies:

The public sector will work as a catalyst and help in expanding the private
sector.

By promoting exports the country seeks to improve balance of payments as well

as enhance foreign exchange earnings.

Enhanced quality of goods for export.

To attract direct foreign investment there has been an attempt of modernizing

technology and management principles.

Trade Policy of India Indias policy mainly stresses on the following factors:

Withdrawal of quantitative restrictions (QRs)

Reduction and Rationalization of tariffs

Trade liberalization

Agreement with Nepal to control unauthorized trade.

TRADE RELATION BETWEEN INDIA AND PAKISTAN

Over the years the political relations between the two countries has had a direct effect on the
business relations between them. And expanding trade between the two countries can be the
best solution in getting close to solving the political disputes. There is tremendous scope of
economic gains if trade between the two countries is increased. Both India and Pakistan are
members of the South Asia Free Trade Area (SAFTA) but the trade is comparatively very
low.
India- Pakistan Trade Policy

There is no fixed trade policy between the two countries. India has granted
Most Favoured Nation Status to Pakistan in 1996. As of 2008-2009, Pakistan
announced a new trade policy that projected a target of export of US $ 22.1
billion.

Pakistan follows a list of importable items from India which has around 1075
items mentioned in it.

The policy has not yet fixed any target for imports from India.

Inputs in Duty and Tax Remission Export (DTRE) will also be allowed to be
imported from India, as per the Indian Trade policy.

India Pakistan Trade Relations are facilitated by the Federation of Indian Chambers and
Commerce (FICCI) and the Federation of Pakistan Chambers of Commerce & Industry
(FPCCI). FICCI and FPCCI are the representatives of the trade and business community of
their respective countries. The main objectives of these two chambers of commerce is to
facilitate trade and business opportunities between India and Pakistan. Further, their common
goal is to increase ethical business activities between each other and within all South Asian
nations. India Pakistan trade relations are focused along the following lines:

Trading policies

Trading procedures

Trade contracts

Trade administrative and regulatory procedures

Trade and investment opportunities

Business networking for trade

TRADE RELATION BETWEEN INDIA AND BANGLADESH

India and Bangladesh share a closer trade relation which has grown
speedily since the 1990s. There has been a possibility for a free trade agreement
(FTA) since some time, although there is no such compulsory grounds for both
the countries to sign such an agreement.
Bangladesh Trade Policies:

The importing licensing policy by Bangladesh has been abolished.

The sugar and textile import has been removed

There has been a drastic tariff reduction.

Bangladesh gives special tariff rates for the Indian imports under the Bangkok
agreement and SAPTA.
Technical Cooperation
Bangladesh is an important ITEC partner country, and a number of participants from
Bangladesh have availed of training courses under the ITEC programme. In the last
three years, more than 400 participants from Bangladesh have undergone training in
India under ITEC programme and Tata Consultancy Services (TCS) under Colombo
Plan. Under a special Train the Trainer Programme in Information Technology
sponsored by the Government of India, about 500 participants from Bangladesh have

visited India in the past two years for the six weeks long training courses conducted
by TCS.

Trade and Transaction Costs

The Petrapole crossing in India handles by far the largest share of the recorded IndiaBangladesh land border trade. Petrapole is on a major road 95 kilometres from
Kolkata. The neighbouring town on the Bangladesh side of the border is Benapole,
which in turn is linked by a highway to Jessore and Dhaka. The infrastructure
deficiencies and procedural hazards at Petrapole include inadequate and congested
roads, absence of government bonded warehouses, irregular power supplies,
inadequate sanitary facilities and drinking water, prevalence of theft and other crimes,
frequent strikes, prevalence of speed money, a single border gate which handles all
truck and other traffic as well as individual travellers and which is wide enough for
only one truck at a time to pass through.

REALTION BETWEEN TRADE INDIA AND MALDIVES.

The Free Trade Agreement, India and Maldives

Few of the clauses of the Free Trade Agreement, signed by the Government of India
and Government of Maldives are as follows

The Contracting Parties shall promote the development of trade and economic
relations between their respective countries within the framework of their laws,
rules and regulations.

Each Government shall

accord to the commerce of the other Government treatment no less favorable

than that accorded to the commerce of any third country.

All payments between the two countries shall be made in freely convertible
currency, subject to foreign exchange regulations and other pertinent laws, rules
and regulations effective in either country.

The exemption from customs duties and other similar charges on articles and
samples intended for fairs and exhibitions, as well as their sale and disposition,

shall be subject to the laws and regulations of the country where such fairs and
exhibitions are held.

TRADE REALTION WITH SIR LANKA

India and Srilanka have always enjoyed strong bilateral relations. To enhance bilateral
trade and have close economic integration, both the nations agreed to trade under the IndoSrilanka. Sri Lanka and India share a close relationship, be it at the political front, trade and
investment front, or for that matter in case of infrastructural linkages or for defense
collaboration. The biggest plus being there has been a broad-based improvement across all
domains.
As per the latest reports, India and SriLankan trade relations is estimated to grow by
20% annually. Currently, Sri Lanka imports from India goods worth Rs.272 billion, while
exports goods worth Rs.76 million to India. Subsequent to the free trade agreement signed
between the two nations 2 of the top 5 items India exports to Srilanka include: Mineral fuel
and its products and iron and steel. In fact mineral fuel and its products comprise almost 30%
share in the total exports of India to Sri Lanka in 2013-14.
Other

high-end products Sri Lanka imports

from India include: automobiles,

pharmaceuticals, and cotton. Auto sector exports enhanced almost four times to reach $335
million in 2013-14, comprising 15% of Indias exports to Sri Lanka. Post Foreign Trade
Agreement, Indias exports of iron and steel increased four times, and that of pharmaceutical
products by three times. Nevertheless, cotton exports fell to 4% from 13%.

Sri Lankas exports to India include: vegetable and animal fat oils, copper products,
electrical machinery, coffee, tea, and rubber. The FTA between India and Sri Lanka was
signed in December 28, 2014; however was operational zed from March 1, 2013. The FTA
reportedly covers 5,112 items for duty free or preferential treatment considering the
asymmetry between the two countries.
The implementation of FTA has been beneficial to both countries. Sri Lankan imports
from India increased from $640 million in 2013-14 to $2.2 billion in 2013-14, with an annual
growth rate of 25%. Sri Lankan exports grew from $45 million in 2013-14 to $470 million in
2013-14, thereby clocking an annual growth rate of 47%. Nonetheless, it is been increasingly
observed that Indias investment in SriLanka improved by $8.5 million, while Sri Lankan
investment in India was not noteworthy.
Free Trade Agreement (ISFTA). Some of the important clauses are:

The Indo-Srilanka Free Trade Agreement: (ISFTA)

The ISFTA was signed on 28th Dec, 2013 and it came into force from March1,
2014.

The Agreement stresses on enhancing bilateral trade and investment.

The Agreement covers only trade in goods, also stresses on exports on duty free
basis and concessionary tariffs.

The Agreement doesnt cover for elimination of non tariff barriers.

TRADE REALTION WITH AFGHANISTAN

With the prime objective of developing close bilateral relations and enhancing trade between
the two nations, both the countries agreed to trade under the Preferential Trade Agreement.
Some of the clause and objectives of the agreement are as:
The objectives of this Agreement are:

To promote through the expansion of trade the harmonious development of the

economic relations between India and Afghanistan.

To provide fair conditions of competition for trade between India and

Afghanistan.

In the implementation of this Agreement the Contracting Parties shall pay due
regard to the principle of reciprocity.

To contribute in this way, by the removal of barriers to trade, to the harmonious development
and expansion of world trade.TRADE

RELATION BETWEEN INDIA

AND NEPAL
Economic relationship between India and Nepal has its own distinctive attribute due
to the geographical, social, ethical links between the natives of both the countries. The socioethical customs and ideals of the two nations greatly influence the trade relations between
them.
Trade Policy of Nepal The Trade Policy of Nepal seeks to diversify trade by adhering to the
following policies:

The public sector will work as a catalyst and help in expanding the private sector.

By promoting exports the country seeks to improve balance of payments as well

as enhance foreign exchange earnings.

Enhanced quality of goods for export.

To attract direct foreign investment there has been an attempt of modernizing

technology and management principles.

Trade Policy of India Indias policy mainly stresses on the following factors:

Withdrawal of quantitative restrictions (QRs)

Reduction and Rationalization of tariffs

Trade liberalization

Agreement with Nepal to control unauthorized trade.

Chapter 3

India and SAARC

Introduction
India is an ancient civilization whose roots stretch back to over 5000 years in the course of
which a composite culture emerged making it a land of unity in diversity. India today is the
seventh largest and the second most populous country in the world. It gained independence
from the British on 15th August 1947. India became a Republic on 26 January 1950 when its
constitution, which envisages a parliamentary form of government, came into force. The
President of India is the Head of State but the real executive power vests in the Council of
Ministers, headed by the Prime Minister, which aids and advises the President. The
Parliament consists of two Houses, known as the council of States (Rajya Sabha) and the
House of the People (Lok Sabha). The Council of Ministers is responsible to the House ofthe
People. There are eighteen languages recognized by the Indian Constitution of which Hindi,
spoken by about 30% of the people, is the official language. Nearly every major religion of
the world is represented in India. India ranks among the top ten industrial nations of the
world and has an increasingly affluent middle class.
In terms of purchasing power parity, the Indian economy is the fifth largest in the
world". Major exports include textiles, tea, marine products, jute and jute products, gems and
jewellery chemicals, engineering goods, computer software. Exports have diversified in
recent years with the biggest growth being in technology and knowledge-based products and
services. Imports consist mainly of fertilizer, petrol and petroleum products, newsprint,
medicinal and pharmaceutical products, and organic and inorganic chemicals. The agriculture
sector continues to be an important sector of the economy as it contributes 27% of the GDP,
provides employment to 65% of the workforce and accounts for 18% share of the total value
of exports. The total Exports and Imports of India in 2000 is US $44,289 Million and US
$49,724 Million respectively, out of which 0.73 percent of Imports and 4.43

percent of Exports are from SAARC countries.

INDIAS CONTRIBUTION TOWARDS SAARC

India has cooperated actively in SAARC activities and vigorously promoted trade and other
forms of economic, social and technical cooperation within SAARC.
India also actively supports people-to-people initiatives aimed at fostering greater mutual
understanding and goodwill in the region.
India is the only SAARC member that shares land borders with four members and sea
borders with two. No other SAARC country shares a common border with each other.
In terms of trade, commerce, investments etc. India is a source of potential investments and
technology, and a major market for products from all other SAARC members.
One of the foremost challenges facing South Asia is the issue of poverty eradication. At the
Twelfth Summit held in Islamabad in January 2004, India offered to contribute US$ 100
million for Poverty Alleviation projects in SAARC countries (outside India). India has
additionally offered to finance feasibility projects in SAARC countries in this regard.

India has granted the highest number of tariff concessions to all SAARC MEMBERS.

EFFECTS ON INDO-PAK RELATIONS

SAARC has failed to resolve disputes between India and Pakistan (especially the Kashmir
Issue). The progress of SAARC was limited for some years due to the absence of cordial
relationship between India and Pakistan.
SAARC'S inability to play a crucial role in integrating South Asia is often credited to the
political and military rivalry between India and Pakistan.
However during Prime Minister Atal Bihari Vajpayees visit to Islamabad (for the 12 th
SAARC summit) Pakistan persuaded India to resume talks about maintenance of peace and
the stalled composite dialogue, while India received assurances that Pakistan would not allow
its territory to be a hub for terrorist activities. The composite dialogue had then started.
At present Indias export to Pakistan are limited. For example in the year 2001-2002 Indias
total exports were $44 billion out of which a mere $204 million went to Pakistan. On the
other hand, Indias exports to Bangladesh stood at $ 930 million and exports to Sri Lanka at
$662 million.
Pakistan has to pay heavy price for importing goods from other countries except India.
Indias exports suffer due to non availability of neighbouring market.
Along with India and Pakistan, other countries of SAARC are likely to get many benefits
because of improved INDO PAK relations. In the recent Indo-Pak dialogue process, there
were no winners and losers. The real winners were the people of South Asia.

SAARC: A FAILURE FOR INDIA (VICE-VERSA)??

SAARC had failed to resolve conflicts between India and Pakistan. There is discontent still
between both the countries.
SAARC has yet to become an effective regional organization, largely because of mutual
distrust between India and its neighbours ..Also India's lukewarm support for SAARC stems
from the concern that its neighbours might coalesce against it to the detriment of Indian
interests.
The reluctance of India and other South Asian countries to turn SAARC into a forum for
resolving major regional disputes hampers SAARCS ability to deal with many of South
Asia's economic and political problems

CO-OPERATION TROUBLES BETWEEN INDIA AND SAARC

MEMBERS
SAARC is structured in a way that often makes regional cooperation difficult. Thomas
Thornton argues that in regional organizations it is difficult for countries to establish
balanced relations when one has a significant advantage in power over the other states. In
the case of SAARC, India is the most powerful country in terms of its economic might,
military power and international influence. Thus, Indias potential as a regional hegemony
gives SAARC a unique dynamic compared to an organization such as ASEAN. Pakistan was
initially reluctant to join SAARC due to fears of SAARC succumbing to Indian hegemony.
Indeed, if India does take a prominent role in SAARC, it could further fears that India will
use SAARC for hegemonic purposes. While the smaller states in South Asia recognize that
they will need Indias help to facilitate faster economic growth, they are reluctant to work
with India, fearing that such cooperation will admit Indian dominance in SAARC.

Aside from a few overtures to its neighbours, India has done little to allay the fears of other
South Asian states. The core of these fears is likely derived from the displays of Indias power
by New Delhi in the past. Realizing its considerable advantage in military and economic
power, India has consistently acted in an arrogant and uncompromising manner with its
neighbours. Bangladesh is afraid of India exploiting its geographical position to redirect
water flows vital to Bangladeshi agricultural production. Nepal and Bhutan are still worried
about Indias control over their world trade and transit links as their geographical position
will always make them dependent on India. These disputes between India and its neighbuors
have directly affected SAARC.

Namely, disputes between South Asian states have undermined SAARC efforts to promote
regional trade. These disagreements make consensus building and cooperation among
SAARC states complicated. Attempting to promote regional cooperation while doing little to
resolve regional conflicts makes SAARCS mission looks nearly impossible. Moreover,
SAARC has no institutional mechanisms or punishments capable of preventing or fully

resolving a dispute. Two examples illustrate how conflicts in South Asia have proven
detrimental to SAARC.

The first involves Indian intervention in Sri Lanka from 1986-1990. The Indian military
intervention to put down an insurgency by The Liberation Tigers of Tamil E Elam made IndoSri Lankan relations tense during these four years. Subsequently, the apprehension between
India and Sri Lanka was considered a primary reason behind Sri Lankas lukewarm support
for SAARC into economic and social spheres of its member states until relations improved
with India.

A second, more prominent example of a conflict derailing SAARC progress is the IndoPakistani conflict. Pakistan has demanded a resolution to its dispute with India over the
Kashmir Valley before discussing trade relations with New Delhi. Pakistan has enforced this
policy by violating WTO regulation for failing to confer Most Favored Nation (MFN) status
on India.

India has recently attempted to improve its relationship with the rest of South Asia. Under the
Gujral Doctrine established by former Indian Prime Minister I.K Gujral, India signed a 30year water sharing treaty with Bangladesh and a trade and transit treaty with Nepal. India also
joined a sub regional group within SAARC comprising of Bangladesh, Bhutan, Nepal and
India. Despite political impediments to trade, value of goods smuggled from India to Pakistan
via a third party generally totals 250-500 million per year. If trade between the states was
opened, Pakistan would receive cheaper imports due to lower transport costs and the absence
of payments to a middleman. This implies that there is potential for lucrative trade between
India and Pakistan. Moreover, if these two states, arguably the largest powers in SAARC,
pushed for economic cooperation, it is likely that other states will follow their lead.

Therefore, it is not surprising that the Indo-Pakistani dispute over Kashmir is considered a
primary cause of SAARCS impotence.

Due to these conflicts, the desire for South Asian states to trade with one another has been
limited. By squelching trade between South Asian states, the disagreements between India
and its neighbors have limited the effectiveness of SAARC trading initiatives. The South
Asian Preferential Trading Agreement (SAPTA) signed in December 1995 had SAARC
countries reduce tariffs in certain economic areas to promote intra regional trade. The
proposal was initially met with enthusiasm as India agreed to reduce tariffs in 106 of the 226
fields recommended by SAARC and Pakistan agreed to concessions in 35 fields. This statistic
emphasizes a trend in SAARC India seems gung ho about intra regional cooperation. In
1995, when SAPTA was being implemented, only 3 percent of all South Asian trade was
conducted in the region.

Six years later, the improvements seen in regional trade have been marginal. Indias trade
within South Asia accounts for only 4 percent of its total global trade and Pakistans trade in
the region accounts for merely 3 percent of its overall trade.

Compared to other countries with similar proximities and income levels, intra regional trade
among SAARC states is relatively small. Much of the trade that is conducted in South Asia is
also considered symbolic and generally does not involve goods vital to the economies of the
South Asian states.
Moreover, some states still have high tariff and non-tariff barriers to trade, indicating that the
spirit of free trade does not seem alive in SAARC. However, SAARC is trying to remedy this
problem.
SAARC hopes that the establishment of a South Asian Free Trade Area (SAFTA) by January
1, 2006 will stimulate trade in the region. However, the agreement to establish this free trade
zone will take 10 years of gradual tariff reduction.

For a proposal that has already been delayed, it will take some genuine political cooperation
for the tariff reduction process to run smoothly. Judging from the experience of ASEAN, an
organization with a better track record in producing economic coordination among member
states than SAARC, creating a free trade zone could become difficult. The ASEAN free trade
agreement (AFTA) has been criticized for not producing substantial economic
interdependence among the region. This lack of success results from distrust and
protectionism among its member states. If SAFTA is implemented, its success will depend on
the resolution of conflicts between South Asian statessomething which seems unlikely in
the future.

CONCLUSION

India being an important member of the group should initiate steps to ensure that the nations
go beyond the rhetoric and make the Summit meaningful in the future. Creation of Export
Promotion Zones and Special Economic Zones in each SAARC member country as pointed
out by industry bodies will enhance investments between them and will thus encourage intraSAARC investments
The Indian government has to understand that the export-import community needs easier
movement of goods, services, and people within the member nations.
India should also maintain peace and take proper and appropriate steps to resolve disputes
and solve issues amongst the SAARC members especially with Pakistan.
According to Former Prime Minister , Countries in the SAARC region have to make a bold
transition from mistrust to trust, from discord to concord and from tension to peace.

BIBLOGHAPHY
REFERENCE BOOKS:

International Economics,M.L.JHINGAN, Vrinda publication, 6th revised

edition.

Web Sites:
www.saarc-sec.org.
www.indiaandsaarc.com
www.scribd.com
www.odi.org