A PROJECT REPORT ON

“INDIA’S TRADE RELATIONS WITH SAARC

COUNTRIES”
SUBMIITED TO

SAVITRIBAI PHULE PUNE UNIVERSITY

IN PARTIAL FULLFILMENT OF THE DEGREE OF

BACHELOR OF BUSINESS ADMINISTRATION

(INTERNATIONAL BUSINESS)

BY

DISHANT RAJKUMAR DODIYA

SEAT NO: 219
BBA-IB VI SEMESTER
UNDER THE GUIDANCE OF

DR. GANESH PATARE

Research Guide
MES GARWARE COLLEGE OF COMMERCE (2018-2019)
 DECLARATION

I, DISHANT RAJKUMAR DODIYA, Student of TYBBA (International Business)

hereby declare that the project report submitted on “name of the topic”, made under

the subject of Research Methodology (Subject Code - 606) this is an original

research work and has not previously formed the basis, either in full or in parts, for

the award of this or any other similar degree to this or any other educational institute

or university. I further declare that whatever material has been borrowed from other

sources and incorporated in this Research project has been duly acknowledged and I

could be held responsible and accountable for plagiarism, if any, detected later on.

I have completed this mandatory project work prescribed by Savitribai Phule Pune

University for the year 2018-19.

Date – 15/03/2019

Place – MES Garware College of Commerce,

Karve Road, Pune – 411004.

Name: DISHANT RAJKUMAR DODIYA

TY. BBA (International Business)

Exam Seat No - 219

AY- 2018-19
 ACKNOWLEDGEMENT

I would like to express gratitude towards our college for the immense support and

help throughout the curriculum, and a special thanks to our research guide Dr. Ganesh

Patare Sir, for extending help, cooperation and guidance right from the generation till

the finalization of the report. He has been a constant source of encouragement and

inspiration in designing out this study. I am grateful to our Principal Dr. Anand Lele

sir for providing necessary facilities to us, I am also thankful to all other respective

people who have guided me throughout the report.

Date – 15/03/2019

Place – MES Garware College of Commerce,

Karve Road, Pune – 411004.

Name : DISHANT RAJKUMAR DODIYA

Exam Seat No. - 219

Class – TY. BBA (International Business)

AY-2018
 INDEX

Chapter No. Particulars Page No.

01 NATURE AND SCOPE OF STUDY 05 - 10

02 RESEARCH METHODOLOGY 11 - 21

03 CONCEPTUAL FRAMEWORK 22 - 32

04 DATA ANALYSIS AND 33 – 40

INTERPRETATION

05 CONCLUSION 41 - 46

06 BIBILOGRAPHY 47
 Chapter 1: Introduction: -

SAARC is one of the regional intergovernmental organization and geopolitical union of

nations in South Asia. SAARC comprises 3% of world's area, 21% of world's population
and 3.8% (US$2.9 trillion) of global economy, as of 2015.

SAARC was established in Dhaka on 8 December 1985. Its secretariat is located at

Kathmandu, Nepal. The organization promotes development of economic and regional
integration. The charter stipulates that decisions are to be unanimous of “bilateral
and contentious issues” are to be avoided. SAARC maintains permanent diplomatic
relations at UN, as an observer, resulting into developing links multilateral entities like the
EU.

Decisions at each and every level are taken on the basis of unanimity, and those
related to bilateral and contentious issues are excluded.

Statement of Problem: -

Many problems are responsible for the SAARC countries; these are as follows:

1) India's conflictual relations with most of its neighbors no doubt have an

adverse effect on the overall performance of SAARC, countries such as Bangladesh,
Nepal, Sri Lanka and Pakistan. This proves a threat in achieving the objectives of SAARC.
 2) SAARC did not originate in response to a commonly and jointly perceived
External threat like the EEC or the ASEAN. All the South Asian countries suffer from a
fear of threat from India. The huge size of India has made it the source of internal threat for
other SAARC members and this perception has resulted in a distortion of inter-state
relations in South Asia characterized by a lack of trust and tensions.

Objectives of the Study: -

1. To Study and Understand about SAARC organization, its trade relations with member
countries, Like Bangladesh, Nepal, Pakistan & Sri Lanka
2. To collect data and information through various resources and analyze it

Scheme of Report:
1) Nature and scope of study:
a) Introduction
b) Objectives of Study
c) Working Definitions
d) Statement of problem
e) Need of Study

2) Research Methodology:
a) Data research and analysis
b) Method used
c) Limitations of Study
d) Overview of SAARC
e) Review of Literature

3) Conceptual Framework:
a) Introduction
b) SAARC (Functions, Agreement, Summits, etc)

4) Data Interpretation & Analysis:

a) Introduction
b) Tables

5) Conclusions:
a) Suggestions
b) Bibliography
c) Findings
 Working Definitions: -
 SAARC: The South Asian Association for Regional Cooperation (SAARC) is an
organization of South Asian nations, which was established on December 8, 1985.

 The first proposal for establishing a framework for regional integration in South Asia was
made by the late president of Bangladesh, Ziaur Rahman. He was one of the first president
who profounded and contributed towards it.

 SAARC always will seek to promote the welfare of the peoples of South Asia, strengthen
the collective self-reliance, promoting active collaboration and providing mutual assistance
in various fields, and building trust & cooperation with international and regional
organizations.

 Promoting peace, stability, amity and progress in the region”, is the line of the SAARC
charter.

Members & Observers:

Country Population GDP Exports (as Foreign Direct Foreign

(Nominal) of 2018) investment exchange
(2018) reserves (in
billions)
Afghanistan 34,656,032 $21.3 bn $0.3 bn N/A $6,442
Bangladesh 162,951,560 $285.815 $37 bn $2.65 bn $32,000
bn
Bhutan 797,765 $2.2 bn $0.7 bn $63 mln N/A
India 1,324,171,354 $2,439.0 bn $464.0 $31.0 bn $422,532.5
bn
Maldives 427,756 $3.0 bn $0.28 bn N/A $356
Nepal 28,982,771 $21.6 bn $1.0 bn $10 mln $5,439
Pakistan 193,203,476 $250 bn $25.1 bn $0.709 bn $16,305
(2014)
Sri Lanka 20,798,492 $80.4 bn $11.8 bn $0.9 bn $8,314
Source: Wikipedia
Need of Study:

As we all know that SAARC is an international organization based with 8 countries, the
need to study SAARC is very important from the view point of India, because:

 India occupies most of the SAARC region, i.e. 70% of both geographically and
economically, the remaining six nations of the SAARC borders with India.

 India is one of the biggest industrialized trading partners among the SAARC countries.
So it does have to recognize a special responsibility is on her, and should take a lead in
making the regional economic cooperation a reality in the South Asia.

 According to the study; it reveals that there are enormous opportunities for closer
economic relations among SAARC countries. These opportunities can and should be fully
utilized through the twin processes of trade liberalization and industrial restructuring,
which proves as a complementary to each other.

 The member countries suggest that SAARC countries should adopt a combined approach
for tariff elimination, tariff reduction and preferential or concessional tariffs. This paper
studies the India’s trade with SAARC countries during the period 1999 – 2013.
 Method of Data Collection: -
Secondary data means data that is already available i.e., they refer to the data which have
already been collected and analyses by someone else. When the researcher utilizes
secondary data, then he has to look into various sources from where he can obtain them.

The sources of unpublished data are many; they may be found in diaries, letters,
unpublished biographies and autobiographies and also may be available with scholars
and research workers, trade associations, etc.

This study is basically based on data collected from different reliable sources of
published journals, reports, and websites (SAARC official website and through World
Bank)

Secondary Data is also collected from Books and Government Reports.

Conclusion: SAARC is that type of organization where the member countries come
together and discuss on the political issues related to climate change, global terrorism,
water crisis, etc, and frame out the solutions agreed by all the nations, with peaceful co-
existence and by mutual agreements.
Chapter 2: Research Methodology:

Introduction:

Generally it can be stated that the formation of SAARC as a regional organization is to

accelerate the process of economic and social development in member states; and to have a
greater cooperation within the eight member countries of SAARC. The intra-country
differences in production and consumption patterns leave a lot of space for further regional
trade expansion. South Asia has progressed in liberalizing trade regimes and slashing
tariffs; since the early 1990s, when most of the countries started with various reforms.

The countries have also undertaken considerable industrial deregulation and other structural
reforms. The governments and the private sector recognize that strong exports are critical
for overall economic growth and poverty reduction. Moreover export-led growth has
become a key thrust in each member country. In this paper India’s trade with SAARC
countries like Bangladesh, Pakistan, Nepal and Sri Lanka were taken and these countries
trade relation with India were analyzed; and the results were produced.

Data collection and analysis:

The trend analysis between India and selected members of SAARC Countries has been
done. In this analysis Bangladesh, Pakistan, Nepal and Sri Lanka were selected for the
analysis. As these three countries are having a high level of trade with India in terms of
Value and Volume. The time period for the analysis is from 1996 to 2013. The analysis
starts with the Asian financial crisis and end up with recent available data. Most of the data
were collected from Department of Commerce, Government of India and Development
Initiatives based on OECD DAC and UN OCHA FTS.
Method Used:

Ordinary Least Square (OLS) method has been used to derive the results. This data was
regressed using OLS independently, with the time as dependent variable. The Conclusions
were made based on the Co-efficient which has been derived.

India’s Trade with SAARC Countries:

In India, the external sector has exhibited a marked transformation since the balance of
payments crisis in 1991. The crisis was overcome by a series of stringent measures with an
overriding objective to honor all external obligations without resorting to rescheduling of
any external payment obligation. While dealing with the crisis through an adjustment
programme, it was decided to launch simultaneously a comprehensive programme of
structural reforms. The major trade policy changes in the post 1991 period included
simplification of procedures, removal of quantitative restrictions, and substantial reduction
in the tariff rates.

Various steps were also taken to promote exports through multilateral and bilateral
initiatives, including identification of thrust areas and regions. The policy stance marked a
move from the provision of direct export subsidy to indirect promotional measures. India
also took several policy initiatives at the multilateral levels for introducing new tariffs.

Here in this paper a purposive selection is made in India’s trade with SAARC countries.
Out of eight countries in the SAARC group only three countries were selected for the
analysis because these three countries were found to be trading with India comparatively on
a higher trade volume and value.
 Year India`s India’s India`s India`s India`s India`s
Export to Import Export to Import Exports Import from
Bangladesh From Pakistan from to SriLanka SriLanka
Bangladesh Pakistan
1996-97 868.96 62.23 157.22 3 6.16 477.41 4 2.84
1997-98 786.46 50.81 143.15 4 4.45 489.23 30.21
1998-99 9 95.64 62.40 106.10 214.45 437.13 32.76
1999-00 636.31 78.15 9 2.95 68.21 499.27 41.59
2000-01 935.04 80.51 186.83 64.03 640.14 45.01
2001-02 1002.18 59.12 144.01 4.76 630.89 67.38
2002-03 1 176.00 62.05 206.16 44.85 920.98 90.83
2003-04 1 740.74 77.63 286.94 5 7.65 1319.20 194.74
2004-05 1631.12 59.37 521.05 94.97 1413.18 378.40
2005-06 1664.36 127.03 689.23 1 79.56 2024.67 577.70
2006-07 1629.57 228.00 765.45 323.62 2167.90 4 70.33
2007-08 2923.72 257.02 975.23 2 87.97 2238.39 634.96
2008-09 2 497.87 313.11 1439.88 3 70.17 2425.92 356.57
2009-10 2433.77 254.66 1573.32 2 75.94 2188.08 392.19
2010-11 3242.90 446.75 2039.53 332.51 3510.05 501.73
2011-12 3789.20 585.73 1541.56 397.66 4378.79 637.43
2012-13 5144.99 639.33 2064.79 541.81 3983.87 6 25.81

India’s trade with Bangladesh, Pakistan and Sri Lanka (1996 – 2013)

A) India’s trade with Bangladesh:

In recent years, Bangladesh has adopted an outward-oriented growth strategy which

aims at reducing the anti-export bias prevalent in the economy and improving
(E)

competitiveness while keeping in view medium-term imperatives and long-term

development agenda. Bangladesh’s trade policy objectives keep pace with
lofHumanSocialScience
-
 globalization and the gradual development of a free market economy under the World
Trade Organization (WTO) rules; facilitate imports of technology and to expand use of
modern technology; ease imports for export industries Calibrating trade policy reform
to support small and medium sized enterprises development is another priority.

India’s trade with Bangladesh is given below. Gradually from the table it
can be clearly understood that the overall exports of India to Bangladesh
has increased overtime. However, fluctuations are found on a year to year
basis. This fluctuation is raised due to some external factors like USA’s
economic meltdown and its impact on the world economy. From this, it
can be understood that the USA`s Aid to Bangladesh during the study
period has taken a downturn, resulting in the reduction of Bangladesh`s
ability to import from India.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

USA 6.5 22 23.1 2.4 7.7 5.3 0 0 39.5 7.8 19.7 7.5

USA’S Grant in Aid to Bangladesh (2000 – 2011) (US$ million)

In the above table, this shows that India’s export to Bangladesh has taken a
dip from the year 2007 to 2010. In other words, the capacity of Bangladesh to
import has taken a hit. India’s imports from Bangladesh in general seem to be
increasing but the total value is seems to be comparatively at a low level. Here
too, the trend of Bangladesh exports exhibits the pattern of Bangladesh`s
imports.
 The results of OLS estimates too depicts that the coefficient of India’s exports to
Bangladesh is 0.901 and it is significant at 1% level. The test of goodness of fit value is
high. With regard to India’s imports from Bangladesh the estimated coefficient are at
0.867 and this is also significant at 1% level. From this, we can say that India’s exports
to Bangladesh were increasing at a good growth rate but with some fluctuations to it.

India has important relations with SAARC member countries, because due to the fact by
having dominant position in terms of geographical size, population, economic, scientific,
technological, etc. Keeping these in mind, the study seeks to analyze the growth and
structure of India’s import and export trade relations with SAARC countries, in bilateral
way.

B) India’s trade with Pakistan:

In case of Pakistan, during the past four years, various initiatives have been announced
as a part of the Trade Policy. These various measures aimed at reducing cost of doing
business and included long-term financing of export oriented projects, relocation of
industries, freight subsidy, sales tax facilitation for export sectors, incentives for
priority export sectors, research and development (R&D), marketing and business
facilitation, special export zones, etc. A Rapid Export Growth Strategy (REGS) was
announced in 2005, aiming at:

(i) trade diplomacy to increase market access;

(ii) diversification of export markets;

(iii) strengthening of trade promotion infrastructure;

(iv) skill development; and

(v) early provision of modern infrastructure

 India and Bangladesh Co-efficient R Squared
Exports 0.901* 0.799
Imports 0.867* 0.751

India and Pakistan Co-efficient R Squared

Exports 0 0.927* 0.859
Imports 0.857* 0.734

India and Sri Lanka Co-efficient R Squared

Exports 0.943* 0.889
Imports 0.894* 0.798

In case of regression estimates the coefficient for India’s exports to Pakistan stands at
0.927. A look into India’s imports from Pakistan presents many interesting features;
and after 2005, India’s import from Pakistan increases over time but it is a marginal in
nature. The coefficient of the OLS estimates is 0.857, gradually at 1% of level. From
this, we can state that compared to India’s exports to Pakistan, India’s imports from
Pakistan is marked at a lower level. The cause for lower level of India’s import from
Pakistan maybe that Pakistan is not producing goods that can be successfully marketed
in India.
C) India’s trade with Sri Lanka:

um
H
G
anS
ocialS
lobalJo

cience
urnalof
Sri Lanka began economic liberalization in 1997 with a move away from
socialism. Sri Lanka’s export- oriented policies have seen a shift from a
reliance on agricultural exports to an increasing emphasis on the services and
manufacturing sectors. The service sector accounts for over 55 per cent of
Gross Domestic Product (GDP).Manufacturing, the fastest growing sector, is
dominated by the garment industry. The agriculture sector, though decreasing
in importance to the economy, nevertheless accounts for around 18 per cent of
national output and employs more than one third of the workforce.

-
However, there exists some fluctuation within the study period. Here the
highlight is that during the year 2009-10 there is marked fall in the India’s
exports to Sri Lanka this may be due to the civil war in Sri Lanka during the
time period. For India’s exports to Sri Lanka the regression coefficient is at
0.943 with significance at one percent level, and the R squared value is 0.889.
In considering the imports from Sri Lanka, the import value was $42 million
in 1996 and $625 million in 2012.

Though the coefficients value is significant level, the values for imports are
actually lower than the exports. This actually covers the fact that India’s trade
with Sri Lanka has been improved since then.
D) India’s trade with Nepal:
Economic relations have been found since the olden ages. India’s trade and
economic relations with Nepal is the product of the age old cultural geographical
and economic ties that have been persisting between the two countries since the
dawn of civilization in the Indian sub-continent. The first Indo-Nepal treaty on
trade and commerce was signed by these two countries in 1951. The Indo-Nepal
trade treaty which took place in 1996 between two countries was a breakthrough
in Indo-Nepal bilateral trade.

India’s Trade with Nepal (2004 – 2014)

Limitations of Study:
In the recent times India’s trade with the selected SAARC countries witness a
general increase in the overall trade. Though there is a general increase India’s
export to and from individual SAARC countries, there exists a difference in trade
relation with India and individual member countries.

In simple terms it is proved that in recent time the general trend contribute
towards the point that India does more exports and imports with Bangladesh
followed by Sri Lanka and Pakistan comes the third in terms of value. When the
same data is analyzed with the OLS estimator, when the value of coefficient and
goodness of fit is taken into consideration, there seem to be an interesting
turnaround, where Sri Lanka comes first followed by Pakistan and then comes
Bangladesh.

An overview of India’s trade with SAARC countries

 Overview of Report:
SAARC is an organization which accelerates the process of economic and social
development in member states. It helps to South Asia’s people to find the solutions for
common problems in a spirit of friendship. The South Asia region has been the fastest
growing regions in the World since 1980s. This study analyzed the growth and structure of
India’s bilateral export and import trade relations with SAARC countries. India has been
made simplification in procedures, removal of quantitative restrictions and reduction in the
tariff rates, India has taken various steps to promote exports through the multilateral and
bilateral initiatives.

The study pulled out the issue that in recent time India’s trade with selected SAARC
countries witnesses a general increase in the overall trade. Nevertheless, there exists a
difference in trade relation with India and individual SAARC member countries. The study
proved to the general trend that India does more exports and imports with Bangladesh
followed by Nepal and Sri Lanka comes third in terms of value. The data shows which are
to be analyzed by using least square method trend line.
 Review of Literature:
A comprehensive review of literature relevant to the area of research is essential as it places
the research study in its proper perspective by indicating the amount of work already done.
This may help in understanding intellectual and practical solutions to the problem through
the application of scientific understanding and methods of the work done so far as a
researcher; it is important to be familiar with and aware of the work done in the related
subjects to get correct approach of the issues. Review of literature provides the previous
information to aid the researcher in examining and designing the research work.

To conclude this research, various books and articles of many researchers support this.
Some of them are given below:

BOOKS:
Kahol, Y. (2003) in his book entitled “SAARC: Through the New Millennium”, has
observed that the SAARC is a significant organization that bears its own importance in the
new world order. SAARC plays a vital role in the politics of the region and particularly in
the areas, touching Indian Ocean. This book is comprehensive and authentic in it and
covers all the aspects and future prospects of the SAARC organization. In this book all the
summits have been accounted in detail. The book is also an essential reading and a
reference tool for all policy makers, researchers, scholars, students and general readers, as
well. The book covers significance of SAARC, its origin and evolution of SAARC,
SAARC regional forum and SAARC Documents.

 Tomislav, D. and Pandey, N. N. (2012); in their book entitled “SAARC: Towards

Meaningful Cooperation”, have studied the only regional organization at the governmental
level for the SAARC member countries to chalk out their differences and promote welfare
of the people, to improve quality of their life and accelerate economic growth. According
to them the last 29 years, SAARC have made significant strides to strengthen economic
cooperation and maximize the region’s vast potential for trade, development and regional
cooperation.
 The concept of SAARC is today having a global appeal. They also predict that SAARC
growth will continue to occur at 6-8 percent until 2030 and considering this growth in the
context of the broader picture of the global economy, it may be observed that South Asia is
currently the second fastest growing region in the world. In 2020, SAARC could also have
the youngest population with a different outlook from their parents and in 2025, this region
will have a middle class of 1 billion people - this explosion of the middle class will force
the region into being an educated, dynamic, and positive and a prosperous region.

ARTICLES:
 Farhat, R., Sumi. U. and Bedi-uz-Zaman (2012); in their study entitled “Effects of Exports
Instability on Economic Growth in SAARC Region Countries” have observed that the
export instability affects the economic growth for SAARC region countries (India, Nepal,
Sri-Lanka, Pakistan) by using neoclassical aggregate production with export instability and
export as the additional variables. They find out export instability has deleterious effects
for these four countries on economic growth and its magnitude is higher for Sri-Lankan
economy. Further they analyzed export and investment had positive and significant effects
on economic growth for all countries except the Nepalese economy where export has
negative but insignificant effect on its economic growth.

 Pradhan, R. P. (2010)46 observed the relationship between government expenditure,

exports for Bangladesh and GDP for Bhutan, Bangladesh, Maldives, India, Pakistan, Nepal
and Sri Lanka for the period between 1960 and 2010. They found that it exists bidirectional
causality between export and economic growth in India. The panel analysis finally suggests
and existence of unidirectional causality from export to government expenditure and from
economic growth to government expenditure. Concluding remark that the uncovered
insightful information regarding the development of an economy, beyond what real data
suggests to be exclusive Keynesian or Wagner viewpoints.

 Chee-Wool H. and Chee-Keong C. (2010) have examined the impact of currency volatility
on the export demand within the SAARC region, eventually covering the SAARC nations :
 Bangladesh, India, Sri Lanka and Pakistan. They emphasized on the effect of exchange rate
volatility on the bilateral trade between India, Bangladesh. Sri Lanka and Pakistan member
of SAARC. According to them there exists evidence of significance long-run steady state
equilibrium where foreign income, real exchange rate and exchange rate volatility does
affect export decisions of producers in the region of SAARC. They concluded that the
exchange rate volatility does play a crucial role in explaining the pattern of export in Sri
Lanka, Bangladesh, Pakistan and India.

 Subhani, M. I. and Rajnesh, K. (2009) in their article entitled “Bilateral Trade: Study on
SAARC Countries” has offered a selective survey of gravity equation in the international
trade. They focused on the bilateral trade volume in the SAARC members varies due to
different variable. They identified the barriers to bilateral trade in the SAARC member’s
countries. Finally, their result also helps to improve trade facilities and trade relations and
enhance trade volumes.

Conclusion:
From the above study, it is clear that a lot of literature has been available in the form of
various works on matters relating to India’s relations with SAARC countries. The present
work takes clues from the earlier day to day happenings in the area of Indo-SAARC trade
and makes an attempt to project the impending problems with some pertinent solution.

India’ s trade with SAARC countries, mainly with Bangladesh, Pakistan, Nepal & Sri
Lanka also creates a impact on the foreign exchange reserves in the foreign market.
Chapter 3: - Conceptual Framework:

INTRODUCTION:

SAARC is an economic and political regional organization of countries in South Asia set
up in 1985. It aims to accelerate the process of economic and social development in its
member states through increased intra-regional cooperation.

SAARC is an international organization where the issues related to trade relations with
other member countries, as well as it focuses on the development of the member states are
resolved with mutual agreements and peaceful co-existence is established between the
member countries of the organization. This is one of the main goal of the organization, as
well as the member countries should contribute towards the growth and development of
the organization.

SAARC is a organization where mutual agreements and peaceful co-existence, both the
terms have to be achieved throughout the membership life of the member country.
Intra Regional Trade Of SAARC countries:

Source: Rahman (2010)

Intra – Regional trade happens when trade in goods and services happens inside a
specific region of the world economy. Like the sub-Saharan Africa or the member
nations of the European Union. An arrangement for enhancing cooperation
through regional rules and institutions entered into by states of the same region.

In recent years the South Asian region has emerged as the fastest growing region in the
world. However, intraregional trade has lagged behind the region's deepening
engagement in global trade with the effects of geopolitics and a legacy of mistrust leaving
a mark on integration efforts. It mainly focuses on the SAARC economies to examine the
impact of trade agreements on the basis of data for fifteen years i.e. from 2000 to 2015.
The emphasis is on understanding the level of intraregional trade, issues, and challenges
of the region.
 Intra – regional trade of SAARC (1990 – 2010)

SAARC has not really achieved much in terms of internal or external trade. It is
interesting to observe incessant efforts by the SAARC members, especially India, being
the most prosperous, to ameliorate conditions of intra regional trade in South Asia. The
robust rise in India’s total imports from SAARC has been underpinned by the sharp
increase in imports from Pakistan, Sri Lanka, Bhutan, and Bangladesh. India generally
maintains a positive trade balance with the other SAARC member countries, and the
trade surplus has risen from US$2.3 billion to US$5.0 billion until recently. Sri Lanka is
again the leading partner, accounting for 31 per cent of India’s total imports from the
region, followed by Pakistan (21 per cent), Nepal (20 per cent), Bangladesh (15 per cent)
and Bhutan (9 per cent). The region also lacks the impetus to incur the unforeseen costs
and investments to initiate any new agenda for economic prosperity unlike ASEAN.
ORGANISATIONAL STRUCTURE OF SAARC:

The SAARC comprises five layers of organizational structure:

1. Council: At the top, there is the Council; represented by the heads of the government
of the member countries. The council frames the apex policy making body. It meets once
in 2 years time.

2. Council of Ministers: It is to assist the council. It is represented by the foreign

ministers of different member countries. Its functions include:

1. Formulation of policies
2. Review of functioning
3. Deciding new areas of cooperation
4. Chalk our additional mechanism
5. Decide about general issues of common of interest of the SAARC member.

3. Standing Committee: The standing committee provides the following objectives,

comprised by the foreign secretariat of the member government.

1. To monitor and co-ordinate the programmes

2. To determine inter-sectored priorities
3. To mobilize cooperation within and outside the region
4. To deal with the modalities of financing.

4. Programming Committee: It includes:

1. Scrutinizing the budget of the secretarial

2. Finalizing the annual schedule
3. External activities assigned by the standing committee
4. Analyses the respects of the technical committee.
5. Technical Committee:

1. To formulate project and programmer

2. To monitor and execute the projects
3. To submit reports.

The Technical Committee covers most of the areas such as: Agriculture, Communication,
Environment, Rural Development, Health and Population, Science and Technology,
Tourism and Transport.

6. Secretarial: Its function includes:

1. Coordination, execution and monitoring of SAARC activities

2. Servicing the SAARC meetings

3. Work as communication link between the SAARC and other international forum.

The secretarials are been headed by the secretary-General appointed by the Council of
Ministers. These are 7 Director (One from each member nation) and the general service
staff.

Secretariat of SAARC:
The SAARC Secretariat is based in Kathmandu, Nepal. It coordinates and monitors
implementation of activities, prepares for and services meetings, and serves as a channel
of communication between the Association and its member States as well as other
regional organizations. The Secretariat is headed by the Secretary General, who is
appointed by the Council of Ministers from Member States. The Secretary General is
assisted by eight Directors on deputation from the Member States.
FUNCTIONS OF SAARC:
The functions of the SAARC Organization are:
a. To collect, compile, document and disseminate data, information, case studies,
indigenous knowledge and good practices relating to disaster management particularly
from the Member Countries;
b. To analyze information, undertake research and disseminate research findings on
disaster management among the Member Countries;
c. To develop educational materials and conduct academic and professional courses on
disaster management;
d. To organize training and awareness programmes for various stakeholders on disaster
management for the Member Countries;
e. To develop training modules on various aspects on disaster management and conduct
programmes of Training for Trainers including simulation exercises;
f. To provide assistance in the formulation of policies, strategies, disaster management
framework and any other assistance as may be required by the Member Countries or
organizations and institutions nominated by the Member Countries.
 AGREEMENTS RELATED TO SAARC:

 SAFTA: SOUTH ASIAN FREE TRADE AREA:

The South Asian Free Trade Area (SAFTA) is an agreement reached on January 6,
2004, at the 12th SAARC summit in Islamabad, Pakistan. It created a free trade area of
1.6 billion people in the eight countries under SAARC.

The seven foreign ministers of the region signed a framework agreement on SAFTA to
reduce customs duties of all traded goods to zero by the year 2016. The SAFTA
agreement came into force on January 1, 2006, and is operational following the
ratification of the agreement by the seven governments. SAFTA requires the developing
countries in South Asia (India, Pakistan and Sri Lanka) to bring their duties down to 20
percent in the first phase of the two-year period ending in 2007. In the final five-year
phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts.
The least developed nations in South Asia (Nepal, Bhutan, Bangladesh, Afghanistan and
Maldives) have an additional three years to reduce tariffs to zero.

Purpose of the agreement:

The purpose of SAFTA is to encourage and elevate common contract among the
countries such as medium and long-term contracts. Contracts involving trade operated by
states, supply and import assurance in respect of specific products etc. It involves
agreement on tariff concession like national duties concession and non-tariff concession.
Trade Liberalization Programme:

According to the Trade Liberalization Programme Contracting countries must follow the
following tariff reduction schedule. It should be a fall of 20% tariff from the existing
tariff by the Non-Least Developing Countries and 30% reduction from the existing tariff
by the Least Developing Countries. But trade liberalization scheme is not to be applied
for the sensitive list because this list has to be negotiated among the contracting countries
and then to be traded. The other sensitive list will involve common agreement among the
contracting countries; favoring the least developed contracting countries.

SAARC Visa Exemption Scheme:

The SAARC Visa Exemption Scheme was launched in 1992. The leaders at the Fourth
Summit (Islamabad, 29–31 December 1988), realizing the importance of people-to-
people contact among SAARC countries, decided that certain categories of dignitaries
should be entitled to a Special Travel document. The document would exempt them from
visas within the region. As directed by the Summit, the Council of Ministers regularly
kept under review the list of entitled categories.

Currently, the list included 24 categories of entitled persons, which include dignitaries,
judges of higher courts, parliamentarians, senior officials, entrepreneurs, journalists, and
athletes.
SAARC SUMMITS:

S.No. Location Date of Summit

1 Dhaka 7-8 December, 1985

2 Bangalore 16-17 November, 1986

3 Kathmandu 2-4 November, 1987

4 Islamabad 2-31 December, 1988

5 Male' 21-23 November, 1990

6 Colombo 21 December, 1991

7 Dhaka 10-11 April, 1993

8 New Delhi 2-4 May, 1995

9 Male' 12-14 May, 1997

10 Colombo 29-31 July, 1998

The meetings of the heads of State or government of member states, empowers the
highest decision making authority. Summits are usually biennially hosted by a member
state, in alphabetical order. It assumes the Chair of the Asoociation. The result of the
SARC summit is called as a Declaration, containing the decisions and directives of the
leaders to strengthen and consolidate regional cooperation in different areas being
pursued under SAARC. The summit also considers and approves the reports of the
Council Of Ministers and Ministerial Meetings.
Regional Centers:

The SAARC Secretariat is supported by following Regional Centers established in the

Member States to promote regional co-operation. These Centers are managed by
Governing Boards comprising representatives from all the Member States, SAARC
Secretary-General and the Ministry of Foreign/External Affairs of the Host Government.
The Director of the Centre acts as Member Secretary to the Governing Board which
reports to the Programming Committee.

Regional Centre Location Country

SAARC Agricultural Centre (SAC) Dhaka Bangladesh

SAARC Meteorological Research Centre Dhaka Bangladesh

(SMRC)

SAARC Forestry Centre (SFC) Thimphu Bhutan

SAARC Development Fund (SDF) Thimphu Bhutan

SAARC Documentation Centre (SDC) New Delhi India

SAARC Disaster Management Centre Gandhinagar India

(SDMC)

SAARC Coastal Zone Management Malé Maldives

Centre (SCZMC)
SAARC Awards:

The Twelfth Summit approved the SAARC Award to support individuals and
organisations within the region. The main aims of the SAARC awards are:

 To encourage individuals and organisations based in South Asia to undertake

programmes and activities that complement the efforts of SAARC
 To encourage individuals and organisations in South Asia contributing to bettering the
conditions of women and children
 To honor outstanding contributions and achievements of individuals and organisations
within the region in the fields of peace, development, poverty alleviation, environmental
protection, and regional cooperation
 To honor any other contributions and achievement not covered above of individuals and
organisations in the region.
 To appreciate the individuals and organizations of the member states, in turn achieve the
main objectives of the SAARC organization.

The SAARC Award consists of a gold medal, a letter of citation, and cash prize of
US$25,000 (₹15 lakhs). Since the institution of the SAARC Award in 2004, it has been
awarded only once and the Award was posthumously conferred upon the late President
Ziaur Rahman of Bangladesh.
 SAARC Literary Award:

The SAARC Literary Award is an annual award conferred by the Foundation of SAARC
Writers and Literature (FOSWAL) since 2001 which is an apex SAARC body. Shamshur
Rahman, Mahasweta Devi, Jayanta Mahapatra, Abhi Subedi, Mark Tully, Sitakant
Mahapatra, Uday Prakash, Suman Pokhrel and Abhay K are some of the prominent
recipients of this award.

Nepali poet, lyricist, and translator Suman Pokhrel is the only poet/writer to get this
award twice.

Conclusion: SAARC is that organization where the main motive: accelerating the process
of economic and social development in its member states; is achieved. SAARC has done
an excellent job in giving literacy awards to those talents, people from the member
countries, who have achieved excellence in various fields like literature, and this helps to
contribute towards the development with other member countries.
Chapter 4: Data Interpretation and Analysis:

INDIA’s TRADE WITH SAARC COUNTRIES:

Introduction:
One of the major objectives of formation of SAARC forum was to accelerate the process of
economic and social development in member States. Subsequently, trade promotion was
also actively pursued as an area of economic co-operation. But, due to lopsided economic
policies followed by these colonies powers; have brought about a little change in the
economic structure of these countries. These countries by and large remained
predominately in nature with nascent manufacturing sector. The political freedom achieved
by the colonies had not brought about radical transformation in their manufacturing and
trading sectors of these economies for a very long period.

Scope of the present study:

India’s trade relations with SAARC countries assume a great significance. Keeping these
aspects and the research gaps mention above, an attempt is made in the present study to
analyze growth and structure of India’s bilateral export and import trade relations with
individual SAARC countries as well as India’s international and intra – SAARC trade.
Special emphasis is paid to analyze the changing structure of the commodity composition
at SITC three-digit levels.

Basically, this study relates to and deals with India’s trade relations with SAARC countries
(Bangladesh, Nepal, Sri Lanka & Pakistan) (import and export), and to find out the
problems creating as an obstacle, as well as the solutions for these problems.
Growth of India’s Trade with World:
Foreign trade has taken important place because it requires basically for mutual satisfaction
of wants and utilities of resources. It leads to division of labour and specialization at the
global level and mainly it can be helped to people to improve their standard of living by
having a choice of new and better varieties of goods and services.

As could be seen the relevant data are furnished in the Table-1, the total export of India has
grown from US$ 44.56 million in 2000-01 to US$ 276.28 million in 2016-17. In other
words, there was six fold increases in the volume of exports during the period of 17 years.
The rate of growth is more pronounced after 2005-06 period compared to previous period.
During the same period, the imports grow at a higher rate than exports.

The imports were up from US$ 50.54 million to US$ 384.32 million showing more than
seven-fold rise during the 17-year period. The study identified one distinguish feature that
the India’s overall trade during the period was negative and balance of trade was raising
over the period.

During the period from 2000-01, the negative trade was fluctuating but during the last four
years period the trade deficit was substantially decreased. Because India’s external sector
witnessed significant improvement during 2013-14.
 Table-1: Performance of India’s Exports and Imports (From 2000 to 2010)

Year India's Total Export (US$ India's Total Import (US$ Balance of Trade
Billions) Billions)

2000-01 44.56 50.54 -5.98

2001-02 43.83 51.41 -7.58

2002-03 52.72 61.41 -8.69

2003-04 63.84 78.15 -14.31

2004-05 83.54 111.52 -27.98

2005-06 103.09 149.17 -46.08

2006-07 126.41 185.74 -59.33

2007-08 163.13 251.65 -88.52

2008-09 185.3 303.7 -118.4

2009-10 178.75 288.37 -109.62

Source: Ministry of Commerce and Industry, Government of India

In this context, the study tried to attempt the contribution of India in SAARC which
promotes development of economic and regional integration. For the analysis purpose, out
of eight countries in the SAARC group the study has been selected four countries namely
Bangladesh, Nepal, Pakistan and Sri Lanka because these three countries were found to be
trading with India comparatively on a higher trade volume and value.
 India’s Trade with Bangladesh:
The Bangladesh remains a poor and inefficiently-governed nation even though sustained
domestic and international efforts to improve economic and demographic prospects. If we
observe the relationship between India and Bangladesh, there are some fundamental issues
such as informal trade, the sharing of water from 54 common rivers, land and maritime
boundary demarcations and interference in internal affairs that have adversely affected their
relationship. Nevertheless, they have been labeled as ‘Soft state’.

 India’s Trade with Nepal:

India and Nepal’s trade, economic relations have been found since the olden ages. India’s
trade and economic relations with Nepal are the product of the age old cultural
geographical and economic ties that have been persisting between the two countries since
the dawn of civilization in the Indian sub-continent (Maheswararao, 2015). The first Indo-
Nepal treaty on trade and commerce was signed by these two countries in 1951. The Indo-
Nepal trade treaty which took place in 1996 between two countries was a breakthrough in
Indo-Nepal bilateral trade. In this agreement the Nepali authorities announced the tariff free
offer on all products which were imported from Nepal by India under the provision of
Indo-Nepal trade agreement.

Nepal’s Import and Export trade with India

India’s trade with Pakistan:
In the case of Pakistan, India was its major trading partner, constituting over
40 and 22 per cent of its global exports and imports in 1951-52 (Lama 2001).Over the
period of years, Indian share in Pakistan's trade has rapidly declined and reached 0.1 per
cent in 1976 on both exports and imports side. It has further declined from 0.20 per cent to
0.07 per cent on export front while having a marginal decline from 0.33 per cent to 0.27 per
cent on the import front during the pre-SAARC period. It is evident that India's average
export share to these countries has increased in the post-SAARC period as compared to
pre- SAARC scenario and the maximum share has been registered during 1996-2000
period. Indian export to Bangladesh has the maximum share in exports.

Total trade of India & Pakistan (2010 – 2016)

BOP forcing the government of India in the initial devaluation of Indian currency; was
higher than that of other countries, thus making its currency cheaper in real terms. As a
result, India’s export to Pakistan, Bangladesh and Sri Lanka increased rapidly, while
making their imports to India dearer. This also led to an increase in trade deficit of these
countries with India, especially for Bangladesh and Sri Lanka.
 As far as trade share is concerned, India's export share shows an increasing trend in the
case of Bangladesh and Sri Lanka. This shows India's favorable trade surplus on
merchandise account with these countries. Thus, except in the case of Pakistan, the major
member countries have deteriorated trade balance with India. In the case of intensity
index, there is a marginal fluctuation in the magnitude of both export and import intensity,
except in the case of Sri Lanka, which was higher in the 1990s than that of the previous
decade.

The role of India’s trade has taken an important place in the SAARC countries. It is to be
contributed funding and diplomatic manpower, as well as gives political relevance and will
power to SAARC. As a result, the co-operation and collaboration can be successful with
these nations when India does play a pivotal role.

SAARC bilateral trade with India (excluding Maldives) from 2001 - 2006

Source: IMF – International Monetary Fund

Solutions for Trade Barriers with respect to SAARC Countries:

Unnecessary barriers should be done away with in order not to deter trade and to boost
volumes. Mundane procedural issues like code mismatches for items on the positive list
between India and Pakistan is one example of avoidable barriers to trade. Harmonizing
customs norms and standards is part of the solution. Easing transportation difficulties,
especially for trade between India and Bangladesh and between India and Pakistan, is
important too. Pakistan has a formal list of goods that cannot be traded through a particular
route (land or rail) for reasons that are unknown to those engaged in trade.

Improving warehousing facilities along borders among other things were agreed upon by
SAARC countries recently but this needs speedy implementation. By setting up special
laboratories to carry out prompt quality checks at borders, as it is often reported that goods
are held up at borders for lab reports that take days, sometimes weeks, to arrive. The way
forward for SAARC with respect to NTBs should also include things like memoranda of
understanding between custom authorities, and providing seamless transit facilities.

And finally the information barrier should be dealt with. Information about standards,
procedural requirements, and so on, must be disseminated to stakeholders. Surveys have
found that traders are unaware of important procedural regulations.

Conclusion:

Since the post liberalization era, India has been taken various steps to promote exports
through the multilateral and bilateral initiatives in the identification of thrust areas and
region. The study culled out the issue that in recent time India’s trade with selected
SAARC countries witnesses a general increase in the overall trade. Nevertheless, there
exist differences in trade relation with India and individual SAARC member countries. The
study proved that in recent time the general trend is that India does more exports and
imports with Bangladesh followed by Nepal and Sri Lanka comes the third in terms of
value. The data shows which are to be analyzed by using least square method trend line, the
overall export to Bangladesh and import from it has increased over a period of time.
Chapter 5: Conclusion:

Although SAARC was faced by many problems such as the issues related to Indo-Pak
agreements, as well as a regional organization, are almost 25 years old but face some
structural weaknesses. The primary factor is number of smaller countries versus a giant
country, India, which continues to still harbor hegemonistic designs in the region.
Moreover, historical bitterness still persists between India and Pakistan.

Common border is another factor having expected positive sign of estimated

Coefficient as reducing the trade cost and communication barrier. In major
SAARC countries common border affects very positively on bilateral trade. It is also
consistent with empirical results that total SAARC trade of India in 2010, highest share is
with Bangladesh, Nepal, and Pakistan, Sri Lanka; this does not have common border but
are very close to India.

It does not say that SAARC has proved to be successful, but yes, there is evidence that
the organization has resolved some issues. An organization related to international issues
and disputes, with the other countries sometimes fail to achieve its objectives, So does
SAARC. So, as per my conclusion, SAARC is an successful organization which aims to
prove the peaceful existence, as well as aiming to develop trade relations with other
countries.
Moreover harmonization of technical trade barriers, mechanism of poverty alleviation,
developing SAARC Development Fund was also included in official declaration. But
declaration is not enough; there is a need of taking concrete steps for implementation. For
the enhancement of intra-regional trade, it is recommended that policy makers of these
countries need to focus on:
(a) improvement in trade facilitation procedures,
(b) minimizing trade barriers and lowering sensitive list
(c) establishing financial institutions mutually for the improvement of capital resources
(d) increasing diversification and specialization in production of goods and services
(e) removal of non-tariff barriers; and
Most important is to put aside political differences so that they could enhance
intraregional trade and achieve the objective of improving welfare of their people.
Suggestions:

SAARC should also seek free and preferential trading arrangements with other regional
bodies, notably the EU and the ASEAN. Remain fully focused on the SAARC social
charter to spread out its reach to the common man. The people of South Asia desire to have
a peaceful, prosperous and secure future, and this can be achieved by making the required
changes in the SAARC organization by its member countries.

The goal is to create peace by creating interdependency between conflicting states and
within a certain region like the South Asian region, to resolve and prevent conflict. This
interdependency is needed to create a long period of peace in which both sides can look
forward to cooperating with each other in the future. They can do this by creating
agreements such as trade agreements that can eliminate trade barriers within the region, to
make it easier to trade along with disbarment agreements to disable or reduce nuclear
weapons.

There is a need to focus on small politics instead of big politics to resolve conflict in
conflicting regions. This would mean that they focus on economic cooperation and other
small ways that can create cooperation and more peace without touching the hot topics and
security issues between Pakistan and India. The problem with this is that Pakistan and India
will not be likely to do or they will do it in a limited manner like they have been doing.

Overall SAARC should indulge in various matters related to international trade issues,
barriers related to tariffs, as well as taking help from WTO, World Bank and IMF, and
solving it through peaceful and mutual understandings.
 Findings:
Indian businessmen are familiar with the economic, administrative, cultural, and climatic
environment in the other SAARC countries and vice versa. Having been adapted to similar
conditions, climate, and tastes, Indians; along with SAARC should promote trade relations
with Bangladesh, Nepal, Si Lanka as well as Pakistan.

Indian enterprises have accumulated valuable experience in setting up, managing and
successfully running wide range of industrial projects. Their expertise could be tapped by
the other SAARC countries through joint ventures. Joint ventures can be set up in a large
number of industries either to feed local demand or expanding manufactured exports of the
SAARC countries.

SAARC countries should try to reframe and rework on their trade related policies, with
respect to import and export of goods and services. They should reduce restrictions/
barriers on trade with other countries. They also should help the other developing countries
in order to become successful organisation.

The analysis of India‘s total trade with SAARC region as presented in the paper indicated
several important findings of far reaching policy implications.

 India‘s total exports (or exports to world) rose from US$31,795million to US$1, 05,152
million showing more than a threefold increase during the period 1995-96 to 2005-
06.The average annual growth rate of exports during this period was 12.07.
 India‘s imports during this period surged greatly exhibiting more than a fourfold increase.
The imports registered a still higher growth rate of 13.71 percent annum. Both the export
and import growth rates were statistically significant.
 India‘s exports to SAARC region also showed a threefold increase from about US$1.721
million to US $5, 405 million. The exports registered an average annual growth rate of
about 13.3 percent that was higher than the growth of India‘s total exports.
 India‘s imports from the SAARC region though lower in magnitude than exports. India‘s
imports from SAARC region registered a spectacular growth of 17.34 percent per annum
even at low levels.
 The share of India‘s exports to SAARC region for total exports was low and varied
between 3.78 and 6.49 percent during various years under study.
 In short India‘s trade with SAARC region (both exports and imports), even though
insignificant, has been growing at a higher rate than India‘s total trade with the world.
Bibliography:
Books:
International Relations by P. Subha Rao

Websites:
1) www.wikipedia.com/SAARC
2) www.academia.edu/Documents/in/SAARC
3) www.nyulawglobal.org/globalalex/SAARC.html
4) https://www.mea.gov.in/in-focus-topic.htm?171 (India & SAARC)
5) www.saarc-sec.org
6) http://www.quora.com/what-are-the-problems-of-SAARC
7) www.dailyexcelsior.com
8) www.wikipedia.com/List-of-SAARC-summits