SAARC AND ITS IMPACT ON INDIAN

ECONOMY

ISC ECONOMICS PROJECT - 2

Submitted by

B.Dhanyaprema Sree
GRADE 11-COMMERCE
UNIQUE ID -
BONAFIDE CERTIFICATE

This is to certify that this project report is a bonafide work of

B. Dhanyaprema Sree (Unique ID- )

In ISC Economics for the academic year 2024-25.

Teacher in Charge Principal

External Examiner
ACKNOWLEDGEMENT

I would like to express my sincere thanks to my economics teacher, Mrs.

W. Persia, for providing their constant guidance and encouragement in completing
this project.

I would like to extend my special gratitude to my parents for being so

supportive and helping me to Collect data, without which this could not have been
possible.

B. Dhanyaprema Sree
Abstract
The South Asian Association for Regional Cooperation (SAARC) is a
pivotal regional organization, established in 1985, comprising eight
member states: Afghanistan, Bangladesh, Bhutan, India, Maldives,
Nepal, Pakistan and Sri Lanka. SAARC's primary objectives encompass
promoting economic cooperation, social development and cultural
exchange, fostering regional integration, economic growth and poverty
reduction. Despite notable achievements, including the establishment of
the South Asian Free Trade Area (SAFTA), the South Asian University
and regional disaster management initiatives, SAARC confronts
significant challenges, including persistent political tensions, economic
disparities and infrastructure constraints. Nevertheless, SAARC has
positively impacted regional trade, connectivity, poverty reduction and
cultural exchange, offering substantial potential for strengthened
institutional capacity, enhanced economic integration and regional
security, ultimately contributing to the prosperity and well-being of
South Asia's 1.8 billion population.
TABLE OF CONTENT
S.NO CONTENT PAGE NO.

1. Introduction 1

2. Objectives of SAARC 3

3. Functions of SAARC 5

4. Role of India as a member of SAARC 7

5. Obstacles Faced 9

6. Achievements of SAARC 11

7. Conclusion 13

8. Bibliography 14

1
INTRODUCTION
The South Asian Association for Regional Cooperation (SAARC) was established
with the signing of the SAARC Charter in Dhaka on 8 December 1985. SAARC
comprises of eight Member States: Afghanistan, Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan and Sri Lanka. The Secretariat of the Association was
set up in Kathmandu on 17 January 1987.

The objectives of the Association as outlined in the SAARC Charter are: to

promote the welfare of the peoples of South Asia and to improve their quality of
life; to accelerate economic growth, social progress and cultural development in
the region and to provide all individuals the opportunity to live in dignity and to
realize their full potentials; to promote and strengthen collective self-reliance
among the countries of South Asia; to contribute to mutual trust, understanding and
appreciation of one another's problems; to promote active collaboration and mutual
assistance in the economic, social, cultural, technical and scientific fields; to
strengthen cooperation with other developing countries; to strengthen cooperation
among themselves in international forums on matters of common interests; and to
cooperate with international and regional organizations with similar aims and
purposes.

Decisions at all levels are to be taken on the basis of unanimity; and bilateral and
contentious issues are excluded from the deliberations of the Association.

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History of SAARC:

Founding and Early Years (1970s-1985)

1. 1977: Bangladeshi President Ziaur Rahman proposes a regional organization to

promote economic cooperation.
2. 1980: Foreign ministers of seven South Asian countries (Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan, and Sri Lanka) meet in Colombo.
3. 1985: SAARC established on December 8th, with the signing of the SAARC
Charter.

Expansion and Key Initiatives (1990s-2000s)

1. 2005: Afghanistan joins SAARC, expanding membership to eight countries.

2. 2004: South Asian Free Trade Area (SAFTA) agreement signed to promote
regional trade.
3. 2005: South Asian University established in New Delhi to foster academic
collaboration.
4. 2006: SAARC Disaster Management Centre inaugurated in New Delhi.

Recent Developments (2010s-present)

1. 2011: SAARC Charter amended to include climate change and food security.
2. 2014: 18th SAARC Summit focuses on regional connectivity and economic
cooperation.
3. 2016: SAARC Satellite launched to enhance regional communication.

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4. 2018: SAARC Secretariat relocated to Kathmandu.

Milestones and Achievements

1. Increased regional trade from 3% to 12% of total trade.

2. Improved connectivity through transportation and communication networks.
3. Enhanced cultural exchange and people-to-people diplomacy.
4. Regional cooperation on health, education, and disaster management.

Challenges and Opportunities

1. Political tensions and conflicts.

2. Economic disparities and infrastructure constraints.
3. Regional cooperation on terrorism, climate change, and pandemics.

SAARC's history reflects the region's commitment to economic cooperation, social

development, and cultural exchange. Despite challenges, SAARC continues to
promote regional integration and address common concerns.

​ HISTORY OF SAARC :
​
​ June 3, 1905
​ Foreign ministry officials of Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan, and Sri Lanka meet for the first
time in Colombo, Sri Lanka.

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​ 1983
​ At an international conference held in New Delhi, India the
foreign ministers of the seven countries adopt the
Declaration on South Asian Association Regional
Coopoeration (SAARC) and formally launched the
Integrated Programme of Action (IPA).
​ 1985
​ SAARC is established when its charter is formally approved.
First Summit is held in Dhaka, Bangladesh.
​ 2004
​ The agreement on the South Asian Free Trade Area (SAFTA)
is signed.
​ 2007
​ Afghanistan became a member of SAARC during the 14th
SAARC Summit.
​ 2009
​ Australia, China, the EU, Iran, Japan, Mauritius, Myanmar,
South Korea, and the United States become observers of
SAARC.

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Objectives

SAARC aims to promote economic growth, social progress and cultural

development within the South Asia region. The objectives of SAARC, as
defined in its charter, are as follows:
● Promote the welfare of the peoples of South Asia and improve
their quality of life
● Accelerate economic growth, social progress and cultural
development in the region by providing all individuals the
opportunity to live in dignity and realise their full potential
● Promote and strengthen collective self-reliance among the
countries of South Asia
● Contribute to mutual trust, understanding and appreciation of one
another’s problems
● Promote active collaboration and mutual assistance in the
economic, social, cultural, technical and scientific fields
● Strengthen co-operation with other developing countries
● Strengthen co-operation among themselves in international forms
on matters of common interest; and
● Cooperate with international and regional organisation with similar
aims and purposes.

PRINCIPLES

be based on respect for the principles of sovereign equality, territorial

integrity, political independence, non-interference in the internal affairs of
other States and mutual benefit.
Such cooperation shall not be a substitute for bilateral and multilateral
cooperation but shall complement them.

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SAARC Functions
According to its charter, SAARC has the following functions:

To raise the standard of living of South Asians in order to improve their

well-being.
Everybody is able to live their lives to the fullest extent of their potential and
dignity, contributing to social, cultural, and economic progress.
To advance and reinforce the idea of self-sufficiency among South Asian
nations.
To support the member nations in their efforts to coordinate and collaborate
with other developing nations.
IMPORTANT BODIES :

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Importance of SAARC
SAARC accounts for 3.8% (US$2.9 trillion) of the world’s GDP, 21% of its
people, and 3% of its territory. Therefore, SAARC as an organization is
significant for the following reasons:

It is one of the most fertile and heavily populated regions on Earth. The
SAARC countries coordinate their efforts since they share customs, attire,
food, and cultural values.
The common issues faced by all SAARC nations include poverty, illiteracy,
malnutrition, natural disasters, internal turmoil, industrial and technological
backwardness, low GDP, and poor socio-economic conditions. By raising
their living standards, SAARC nations have been able to advance in
common areas and find common solutions to these problems.
Here's a 300-word overview highlighting the importance of SAARC:

Economic Importance

1. Regional Trade: SAARC promotes intra-regional trade, reducing

dependence on external markets.
2. Economic Integration: SAFTA (South Asian Free Trade Area) aims to
create a single market, enhancing economic cooperation.
3. Investment Opportunities: SAARC facilitates cross-border investments,
stimulating economic growth.

Social and Cultural Significance

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1. Cultural Exchange: SAARC fosters people-to-people diplomacy,
promoting cultural understanding and heritage preservation.
2. Education and Research: The South Asian University promotes regional
academic collaboration.
3. Social Development: SAARC addresses poverty, health, and human rights
issues.

Strategic and Security Importance

1. Regional Security: SAARC addresses terrorism, narcotics, and human

trafficking.
2. Conflict Resolution: SAARC provides a platform for dispute resolution
and diplomacy.
3. Regional Stability: SAARC promotes stability through economic and
social cooperation.

Developmental Impact

1. Poverty Reduction: SAARC's initiatives aim to reduce poverty and

inequality.
2. Infrastructure Development: SAARC promotes regional connectivity
through transportation and communication networks.
3. Disaster Management: SAARC's disaster management initiatives enhance
regional preparedness and response.

Global Relevance

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1. Regional Voice: SAARC represents South Asia's interests in global
forums.
2. International Cooperation: SAARC collaborates with international
organizations, promoting global understanding.
3. Economic Bloc: SAARC's combined GDP exceeds $2.5 trillion, making it
an attractive economic bloc.

In conclusion, SAARC plays a vital role in promoting regional cooperation,

economic growth, social development, and cultural exchange among South
Asian nations. Its importance extends beyond economic benefits,
encompassing strategic, security, and developmental dimensions.

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INDIA’S CONTRIBUTION IN THE SAARC
Right from the origin and evolutionary growth of SAARC, India has been playing
a prominent role in it.
Here to assess the India’s initiatives in the SAARC are:
India took sincere effort for the formation of SAARC. It played a big role in the
first summit, which was held during the origin of this organization as well as the
preparation of its Charter. India was hosted to SAARC summits three times. The
second summit was held in 1986: Eighth summit was held in 1995: and Fourteenth
summit was held in 2007. During the 2nd Summit the Heads of State or
Government welcomed the signing of the MOU on the establishment of the
SAARC Secretariat by the Council of Ministers and their decision to locate the
Secretariat in Kathmandu, Nepal and appoint Abul Ahsan of Bangladesh as the
first Secretary-General of SAARC. India, given its size, population, economy and
central location is indeed the pivot of SAARC. It has common land/sea borders
with six of the seven other members which place it in an unquestionable
leadership role. India because of its geography, economy, international stature and
commitment to the region is central to SAARC. The SAARC region has acute
asymmetrical power balance as India encompasses more than 75 percent of the
region’s GDP and more than 70 percent of population, territorial dependency in
India is high and it possesses enormous military power compared to other countries
in the region. India has a special responsibility flowing from the geography of the
region and the size of its economy. Taking the region along in India’s march
towards progress and prosperity is both an economic and demographic imperative.
India has so far contributed over US$ 530.- million to SAARC institutions for
socio-economic development.
India’s trade with South Asia accounts for around 5.5% of its global trade. India

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have been advocating expedited negotiations/implementation of agreements,
promoting investments, trade, exchanges in the region. India’s emphasis is on three
central themes of SAARC- trade, connectivity and people-to- people contact.

Fig : Share of exports graph (highest - India )

Fig : Land mass of SAARC

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OBSTACLES TO INDIA’S INITIATIVES IN
THE SAARC
The above said India’s contribution to the SAARC, no doubt it is the driving force
to strengthen the Organization but India has been facing some obstacles regarding
her initiatives in the SAARC. They are:
1. The small neighbor countries of SAARC feel the “Big Brother Syndrome” about
India. India’s larger size of territory made India the most striking culprit in the eyes
of its smaller neighbors in the SAARC.
2. Due to its economic strength, scientific and technological development India is
creating in the minds of smaller neighbors’ suspicion of domination feeling by
India.
3. Pakistan factor is another obstacle to India’s initiatives in the SAARC. Though
the two countries occupied the largest in numbers in size i,e. 80% of SAARC land
area, over 85% of its population and over 90% of its
GDP, but Pakistan’s uninterrupted enmity disturbed her initiatives in the SAARC.
For example India and few SAARC members boycotted 19th SAARC Summit
which was held in Islamabad due to the Pakistan’s
sponsored terrorist attack on Uri army camp in J&K. And ultimately it was
scraped.
4. China’s intervention in the South Asian countries also one of the obstacles to
India’s initiatives in SAARC. China has border connectivity with India, Pakistan,
Nepal, Bhutan and Myanmar. Except India all are Least Developed Countries
(LDCs). For this reason China has increasing her influence in these countries
by investing billions of dollars and provided loans with subsidy. It will definitely
leads to containing India’s influence in South Asian region. For example China got
contracts for the construction of Hambantota port

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and the expansion of Colombo port. During the Chinese president in Bangladesh in
October 2017, the two governments signed 27 agreements involving $24.45 billion
in assistance and investment for Bangladesh.
5. Another obstacle to India’s initiatives in the SAARC is the small members of
SAARC like Bangladesh, Nepal and Sri Lanka considered India is to be the main
source of threat to their security, they welcomed either directly or indirectly, the
role of extra-regional powers in the region to counter the military might and
the alleged military threat of India.

Fig : Problems of SAARC in percentage

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ACHIEVEMENTS OF SAARC

Economic and trade cooperation is crucial for the success of SAARC and indeed
for the development of South Asia. Many years of negotiations have laid the
groundwork for cooperation, at least in this particular area. During the 1990s,
SAARC member countries discussed the Preferential Trade Area (SAFTA) which
was implemented in the form of the Free Trade Agreement, now known as the
South Asian Free Trade Area (SAFTA). According to the agreement, a tariff
reduction plan was drawn up in 2006. Although the initiatives taken for free trade
in the region have faced many difficulties, we cannot ignore the fact that the
member countries are moving forward with their plans to improve regional growth
and cooperation. Since the formation of SAARC in 1985, the level of cooperation
among the member countries has increased significantly. SAARC was established
to enhance the living standards of the people, cultural and regional economic
growth and increase cooperation with other regions of the world. SAARC members
have made sense to accelerate regional economic development and have moved
towards practical implementation of various plans and policies to turn this weak
region into a potentially developed region. This cooperation has led to the
establishment of various programs and forums for mutual benefits like South Asian
University, New Delhi; SAARC International College, Bangladesh; Agreement on
Judicial cooperation on Counter-Terrorism; Telemedicine Network; SAARC
Writers and Literature Foundation; South Asia Foundation; South Asia
Co-operative Environment Programme; South Asia Centre for Policy Studies;
South Asia Women's Centre South Asia Olympic Council (South Asian Games). In
the field of science and technology, there have been meaningful and constructive
exchanges that are relevant to the South Asian economy.

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These include solar energy, bio-fertilizers, low cost housing, shrimp hatcheries,
electronics and molecular biology, biomass gasification; Wastewater recycling and
pollution control, post-harvest and development of food technology; Renewable
energy resources; Photovoltaic; Pesticides; Instrumentation, maintenance and
calibration, cultivation and processing of medicinal and aromatic plants, weather
forecasting, radar weather, telecommunications and much more. SAARC has made
great strides in education, sports, culture and media. The South Asian University
has become fully operational and has scholarships and fellowships for research in
various fields. Cultural exchanges are taking place through film festivals, literary
seminars, cultural festivals, media programs and food festivals. SARSO has been
established to achieve and enhance coordination and cooperation among SAARC
member countries in the fields of standardization and conformity assessment and is
aimed to develop harmonized standards for the region to facilitate intra-regional
trade and to have access in the global market. It is a fact that youth in developing
countries are neglected. Although the youth are an important part of the
development of any nation, they are not consulted when making important policy
decisions. Given the age-sensitive brackets in which young people fall. They are
extremely risky and if there is no chance of progress, they even cause the
government to fall. There is a growing rate of young population among SAARC
countries and they must become the focus of attention that SAARC has considered.
The SAARC Youth Award is given to outstanding individuals in the SAARC
region. The award is significant in recognition of the award winners in the
SAARC region. The award is based on specific themes that apply each year. The
award recognizes and promotes the commitment and talent of young people who
give back to the world at large through various initiatives such as innovation,
environmental protection and disaster relief.

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CONCLUSION

The formation of SAARC is an important step for the leaders of this region. The
main reason for its establishment is to create a conducive environment where all
nations can communicate peacefully, build lasting peace and promote mutual
economic well-being through the peaceful process of economic cooperation using
the resources available in the region. However, more than three decades after its
establishment, no country in SAARC has been able to push the integration process
to the fullest, or the organization itself has not been effective enough to bring about
harmony and economic cooperation for preventing conflicts in the region. The rate
of its economic growth and the slow pace and backwardness of development
planning created problems in the socio-economic field. It is a relatively young
regional organization burdened with huge social,political and economic problems.
This is the world's largest regional organization by population but the smallest in
terms of inter-regional trade. In a region plagued by poverty, religious problem,
illiteracy, social discrimination, unemployment, and terrorist activities, the
organization faces a real challenge in achieving socio economic development. Not
everything in SAARC is gloomy. By submitting and reviewing their views at the
Summit, the Member States have expanded their cooperation in trade cooperation,
counter-terrorism, citizenship, socioeconomic and political issues. Many projects
have been taken up on priority basis. Establishment of the SAARC Secretariat in
Kathmandu has strengthened the trend of development. Taking measures for food
security, taking action against terrorism, taking projects for the welfare of infants
has increased the importance of SAARC.

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Bibliography
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House.
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a-region/
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od/india-and-south-asiaregional-co-operation/saarc/

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