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The South Asian Association for Regional Cooperation (SAARC) was established at the
First SAARC Summit in Dhaka on December 7-8, 1985. Its members are Bangladesh,
Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
The abbreviation, SAARC stands for The South Asian Association for Regional
Co-operation. The move to have an economic regional block among south Asian
countries started taking shape from 1980. The first summit of seven south Asian
countries viz. India, Pakistan, Bangladesh, Nepal, Sri Lanka, Bhutan and Maldives
took place at Dhaka in December 1985 and the SAARC came into existence.The idea
behind the formation of SAARC was to have fearless tensionless progress and prosperity
in the South Asian Association for Regional cooperation regional group countries. The
SAARC Secretariat is based in Kathmandu, Nepal. The SAARC emerged out of the
problems faced by South Asian countries.
The SAARC has got over 1/5th of worlds population. It has only 3.3% of worlds total
land area. It has a major share of total worlds poor population. These countries can be
branded as a low per capital income countries. India is the largest SAARC country having
2/3rd of SAARC population while Maldives is the smallest island having population of
only 3 lakhs. SAARC is a manifestation of the determination of the peoples of South Asia
to work together towards finding solutions to their common problems in a spirit of
friendship, trust and understanding and to create an order based on mutual respect, equity
and shared benefits. The main goal of the Association is to accelerate the process of
economic and social development in member states, through joint action in the agreed
areas of cooperation. The SAARC policies aim to promote welfare economics, collective

self-reliance among the countries of South Asia, and to accelerate sociocultural development in the region. The SAARC has developed external relations by
establishing permanent diplomatic relations with the EU, the UN (as an observer), and
other multilateral entities. .

The objectives of the Association as defined in the Charter are:
To promote the welfare of the peoples of South Asia and to improve their quality of
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 potential;
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
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 interest; and
To cooperate with international and regional organisations with similar aims and

Decisions at all levels in SAARC are taken on the basis of unanimity. Article X (2) of the
SAARC Charter excludes bilateral and contentious issues from the ambit of SAARC.
After India adopted the policy of NSR (National Self Reliance) in order to remove
dependence on foreign aid, India took the next step of forming SAARC along with the 6
neighbouring countries.

This step has helped India develop good and cordial relationship with its neighbouring
countries in all aspects i.e. socially politically and economically. After SAARC being
formed by India along with 6 of its neighbouring countries, India has been able to
develop trade relations with all the SAARC members.
India had the chairmanship of SAARC during the year 1996-97.India hosted the 17th
session of the SAARC council of ministers at New Delhi in 1996.
Recently the 14th SAARC summit was held in New Delhi


- Cooperation within the framework of the Association is based on respect for the
principles of sovereign equality, territorial integrity, political independence, noninterference











- Such cooperation is to complement and not to substitute bilateral or multilateral

- Such cooperation should be consistent with bilateral and multilateral obligations of the
member states
- Decisions at all levels in SAARC are taken on the basis of unanimity.
- Bilateral and contentious issues are excluded from its deliberations.


The highest authority of the Association rests with the Heads of State or Government.
During the period 1985-95, eight meetings of the Heads of State or Government had been
held in Dhaka (1985), Bangalore (1986), Kathmandu (1987), Islamabad (1988), Mal
(1990), Colombo (1991), Dhaka (1993), New Delhi (1995) and Male (1997) respectively.
Council of Ministers
Comprising the Foreign Ministers of member states is responsible for the formulation of
policies; reviewing progress; deciding on new areas of cooperation; establishing
additional mechanisms as deemed necessary; and deciding on other matters of general
interest to the Association. The Council meets twice a year and may also meet in
extraordinary session by agreement of member states. It has held fifteen sessions till
November 1995.
Standing Committee
Comprising the Foreign Secretaries of member states is entrusted with the overall
monitoring and coordination of programmes and the modalities of financing; determining
inter-sectoral priorities; mobilising regional and external resources; and identifying new
areas of cooperation based on appropriate studies. It may meet as often as deemed
necessary but in practice it meets twice a year and submits its reports to the Council of
Ministers. It has held twenty regular sessions and two special sessions till November
Programming Committee
Comprising the senior officials meets prior to the Standing Committee sessions to
scrutinize Secretariat Budget, finalise the Calendar of Activities and take up any other
matter assigned to it by the Standing Committee. This Committee has held fifteen
sessions till November 1995.
Technical Committees

Comprising representatives of member states, formulate programmes and prepare

projects in their respective fields. They are responsible for monitoring the implementation
of such activities and report to the Standing Committee. The chairmanship of each
Technical Committee normally rotates among member countries in alphabetical order,
every two years. At present, there are twelve Technical Committees. However, with the
merger of the Technical Committees on Environment and Meteorology, beginning from
1st January 1996, the number of Technical Committees will be eleven.
Action Committees
According to the SAARC Charter, there is a provision for Action Committees comprising
member states concerned with implementation of projects involving more than two, but
not all member states. At present, there are no such Action Committees.
Other Meetings
During the first decade of SAARC, several other important meetings took place in
specific contexts. A number of SAARC Ministerial Meetings have been held, to focus
attention on specific areas of common concern and has become an integral part of the
consultative structure.So far Ministerial-level Meetings have been held on International
Economic Issues:

Islamabad (1986), Children

New Delhi (1986) & Colombo (1992), Women in Development

Shillong (1986) & Islamabad (1990), Environment - New Delhi (1992), Women
and Family Health

Kathmandu (1993), Disabled Persons

Islamabad (1993), Youth - Male' (1994), Poverty

Dhaka (1994) and Women : Towards the Fourth World Conference on Women

So far, six Meetings of Planners have been held, one in 1983 and five annually
from 1987 to 1991. These meetings initiated cooperation in important areas such
as Trade, Manufacturers and Services; Basic Needs; Human Resource
Development; Data base on socio-economic indicators; Energy Modelling
Techniques ; Plan Modelling Techniques and. Poverty Alleviation Strategies.
In addition, a high level Committee on Economic Cooperation (CEC) has been
established in 1991, for identifying and implementing programmes in the core
area of economic and trade cooperation.
A three-tier mechanism was put in place in 1995, to follow-up on the relevant
SAARC decisions on Poverty Eradication. The tiers consist of Meeting of
Secretaries in-Charge of Poverty Eradication, Meeting of Finance/Planning
Secretaries, and Meeting of Finance/Planning Ministers.


Member states make provision in their respective national budgets, for financing
activities and programmes under the SAARC framework including contributions to the
Secretariat budget and that of the regional institutions. The financial provision thus made
is announced annually, at the meeting of the Standing Committee.
The annual budget of the Secretariat, both for capital as well as recurrent expenditure, is
shared by member states on the basis of an agreed formula. The initial cost of the main
building of the Secretariat, together with all facilities and equipment, as well as that of
the annex building completed in 1993 has been met by the host government.
A minimum of forty percent of the institutional cost of regional institutions is borne by
the respective host government and the balance is shared by all member states, according
to an agreed formula. Capital expenditure of regional institutions which includes physical
infrastructure, furnishing, machines, equipment etc. are normally borne by the respective
host government. Programme expenditure of regional institutions is also shared by
member states, according to the agreed formula.
In the case of activities under the approved Calendar, the local expenses including
hospitality, within agreed limits, are borne by the host Government, while the cost of air
travel is met by the sending Government.


SAARC has taken important steps to expand cooperation among member countries in the
core economic areas. In 1991, a Regional Study on Trade, Manufactures and Services
(TMS) was completed outlining a number of recommendations for promoting regional
cooperation in the core economic areas. The Council of Ministers at its Ninth Session in
Mal in July 1991 endorsed the Study and decided to set up a high-level Committee on
Economic Cooperation (CEC). This Committee has so far held six meetings.
At the Colombo Summit in December 1991, the Heads of State or Government approved
the establishment of an InterGovernmental Group (IGG) to seek agreement on an
institutional framework under which specific measures for trade liberalization among
SAARC member states could be furthered. IGG evolved a draft Agreement on SAARC
Preferential Trading Arrangement (SAPTA) during its first two Meetings. Subsequently,
the Council of Ministers, upon the recommendation of CEC signed the framework
Agreement on SAPTA in Dhaka on 11 April 1993 during the Seventh SAARC Summit.
In the subsequent four Meetings of IGG, the member states conducted their
bilateral/multilateral trade negotiations in which they exchanged concessions to be
offered/sought. The Consolidated National Schedules of Concessions were finalised in
the Sixth Meeting of the IGG held at the SAARC Secretariat, Kathmandu on 20-21 April
1995 and subsequently approved by the Council of Ministers in May 1995. All SAARC
member countries have ratified the SAPTA Agreement and as per Article 22 of the
Agreement, SAPTA will enter into force on 7th December 1995 - two years ahead of the
time schedule envisaged initially.
The Council of Ministers at its Fifteenth Session agreed that the full and timely
realisation of the benefits of regional economic cooperation required


(a) the implementation of other related measures such as the removal of para-tariff, nontariff and other trade control barriers within the specific timeframes and
(b) eventual progression to the creation of a free-trade area in the region.
The Heads of State or Government at their Eighth SAARC Summit (New Delhi, May
1995) noted with satisfaction that the first round of trade negotiations under SAPTA has
been completed. They reiterated their firm belief that the operationalisation of SAPTA
will herald the beginning of a new and significant process of regional cooperation and
would lend strength to SAARC as an institution for promoting the welfare of the peoples
of South Asia.
CEC at its Sixth Meeting (New Delhi, November 1995) recommended that with the
operationalisation of SAARC Preferential Trading Arrangement (SAPTA), it is now
desirable to work towards removal of para-tariff and non-tariff barriers, widening and
deepening the tariff cuts and expanding the list of products to be included for intraSAARC preferential trade under SAPTA. It reiterated that the South Asian Free Trade
Area (SAFTA) is a clear eventual goal, at the same time it noted that the progress towards
it may have to be in gradual stages. To push the SAPTA process forward, it recommended
that the Inter-Governmental Group on Trade Liberalisation be reconvened to conduct the
Second Round of Trade Negotiations under SAPTA and proposed that the first meeting of
the second round may take place in early 1996 and appreciated the offer of Sri Lanka to
host the same. The Committee also recommended that the first Meeting of the Committee
of Participants of SAPTA may be held in the third quarter of 1996 to review the progress
in the implementation of the Agreement.Each member country will notify the SAARC
Secretariat and the SAARC Chamber of Commerce and Industry about their overseas
bulk purchases. A Group of Experts from Research Institutions of Member States have
been requested to commission a tripartite study involving governments, business and
academic sectors to accelerate the process of eventual progression to the creation of a
free-trade area in the region.


ROLE OF INDIA:India plays a dominant role in SAARC because of its commanding position in SAARC.
Demographically India is the most popular country among the SAARCcountries. It
possess the largest land area and economically also it commands relativelya better
position. Though India itself suffers from several problems still there is a scopefor India
to play its dominant role in SAARC from both the sides i.e from the side ofrendering
helping hand to member countries of SAARC to tide over their problems andfrom the
side of demanding help from the member countries of SAARC in terms of piloting the
scheme of joint ventures specially in the fields of Co-operation, Agriculture,industry,
energy, transport, tourism, business, communication, widening of markets etc.The second
SAARC summit was held in India at Bangalore in 1986.



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
The study reveals that there was presence of convergence in India exports with SAARC
countries and in the other words, actual Indias exports to SAARC countries converged
towards the estimated export potential. Among SAARC countries, Indias export potential
exists for Maldives, Bhutan, Pakistan and Nepal. India is the only SAARC member that
shares land border with four members and sea border 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 investment and technology and a major market for products
from all other SAARC members. Therefore, it is essentially in Indias interest to put her
weight behind SAARC


The South Asian Assoc:iation for Regional Co-operation (SAARC) recently completed to
decade!; in existence. In the second decade of its existence, the mood among member
countries is distinctly optimistic. There is an increasing conviction among these countries
that economic co-operation among the countries of the regon can bring about better and
effective regional co-operation. "This z~ptimism stems from the present note for SAARC
in fulfilling an impon.ant task of allowing the forum to provide a -for platform formal
contact between counties in the region."' India's rapport with Pakistan would be discused
before examining India's interaction with other SAARC countries.



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
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.
India relation with China
By the late 1950's the situations become more complicated and China failed to fit into
the rivalry between the two super powers and China took its own
position even in the relations between India and Pakistan. During that period China was
in confrontation with Soviet Union and tried to prevail over India, its geo-political rival
in Asia and the third world. China achieved mutual understanding and co-operation with
Pakistan - an ally of the US, which was one of China's main enemies. The alliance
became beneficial to Pakistan from the geopolitical perspective because China supported
Pakistan on Kashrnir and began to provide. Pakistan with military economic assistance
coupled with political and diplomatic support. Though China has asserted
Pakistan that it would support on all important issues, including assistance The
involvement of Pakistan in American military and strategic designs and the further
developments and expands on of US-Pakistan military and economic operation did not
enable to resolve the suspicio and contradictions between Pakistan and India for the
nuclear programme, China did not go any further during the war between India and
Pakistan, apart from delivering arms and protesting to India in a threatening manner.
Military conflicts between India and Pakistan have not brought any results. I~I 1972, a
diplomatic solution was tried through Simla Agreement. The agreement stands for
solving outstanding issues and disputes only through peaceful means at bilateral
negotiations. The agreement also wants to prevent frictions, conflicts etc. which could
destroy the establishment of peaceful and friendly relations and wants to respect national
unity, territorial integrity, political independence and sovereignty of each other and
refrain from making any hostile propaganda against the other party.


India's Relations with Nepal

India considers South Asia as its geopolitical region of influence and expect that its
smaller neighbours pay due regard to its sensitivities. Pakistan becomes angry when India
presumes 'the right' to prescribe what kind of weapons system are sufficient for Pakistan.
The Nepal's ruling class are equally resentful at how India over runs Nepal, politically,
culturally and economically. Bangladesh has deep grievances over water arrangements,
India's 'big brother' attitude creates suspicion and hostility. They look at India's policy of
bilateralism as a method of coercive diplomacy. In turn, India feels that its rights and
security sensitivities are not respected. 'India has not the politico-military and economic
power to compel acquiescence, except in the case of the land-locked states of Nepal and
Bhutan. India may have failed in its efforts to block arms transfer to Pakistan but it has
been much more successful in preventing US arms sale to Nepal in 1983 - 84 or in
discouraging US plans to Sri Lanka to set up high power transmission facilities or
build ;m oil tank complex in Trincomallee. However it is an accepted fact that India has
played a significant role in creating balance in order to ensure stability in the south Asian
state system, by invitation in the Maldives, by forces of circumstances in East Pakistan
and by agreement in Sri Lanka. The politico-military backlash against the role of the
IPKF in Sri Lanka has created a poor image and also it adversely affected the relations
between Sri Lanka and India and that of LTTE and Government of India. It has also
brought home to the Indian ruling class the limits of Indian power to shape the regional
environment. 'India's move to merge the Protectorate of Sikkim, was an object lesson in
the ability to use a politically role-dominant ethnic community the Nepali in Sikkim to
change the politico-demographic reality there.India's conflict of interest with these
smaller countries comprises minor disputes over temtory llke Kachchativu with Sri
Lanka, Kalapani with Nepal, Tin Banlga and New More Island with Bangladesh. More
serious and important problems are over sharing of resources, cross border population
movements, ideological and nation-state identity politics. These small neighbouring
nation states base their identity by asserting there differences with India. lZ LO hta
Manchanda, "India in comprehensive and co-operative security in South Asla", edited by


Dipankar Banerjee (New Delhi: Institute of Peace and Conflict Stumes, 1998)


border ethnic, religious and lingustic connection have made mutually vulnerable all the
countries of South Asia, including India. India's small neighbours feel threatened and in
secure by Inma's size and its growth potential. India's political connections with
democratic forces in these countries have been a matter of great concern 189 Just like
Pakistan, the other neighbours Nepal and Sri Lanka have invited extra regional powers
1.0 counter Indian power. Nepal sought to play off China against India. India relationship
with Nepal began when India set up its embassy at Kathmandu. Bhabani Sen Gupta and
others in their study on, Regional co-operation and Development in South Asia explain
how in 1951, after the liberation of Tibet by Communist China, Government of India
placed Nepal within India's security orbit. Nepal is perceived as a buffer state between
India and China and its overtures were seen as threatening and punished for chat. Prime
Minister Rajiv Gandhi showed his unhappiness at an Arms Agreement between Nepal
and China by closing the transit points and thus bottling up land locked Nepal. Before
that, Prime Minister Rajiv Gandhi did not approve Nepal's proposals for International
recognition as a 'Zone of Peace'. According to Bhabani Sen Gupta, India's acceptance of
the zone of peace concept would not have affected on the Indo - Nepal Treaty, but its
impact on the Nepalese elite would have been effective. He further says that it would not
make a least change in the geo-political realities of the Himalayas or in Nepal's relation
with India and China. Twenty years later, in the context of the Gujrat doctrine's new
responsiveness towards the sensitivities of neighbours, India has agreed to review the
Indo - Nepal treaty. There is public opinion in Nepal against unequal agreements on the
sharing of waters of the rivers Gandak and Kosi. Nepal like other neighbours, looks at
Indian bilateralism as euphemism of for hegemonic diplomacy. The 1996 agreement on
Wahakali River symbolises the problems of suspicion and mistrust and the promise of cooperation. "At stake is the development of the whole of North-East and the costs of under
development in the form of political unrest and destabilishing population movements
across the border."I3 The 1950 Treaty established the unique open border between India
and Nepal. The Indian security believes that the theory about a greater Nepal across the
Trans-Himalayan region has again been revived, particularly in the context of tlie
politico-demographic shifts in Darjeeling and Sikkim. The Greater Nepal concept is


manipulated to give political legitimacy to Bhutan's expulsion of 1,10,000 people of

Nepalese orign. Nepal wants to Involve India to pressurise Bhutan to take back the
Lhotsampas. Bhutan says that they are Nepalee citizens. "Increasingly, the management
of the challenge of population movements - refugees, migrants and stateless peoples requires a co-operative regional responds. A regional regime will de-politicise the issue of
giving refugee and build up group pressure on states not to make their citizens
stateless."14 The encroachment of Indian territory by the Nepalese citizens is another
irritant in the relationship between these two countries. Over 5839 acres of land along
river Gandak in West Champaran district is presently reported to be under illegal
occupation by the Nepalese citizens.15
India's Border with Nepal is not only open but has become insecure by the militants,
criminals and anti-India elements. It is relevant to be noted IS The Hindustan Times, New
Delhi July 23, 1993 here that to curb the menace fr3m the militants and criminals, India
has been engagaed in modernising the Nepal defence structure by providing assistance in
accordance with the 1950 Treaty and Arms Assistance Agreement 1965, provides an
important military link between the two countries. A militarily stronger Nepal would
reduce Chinese threat to India through Nepal becoming a more effective buffer.16 Only
in an atmosphere of peace and friendship, the security arrangements are effective and
implementative. Even if one signatory makes a half hearted attempt to accept the treaties
and arrangements then the effect of the same is diminished. One of the biggest criticisms
against India, according to the Nepalese, is the Indian bureaucracy and its mindset to rule
Nepal with a carrot and stick policy. There should be attitcdinal change amongst the
policy makers in India who would be sensitive to Nepal's sovereignty and adhere to good
neighbourliness. The draft proposal sent by India in 1989 shows the Indian minds as to
treat Nepal with suspicion who, it is said can harm India's security interests. The trade
relations between India and Nepal requires special attention. The government of India
cannot look after the economic needs of Nepalese because of its own compulsory. India is
hard pressed for its resources and its economy for its development. On each and every
issue Nepal talks about its sovereignty and independence being under constant threat and
India talks about its security interests. It would be in the interest of both the countries to
strike a balance between the two. India and Bangladesh The problem of Bangladesh


migrants is a major tension between India and Bangladesh. What is significant to note
here is that it is engulfed in the fundamentalist political discourse in India. It is a fact to
remember here is that the political parties like B.J.P. are targeting Muslim Bangladeshi
migrants. Incapability of Bangladesh to provide food and security to its citizens, makes it
unavoidable that people will cross the border for a livelihood. Apart from that, Irtdia
should take some of the responsibilities for the making of environmental I-efugees in
Bangladesh as a consequence 1of the degradation caused by the Indo-Bangladesh Farraka
agreement, fencing the border is not an alternative. An integrated economic development
of the region is essential for more regional co-operation, despite of natural gas in
Bangladesh which can transform the economy of the region. Foreign investors are
looking at India as the natural market for piped natural gas from Bangladesh. This would
remove the history of distrusi and suspicion, which has been preventing co-operation,
especially after the emergence of Bangladesh. Anti-India propaganda is being launched
by the ruling elite of Bangladesh. The Farraka Water Barrage Agreement is looked at as
the symbol of India's hegemonic bilateralism. The revised 1997 Ganga Water Agreement
represents an approach more responsive to sensitivities of Bangladesh. For India and
Bangladesh, the denial of san1:tuary to militants across the border is very essential. If
done so, this can bring about better relationship between India and Bangladesh. India has
been backing militant, Chakma groups like the Shanti Bhahini while Bangladesh has
been providing sanctuary to insurgent groups like the Bodos and ULFAS. Indo Bangladesh relations suffered due to the persisting disputes like the problem of illegal
rnigratim from the Chittagong Hill Tracts and the demarcation of boundaries involving
fertile island and enclaves. Moreover, both the countries frequently each other in their
respective troubled territories. The bilateral talks and negotiations are not yet reached in
the desired destination of amicable settler~ient in the issues like sharing of Ganga water,
Farrakka Water Barrage, Electric wire felicing across the borders, surprised attacks from
Bangladesh rifles against India's Border Security Forces and the anti-India sentiments and
all other forms of insurgencies. To illustrate this, Bangladesh has repeatedly accused
India of supporting the militant wing of the Chakma insurgency of Bangladesh, where as
India believes that Bangladesh encourage various subversive and guerrilla activities in
the North Eastern states of India such as Tripura and is or am.6.4 India and Sri Lanka The


Tamils are a minority in Sri Lanka. The majority lnhalalites have followed a policy of
discrimination against the Tamils. This has led to a civil war between Tamil groups and
Sri Lanka. Thousands of Tamil refugees have come to India since the beginning of civil
war in Sri Lanka. India has provided humanitarian relief of the refugees. Emotional
solidarity with their persecuted ethnic kin encouraged the state government in TamilNadu
to find the militants. It is alleged that Prime Minister Indira Gandhi and Prime Minister
Rajiv Gandhi armed and trained the militants." Sri Lankan President Julius Jayawardane's
close proximity with the USA, UK and Israel were looked by the Indian government as
complicating India's security interests. This was the time when India was building up its
regional muscle and wanted no extra regional power to get involved in its neighbourhood.
There was a fear percipitates, that the partition of Sri Lankans would take place due to the
acute ethnic crisis. India went for a peace agreement with Sri Lanka and sent IPKF to
implement it. Three years later, Sri Lankan 18 Partha S. Ghosh, "Co-operatio11 and
Conflict In South Asia," (New Delhi: Manohar Publications, 1989) pp. 73-86. l9 Rita
Manchanda, "India in comprehensive and co-operative security in South Asia", edited by
Dipankar Banerjee (New Delhi: Institute of Peace and Conflict Studies, 1998) p.49.
government forced India to withdraw its Forces from the Island and learned a lesson from
this humiliating exit. The assassination of Rajiv Gandhi created a situation, wherein India
stopped its moral support to Tamil militants. Successive Sri Larkan governments have
been cautious in respecting India's sensitivities about a foreign presence in its backyard.
Indo-Sri Lankan relations go deep into history, which is shrouded in myth, mystery and
miracles. From pre-historic times there has been a flow of people firom the Northern and
Southern India in to Sri Lanka. "The Buddhist Sinhalese derived their spiritu;ll strength
from the north of India and the Hindu Tamils derive their spiriiual sustenance from their
ancestors of South India. Sinhala Buddhists and Hindu Tamils were involved in historical
rivalry and antagonism after the advent of South Indian invaders on the Island. During
the colonial rule, India and Sri Lanka did not have independent interaction except in late
18'~ and 19'~ centuries when mass indented labour from South India was recruited on tea
and coffee plantations. After its independence, Sri Lanka began to have a fairly
independent course in its foreign policy and yet maintained cordial and warm relations
with India. This rela.tionship, which became cordial during the period of Bandarnakes,


declined in the late 1970's. The question of the stateless Indian Tamils in the island nation
and the militant demands of the Sri Lankan Tamils for a separate Elarn State embittered
Indo-Sri Lankan relations. The problems arising out of divided communities spread
across the South Asian countries are particularly intractable when open borders
encourage constant interaction between the populace of these countries. Indo-Sri Lankan
relations also remain strained over the discrimination and occasional mistreatment meted
out to Tamils in Sri Lanka. Indeed, relations between India and Sri Lanka have also not
improved much due to the withdrawal of the IPKF following the break of 1987 Indo-Sri
Lankan Accord and the hectic democratic efforts of President Kumaratunge for restoring
peace in the island. Both countries continue to view each other with suspicion regarding
the LTTE crisis, while Sri Lanka battles as against the increased hostility of Tamil Tgers
who are disrupting the stability of the Island with wide connotations for the entire region.
Recent reports have repeatedly suggested that India is keeping a cordial relationship
towards Sri Lanka, even Sri Lankan President Chandrika Kumaratunga has lost much of
shine in so far as her peace proposals to end the bloody ethnic war in the island remained
just a package. Meanwhile, attacks by the LTTE at soft targets in the capital city have
turned Colombo into a 'nightmare' - security checks, blocks and arrests of minorities have
disgruntled the Tamils and eroded much the goodwill the President once commanded.20
6.5 Indo-Bhutan Relations.Both India and Bhutan have been to maintain good and cordial
relations without any mistrust and suspicion. The Treaty of 1949 between India and
Bhutan in very significant in terms of the interests of both the countries. Bhutan has
changed today in all respects, including the economy 20 K.M. De Silva, ''Fifty Years of
Sri Lankan Independence; The Past Holds the Clues,"The Indian Express, Baroda,
January 29, 1998, and international stature since 1949. In the words of Dawa Tsering, the
then Foreign minister of Bhutan. "The Indo-Bhutan ties are a model in International
relations today. India is a big power and Bhutan is a small land locked kingdom. Still, we
get along very well. What can be more satisfying is this model relationship.



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



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 Indo-Sri 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
Indo-Pakistani 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 Gujrat Doctrine established by former Indian Prime Minister I.K Gujrat,
India signed a 30-year 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 IndoPakistani 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.


India needs to play a major role in SAARC 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 intra-SAARC 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 Atal Bihari Vajpayee, Countries in the SAARC region have to make a bold
transition from mistrust to trust, from discord to concord and from tension to peace.