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South Asia constitutes an ideal grouping for economic integration as it is a huge contiguous land mass crises-crossed by mighty rivers, with a wealth of natural resources, a variety of climatic conditions, and a common history and heritage, as also shared languages, literatures, and religions. The Indian sub-continent which constitutes the bulk of the region, has also inherited from the colonial period common institutional and legal infrastructures and a common physical infrastructure of roads, railways and inland waterways. These got disrupted disconnected at places, because of prolonged neglect, disuse and even deliberate destruction during periods of conflict. They can be resorted without much cost. South Asia has a market consisting of 1.3 billion consumers with rising incomes. And lastly, over the last two decades, there has been a convergence of the macro-economic policies of these countries and also diversification of their economies along similar lines. In spite of this, South Asia is latecomer in the arena of regional integration. The first wave of regionalism triggered, above all, by the signing of the Treaty of Rome in 1957, totally bypassed the region. Institutionalized regional cooperation began as late as in 1985 when the South Asian Association for Regional Cooperation (SAARC) was established. SAARC, by a political choice, shunned cooperation’s in the hard core economic areas of money, finance, trade and manufactures, until 1995, when after the completion of the first round of negotiations, the South Asian Preferential Trading Agreement (SAPTA) was launched. For almost a decade, SAPTA meandered along the unproductive course of commodity-by-commodity negotiations for reducing tariffs. Then came the South Asian Free Trade Agreement (SAFTA) at the end of Islamabad SAARC summit in January 2004 (Dubey, 2007).

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