Budget strategy process

The inflow of foreign funds in the organization support the long- term objectives in regard to  other aspect of India’s strategy has been to evolve consensus in SAARC on international economic and political issues. Such consensus would strengthen India’s own bargaining position in international forum. This competitive game and diversity in objectives may help to sustain SAARC but is not congenial for effective regional integration.
There are diversities in threat perceptions among the South Asian states. For example, the presence of a superpower in the Indian Ocean draws more fire from some South Asian neighbours than others. Practically, threat perceptions in South Asia seem to be quite a mixed issue. The smaller members of the community fear India, and some of the South Asian states are concerned about American interests in the region. China figures as a possible threat in the Indian calculations, but China is uniformly absent from the threat perceptions of most of the other South Asian states. These differences in perception and response point to the absence of any kind of a regional outlook on defence issues. For this reason different military capabilities have emerged in the South Asian region, which is in no way congenial for effective regional integration.
There is diversity in constitutional arrangements among South Asian states. For example, India and Pakistan have provincial government, but others lack these. It takes much time in India to ratify a treaty which as a consequence of having provincial governments. For smaller states it is very easy to get approval from their parliaments. Sometime in India central government’s willingness is not sufficient to solve a problem without the help of provincial government and the Indian Supreme Court. Sometimes this time-consuming system creates mistrust amongst smaller treaty partners. This situation is also not congenial for effective regional integration in South Asia. Different attitudes among the ruling elite’s is further  factor that hinders effective regional integration in South Asia. For example, since 1971 the Indian ruling elite has gradually realised that if  outside powers could be excluded from the region, there would not be a single state in South Asia to challenge India either diplomatically or militarily, or both. On the other hand, the elite’s of Sri Lanka and Nepal have an attitude to seek assistance from extra-regional powers. In Pakistan and  to some extent in Bangladesh, the ruling elite’s hold anti-Indian attitudes. They frequently express and use those attitudes in their policies and politics.

The disproportionate size of the market appears to be one of the most important obstacles to the expansion of trade in South Asia. India is a great economic power in the region. It accounts for 59 percent of the import market, 62 percent of the export earnings, 41 percent the external reserves, 79 percent of industrialized value added and 68 percent of mechanized exports. In terms of exportable commodities, India owns over 5,600 commodities to export. Only Pakistan, which has about 4000 commodities, comes next in South Asia. Nevertheless, Pakistan is no match to India in industrial development and size of the market. But the positions of other smaller members of SAARC in this regard are not same.

In view of the above, it is evident that the horror of Indian economic supremacy over the economies of the smaller countries is a barrier to trade co-operation in South Asia. India’s economic ascendancy is reproduced in its trade imbalance with almost all the countries of South Asia, except Pakistan. In 1992, India exported US$ 258 million to Bangladesh, US$5 million to Maldives, US$ 85 million to Nepal, US$ 47 million to Pakistan, US$ 192 million to Sri Lanka. In the same year, India imported US$ 5 from Bangladesh, US$ 21 million from Nepal, US$ 149 million from Pakistan and US$ 13 million from Sri Lanka. The strong industrial base, technological development and its comparatively restricted market have given India a predominant position in South Asia. The spill-over effects of the fear of India’s economic domination is also reflected in its neighbour’s psyche. For instance, it is noticeable in the statement of a Pakistani psychoanalyst, who alleged: ‘It will be more apposite to say that Pakistan is not willing to have unregulated trade with India without adequate safeguards for its indigenous industries and comparatively high-wage labour force.’ If passable safeguarding measures that are incorporated in the South Asian Preferential Trading understanding for least developed members are not properly applied to them, the lopsided size of the market may generate the imbalance basis of trade among the South Asian countries.