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Question 8 of 10 · Economic Reforms & Foreign Trade
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The South Asian Free Trade Area (SAFTA) agreement, signed in 2004, came into force in:

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Answer: Option D — 2006

Detailed Solution

The Agreement on the South Asian Free Trade Area (SAFTA) was signed in January 2004 and came into force on 1 January 2006.

About SAFTA:

  • It was signed at the 12th SAARC Summit held in Islamabad, Pakistan, in January 2004.
  • It replaced the earlier SAARC Preferential Trading Arrangement (SAPTA), which was signed in 1993 and came into force in 1995.
  • Its members are the SAARC countries: Afghanistan (which joined in 2011), Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.
  • Its aim is to reduce customs duties (tariffs) on trade among member countries and to promote regional trade and economic cooperation.
  • Under its "Trade Liberalisation Programme", member countries were to gradually reduce their tariffs to 0-5 per cent:
  • The non-least developed countries (India, Pakistan and Sri Lanka) were to do this by 2013 (Sri Lanka by 2014).
  • The least developed countries (Bangladesh, Bhutan, Nepal, the Maldives and Afghanistan) were given more time, until 2016.
  • Each country has a "Sensitive List" of products that are excluded from tariff cuts.
  • It also provides for special and differential treatment for the least developed countries.
  • A "SAARC Agreement on Trade in Services" (SATIS) was signed in 2010.

Limitations:

Intra-regional trade in South Asia remains low (only about 5 per cent of the region's total trade), because of long sensitive lists, non-tariff barriers, poor connectivity and political tensions, especially between India and Pakistan.

India's other trade agreements:

  • India-Sri Lanka Free Trade Agreement (1998, in force 2000).
  • India-ASEAN Trade in Goods Agreement (2009, in force 2010).
  • India-Japan Comprehensive Economic Partnership Agreement (2011).
  • India-UAE Comprehensive Economic Partnership Agreement (CEPA, 2022).
  • India-Australia Economic Cooperation and Trade Agreement (ECTA, 2022).
  • India-EFTA Trade and Economic Partnership Agreement (TEPA, signed 2024).
  • India-UK Comprehensive Economic and Trade Agreement (signed 2025).
  • India decided not to join the Regional Comprehensive Economic Partnership (RCEP) in 2019.

Why not the other options?

  • ✗2004 is the year SAFTA was signed, not the year it came into force.
  • ✗2008 is not correct.
  • ✗2010 is the year SATIS was signed.

Quick tip

Remember: SAFTA = signed January 2004 (12th SAARC Summit, Islamabad), in force 1 January 2006; replaced SAPTA (1993/1995); India-UAE CEPA = 2022; India-Australia ECTA = 2022; India left RCEP in 2019.

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