Chapter 1: Introduction

1.1 Research Gap of the Study
In the present globalized world total depend on any country is on its foreigntrade. Defiantly it is trade which is giving a country a leading role in world andmaking it as a world economic power. While all those countries that has foreign tradeis not balanced are economically weak. At present globalized world all thosecountries are poor who are facing trade deficit. As all SAARC members areunderdeveloped economies therefore it needs to have surplice trade but unfortunatelyare members of SAARC are facing huge trade deficit which is also its main cause ofpoverty. There are many determinants of trade deficit in SAARC countries includingweak industries, high rate of taxes, high export duties, weak infrastructure, lack ofscientific methodologies in industries, uncompetitive products, and lack of access tointernational market. Many individual studies have been conducted on the matterconcerned but an organized and systematic study yet could not be done which couldexplore trade deficit and its determinant in SAARC countries. Though SAARCcountries have also signed free trade agreement but did not implemented full mostlybecause of India and Pakistan rivalries. Pakistan and India are the big and powerfulcountries of SAARC therefore this organization has been dominated by India andPakistan. This study is proposed to explore systematically the trade deficit of SAARCcountries and critically examined its determents.
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1.2 Significance of the Study
Economy is the backbone of present-day nation-states and key for individualprosperity and overall, all development of any state or nation. There are many meansto grow and expand the economy of a state to make it a big economy. Among thesemeans trade is most important one. In present globalized world no country issufficient to fulfill its routine indigenous needs therefore export the goods which aremore than its need and import which the state concerned is lacking. Trade deficit isthe difference between these two. The critical world economic review shows thatthose countries are wealthier and economically strong who has no trade deficit whilethe rest are poor. Like other regions SAARC countries are economically weak mainlydue to trade deficit. It needs to overcome the trade deficit to improve its economies,decrease its dependency over others, bring prosperity and remove poverty as allSAARC countries are fighting war against poverty. Half and in some case more thehalf of the population of these countries are living below the poverty line. Therefore,this study will be very important on two levels i.e. state level and individual level aswell. Before this proposed study no one conduct research study neither on SAARCcountries trade deficit nor on its determinants. Moreover, this study willsystematically study trade deficit of the SAARC member as well as its determinantstherefore its results and conclusion would be a significant element to the establishedInformation body on the problem concerned. It would also help SAARC statesovercome trade deficit, to improve their economies and would ultimately contributeto prosperity.
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Chapter 2: Literature Review

2.1. Determinants of Trade Deficit
In contrast with different locales, South Asia's fares incorporate an abnormallyenormous portion of work serious makes. India appreciates the best situation in thearea regarding a moderately differentiated fare structure with its main 20 warebunches representing just 43 percent of fares. Be that as it may, the structure of faresin various SAARC part nations has experienced huge changes in the on-going past.An empowering highlight is that their assembling yield has been relentlesslyexpanding.
The initiative itself is now twenty years old. The association should be in the fullgrowth of its youth and it will be ready to get on new tasks and challenges. But,unluckily, SAARC states takes the image of high profile and small performance,commitment, objectives, lacking concrete, and even a sense of regional identity. Forexample, the issues of discovering continuing advantages in joint development, theirreconcilable and reconcilable differences over the direction and volume ofdevelopment, and the allocation of advantages among the members have not beenmarked by any of the SAARC organization.
Exchange deficiencies are just the aftereffect of a larger number of imports thansends out for an economy in a specific period. In any case, the basic causes can beconvoluted, changing period by period (and nation by nation). It is generally hard todistinguish the causes from the impacts because numerous variables connect at thesame time (Pingfan, 2001).
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2.2 SouthAsia Free Trade Area (SAFTA)
The exchange organizations that advanced amongst the South Asian nationsprobably will not encourage a fast increment in intraregional exchange because offeeble exchanging relations among the SAARC nations (Pitigala, 2005). This viewwas bolstered by an investigation of Baysan, et al. (2006). They contended that thefinancial cases for SAFTA were moderately frail. From a financial point of view,neither a subjective contention nor a quantitative appraisal that was accessible to giveone explanation to feel excited about the course of action. Also, contrasted with theremainder of the world, this locale was minor both as far as monetary size asestimated by GDP (and per capita salary) and the offer on the planet exchange.Hence, exchange inclinations to the local accomplices would probably be promptingan outcome of exchange preoccupation as opposed to exchange creation. Essentially,the proof of exchange correspondingly in South Asia is blended, so exchangingactivity depended on a powerless suggestion (Das, 2007).
As of late, new farmer and Pierola (2007) found that the courses of action ofparticular exchanging South Asia including SAFTA missed the mark regarding theirpotential in light of item exceptions, extraordinary game plans for chosen items andprohibitive standards for purpose of root. In this manner, however upside possibilitiesfor SAFTA were extraordinary, profits by this exchanging course of action weredubious. Thus, the approach creators will require steady assurance to make it fruitfulin future. Bader (2006) contemplated the consequence of exchange shortage (faresand imports) on the development of a nation. The point of this investigation was toevaluate the connection among fare and exchange deficiency.

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