The South Asian Association for Regional Cooperation (SAARC) is an economic and political organization of eight countries in Southern Asia. In terms of population, its sphere of influence is the largest of any regional organization: almost 1.5 billion people, the combined population of its member states. It was established on December 8, 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives and Bhutan. In April 2007, at the Association's 14th summit, Afghanistan became its eighth member.

Free trade agreement
Over the years, the SAARC members have expressed their unwillingness on signing a free trade agreement. Though India has several trade pacts with Maldives, Nepal, Bhutan and Sri Lanka, similar trade agreements with Pakistan and Bangladesh have been stalled due to political and economic concerns on both sides. India has been constructing a barrier across its borders with Bangladesh and Pakistan. In 1993, SAARC countries signed an agreement to gradually lower tariffs within the region, in Dhaka. Eleven years later, at the 12th SAARC Summit at Islamabad, SAARC countries devised the South Asia Free Trade Agreement which created a framework for the establishment of a free trade area covering 1.4 billion people. This agreement went into force on January 1, 2006. Under this agreement, SAARC members will bring their duties down to 20 per cent by 2007.