The collapse of the global strategic overlay and the disillusionment due to the slow progress of multilateralism, coupled with the success of regional organisations like the European Union prodded many countries to form regional groupings. The South Asia Free Trade Agreement (SAFTA) came into effect from 1 January 2006 and aims to promote trade and economic cooperation among SAARC states, primarily through the implementation of the tariff liberalization programme wherein all customs duties would be reduced to 0% to 5% by 2016.

The moot question is whether SAFTA will prevent conflicts - both internal and external - in the region? The economics-security nexus has engendered sufficient debate in international relations literature to call for further discussion in this article. Suffice it to say that SAFTA can lessen conflict in the region provided it takes care of three gaps that exists in the sub-continent in a sequential manner viz. (a) the capability gap (b) connectivity gap and (c) the convertibility gap.

Capability gap reflects the inability of the region to cope with the economic needs and expectations of the people, thereby increasing their deprivation and the proclivity to fall prey to ethno-religious conflicts. The SAFTA can reduce the capability gap in the region by having 'trade creation effects' and promoting welfare gains and thereby increasing both the futility as well as the economic costs of conflicts affecting the internal security of countries of SAARC region.

To bridge the capability gap, SAFTA envisages unique provisions for a Mechanism for the Compensation of Revenue Loss (MCRL) and a Technical Assistance Programme for the LDC's. Under MCRL, LDC's will be compensated for losses they face due to reduction in the customs duties. Under the Technical Assistance Programme, LDCs will be provided added support in terms of capacity building and trade facilitation measures so that they reap the benefits of SAFTA by increased market access. These measures, demonstrate India's diplomatic resolve to assuage the trade and economic concerns of the smaller neighbours.

India realizes that presence of failed or near failed states due to poverty would ultimately endanger its own stability. The South Asian Preferential Trading Agreement (SAPTA), which was the precursor to SAFTA, had very limited trade coverage. The intra-regional trade density in the 1.5 billion SAARC region was less than 5 per cent even after more than a decade of SAPTA being effective. However, due to SAFTA, trade is expected to jump from the present level of US $7 billion to $22 billion by 2015. Further, direct trade between India and Pakistan is expected to increase substantially. Till date, most of the bilateral trade between these two countries is rooted through third countries. The probability that no country would like to offset increased economic gains from freer trade will deter future conflicts. SAFTA negotiations and post-SAFTA meetings might also promote norms of cooperative behaviour that could facilitate future negotiations in the security arena.

Increasing cross-border trade and intercourse can bridge the connectivity gap between contiguous geographical regions of India and its South Asian neighbours. If history is any guide, Taiwan's investments to China grew by a factor of 35.86 per cent between 1993 and 1998 in spite of the 1996 Taiwan straits crisis, thereby suggesting that high trade density is one of the factors preventing a full-blown cross-straits crisis. Optimum power stratification and increased economic interdependence between France and Germany managed to reign in 'security dilemmas' and promote European integration. Economic logic would call for Regional Production Networks (RPNs) in South Asia, not necessarily coterminous with geographical boundaries. This would increase domestic pressures on respective governments to reduce belligerence in order to sustain economic interactions. To this extent, India also needs to play a benign role in assuaging fears of smaller countries that they would be swamped into India's economic fold. Such a move will also pre-empt moves of these countries to look for trade and economic alliances beyond the region solely as a measure to counter growing Indian influence. India can also link development of its northeastern region to those of Bhutan and Bangladesh, thereby promoting a growth triangle that could see peace through prosperity.

Finally, SAFTA needs to bridge the convertibility gap existing between the present minimal trading relations and creation of a South Asian Economic Union (SAEU); covering issues like trade in services, finance and investment. The aim should be to traverse from SAFTA to SAEU in less than half the time it took from moving from SAPTA to SAFTA. This would put the regional economy on a growth trajectory and offset the costs of fuelling conflicts. Opening up of the services sector that constitutes around 40 per cent of the GDP of SAARC region would promote greater people-to-people contacts and thereby greater understanding in the South Asian region. Greater promotion of region wide investments intertwined with measures to foster regional energy and water security grids would link economic spin-offs to redressal of non-traditional security concerns like water, food and energy security. In the ultimate analysis, SAFTA is the first step in promoting cooperative security in South Asia as it can help in deterring states from easily waging war on one count and promoting non-traditional security issues on the other.

Views expressed are personal