While home to about 20 percent of the world's population and 40 percent of the world's poor, South Asia accounts for only about 3 percent of both global gross domestic product (GDP) and total world trade. The states of the region have followed a long history of protectionism with inward looking polices that curtailed the region's economic growth as well as its trade flows, both within and outside the region. Unilateral liberalization initiatives started in the 1990s and worked towards accelerating growth – raising trade and investment flows in the region and as a result South Asia's growth rate over the last decade has exceeded the average in developing countries. Likewise, the region's export and import growth has been quite robust at 9.1 and 4.1 percent respectively in 2012 against 7.0 and 6.2 percent in developing countries (UNCTAD 2012).

At the outset, references to regional trade in South Asia need to account for the diversity and varied priorities of the different member states of the South Asian Association for Regional Cooperation (SAARC): India is a major emerging economy with substantial economic and political clout not only in South Asia but also in the world; Pakistan, Sri Lanka, Bhutan and Maldives are developing nations, while Afghanistan, Bangladesh and Nepal are least developed member states. Additionally, while Sri Lanka and the Maldives are small island states, Afghanistan, Bhutan and Nepal are landlocked nations.