The correct answer is: C. Both 1 and 2
The South Asian Association for Regional Cooperation (SAARC) is an intergovernmental organization comprising eight member states in South Asia: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. The organization was established on 8 December 1985 in Dhaka, Bangladesh.
The observer states of SAARC are China, the European Union, Iran, Japan, Mauritius, Myanmar, and South Korea.
Option 1 lists all eight member states of SAARC. Option 2 lists all eight member states of SAARC, plus the observer states of China, the European Union, Iran, Japan, Mauritius, Myanmar, and South Korea. Therefore, both options 1 and 2 correspond to the member and observer countries of the SAARC.