Indo-Pak Trade

12 Sep, 2001    ·   574

Suba Chandran looks into the various issues on Indo-Pak trade

D Suba Chandran
D Suba Chandran
 Director
Improving the trade relations between India and Pakistan has always been discussed in the various summits between the leaders of both the countries at the highest levels. A cursory look at the bilateral trade statistics will reveal the dismal scenario between the two countries. 

 

 

Indo-Pak Bilateral Trade since 1996 (in Rs Crores)

 

Year

 

Exports to Pakistan

 

Imports from Pakistan

 

 Balance of Trade

 

Total Trade

 

1995-96 

 

257.00

 

150.09

 

+106.10 

 

407.90

 

1996-97

 

557.83

 

129.55

 

-428.28 

 

 687.38

 

1997-98

 

537.83 

 

139.68 

 

+395.47

 

676.82

 

1998-99

 

465.99

 

891.85

 

-425.99 

 

 1357.84

 

1999-2000 

 

405.35

 

296.74

 

+108.61

 

702.09

 

 Source: www.meadev.nic.in/agrasummit/in-paktrade.htm

 

 

The bilateral trade was less than one percent of their global trade. For example, during 1999-2000, Indo-Pak bilateral trade amounted to 0.22 percentage of India ’s global trade. 

 

 

There are at least eight issues involved in Indo-Pak trade. First, for increasing the trade between India and Pakistan , it is essential that Pakistan grants MFN status to India . India has granted this to Pakistan long back. Granting MFN status to India will benefit both countries. 

 

 

Second, Pakistan has erected trade barriers against Indian goods, as a result of which bilateral trade is very low. Today, there are only 600 items which Pakistani traders can import from India . 

 

 

Third, due to these factors, un-official trade (which should be differentiated from illegal trade) is four to five times greater than official trade. For example, in 1999-2000, the official trade between the two countries was worth $800 million, whereas, the unofficial trade was $1.2 billion. Goods such as medicines, videotapes, viscose fibre, cosmetics, alcoholic beverages, cotton fabric etc are exported from India to countries like Singapore and Dubai , from where they are imported by Pakistan . The local traders in Pakistan find Indian goods imported through these countries cheaper than similar goods being imported from Europe , USA and Japan .

 

 

Fourth, Pakistan imports certain goods and commodities from far off countries at higher cost than from India . For example, Pakistan is the second largest consumer of tea in the world and India is one of the principal exporters of tea. Pakistan imports tea from Kenya , which is lower in quality and higher in price. Pakistan ’s tea imports from India were always below 1.5 percentage of its total imports. Iron ore, essential for Pakistan ’s engineering industry is imported from Brazil and Australia . Likewise textile machinery is imported from Germany . Besides paying a higher price, Pakistan also has to pay more for freight and insurance charges.

 

 

Fifth, there are certain commodities which, imported from India , would increase Pakistan ’s exports to other countries and even make Pakistani goods competitive. For example, if Pakistan imports iron ore from India instead of from Brazil , the price of Pakistani steel would come down by at least 70 percent. Likewise, Indian chemicals and dyes will increase production in Pakistan ’s chemical industry and make its products competitive in the global markets.

 

 

Sixth, there are certain commodities, which Pakistan does not allow to imported directly, hence the common man has to pay a huge price to import indirectly from India . For example, the Indian pharmaceutical products do reach Pakistan , but through third countries, thus increasing the cost unnecessarily. Indian tyres are smuggled into Pakistan . Since any way these Indian goods reach Pakistan anyway their direct import would reduce the cost and benefit the common man.

 

 

Seventh, infrastructure essential for bilateral trade needs to be improved. India and Pakistan should permit the movement of goods by road, rail and sea. Trade by road between the two countries through Wagah should be permitted. Besides, both countries could remove certain ridiculous procedures. For example, ships from Bombay cannot empty its goods at Karachi , unless it has touched a third country’s port.

 

 

Eighth, visa procedures for businessmen need to be made easier. Multiple entry visas and exemption from reporting to the local police are some of the measures that have been suggested. 

 

 

 

 

 

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