Indo-pak trade relationship: past present & future

By Ashish viswanath prakash Vivek Pai Binay kumar Sahoo

School of Management Manipal Institute of Technology Manipal University

 Relations between India and Pakistan have been strained by a number of historical and political issues. violent partition of British India in 1947 the Kashmir dispute numerous military conflicts

India Population Area Population density Capital Largest city Government Official languages 1,210,193,422 3,287,240 km (1,269,210 sq mi) 382/km (922/sq mi) New Delhi Mumbai

Pakistan 170,600,000 796,095 km (307,374 sq mi) 214.3/km (555/sq mi) Islamabad Karachi

Federal republic, Parliamentary Islamic Parliamentary Republic democracy Hindi, English and 20 other official languages Urdu, English

Main religions

GDP (nominal) GDP (PPP) Military expenditures

80.5% Hinduism, 13.4% Islam, 95-98% Islam (80-95% Sunni, 2.3% Christianity, 1.9% 5-20% Shi'a), 1.6% Christianity, Sikhism, 0.8% Buddhism, 0.4% 1.6% Hinduism, others Jainism $1.537 trillion ($1,265 per $174.866 billion ($1,049 per capita) capita) $4.06 trillion ($3,339 per $464 billion ($2400 per capita) capita) $36.03 billion (1.83% of GDP) $5.1 billion (2.8% of GDP)

Social relations
Cultural links
similar cultures, cuisines and languages Pakistani singers, musicians, comedians and entertainers Indian music and film are very popular in Pakistan

The Punjabi people are today the largest ethnic

group in Pakistan- city of Nankana Sahib

Linguistic ties
Hindustani is the lingua franca of North India and Pakistan

Matrimonial ties
cross border love Veer Zara- SRK shoaib malik weds sania mirza

Sporting ties
Sports diplomacy#Cricket ziya ul haq,sardari,musharaf Rohan Bopanna of India and Aisam-ul-Haq Qureshi of Pakistan indo pak express

Indo-pak trade relation

why India and Pakistan trade so little with each other despite the existence of common history, language, culture, and long borders.? Both member of SAFTA AND SAPTA but trade between the two countries is unnaturally small

History
In 1948-49, more than 70 per cent of Pakistans

trading transactions were with India, 63 per cent of

Indian exports to Pakistan. Pakistans decision not to devalue the rupee with

respect to sterling
Commonwealth, including India, imposed a trade embargo on Pakistan

from 70 percent in 1947 to 18 percent in 1949.

Almost negligible due to 1965 & 1971 war

 30 November 1974- shimla agreement- lifting embargo 15 July 1976- Pak Govt. permitted its private sector to trade with India June 1983, Joint Business Commission 1986- SAARC July 1989- Pakistan agreed to import 322 Indian items- shariff SAPTA-5550 tariff lines- for concession 1996- India offered MFN to Pakistan-Pakistan increased its positive list to 600 items (imports from india) Kargil war

 2005- musharaf manmohan trade did pick up significantly -$1.5 billion in 2006

and crossing $2 billion in 2008

March 2006- new shipping protocol, deregulations of air services, the joint registration of basmati rice, an

increase inthe size of Pakistans positive list,

cooperation in capital markets. 2009 Mumbai terror attack 2013 Pak granted MFN status to india

stance
India has been arguing that trading relations could be considered a precursor to more general discussions Pakistan has historically been hesitant to encourage cultural and economic exchanges kashmir issue PAK military is opposed to any thawing of relations with India Pakistan Business Council- reviving trade

Trade Potential

stimulated by the removal of existing barriers

10 to 20 times the current level $2.5 billion to around $50 billion

Impediments to trade
NTBs
Deal with visas Tedious customs procedures as outlined in the customs cooperation agreement Multiple sanitary and phytosanitary standards And ineffective dispute settlement through the redressal of trade grievances agreement India has not allowed FDI from Pakistan

 Banks from both countries can open branches in the other by 2013

Opening up the 11 historical trade routes

between the two countries instead of single border wagah Cargo loading/unloading capacities on both sides

No free trade zones

Negetive list of items by Pakistan by PITAD Risk perception- national security

NonTariff Barriers
Due to lack of reciprocity in granting MFN status to India Eg: When India granted MFN to Pakistan in 1996, within six months Pakistan captured 30 percent of the Indian yarn market Indian reverted to using NTBs

duty on fabrics is charged either by weight or value,

whichever way the rate is higher Eg : As Pakistans fabric is typically of slightly lower quality and therefore has less value than Indian fabric, but has much more weight, the effective duty is larger. Export bans by India 2011- 2011 cancellation of 1.5 million bales of cotton

 lack of infrastructure in both countries

necessary for expanded trade only 400 trucks a day No truck scanners- physical inspection

Indian regulations in May 2012 prohibit the

trucking of goods in vehicles with more than 10 wheels as well as those with over 40 tons capacity.

Winners & losers issue

PITAD negetive list Pakistan revealed comparative disadvantage in about twothirds of the 926 product lines looked. 639 of the 926 products be put on the negative list

impact
Pakistan will gain from access to advanced technology and machinery from India. likely that the pharmaceutical and automobile industries will lose out to more competitive Indian industries Indias heavily subsidized agriculture makes Pakistani products uncompetitive pak sectors like textiles, electric fans, and tires will gain efficiency gains for pakistan, as they will be able to achieve economies of scale with a large Indian market Pak textile sector can greatly benefit from the growing demand of the Indian middle class

 Field-level or lower bureaucracy on both sides of the border as a major NTB

Mind-set of field-operating customs officers and other government officials is excessively bureaucratic and negative about trade between the two countries, resulting in undue delays. Subsidised agriculture industry in india Eg: 450 pakistani rupees per 20 kg bag, whereas it is 1,800 rupees per bag in pakistan As well as for electricity and diesel,

 possibility of joint ventures, however, can help the Pakistani industry in general expand.

Indian fan industry will not be competitive in Pakistan

World bank study predicts no trade taking place in wheat, while mutually beneficial sugar trade is possible

Benefit to Indian chemical industry - three-fourths of

Pakistans chemical imports would then come from

 Obvious gainers for Pakistan would be textiles and leather, which can gain from cheaper imports of chemicals from India

potential for exporting agricultural machinery

from Faisalabad to India main losers for pakistan from opening up trade with India would be the automotive parts

Should we promote trade?

Steps to promote
Reaching agreement on non-tariff barriers (NTBs) Developing and implementing a dispute resolution framework. Developing the physical infrastructure required to facilitate two-way trade Transportation Opening up trade in services medical,banking, education, tourism?? Lol :D

Building confidence

Reference
1. Mohsin Khan (2013);India-Pakistan Trade Relations A New Beginning 2. Michael Kugelman,Robert M. Hathaway (2013); PakistanIndia Trade:What Needs To Be Done?What Does It Matter?;available at:www.wilsoncenter.org/program/asiaprogram 3. PHD Research Bureau (2013);India-Pakistan Bilateral Trade: Past, Present & Future;available at:www.phdcci.in