india - pakistan trade relationship
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Indo-pak trade relationship:
past present & future
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Byshish viswanath prakashVivek PaiBinay kumar SahooSchool of Management
Manipal Institute of TechnologyManipal University
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Relations between India and Pakistanhavebeen strained by a number of historical andpolitical issues.
violent partition of British India in 1947
the Kashmir dispute
numerous military conflicts
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India Pakistan
Population 1,210,193,422 170,600,000
Area 3,287,240 km (1,269,210 sqmi)
796,095 km (307,374 sq mi)
Population density 382/km (922/sq mi) 214.3/km (555/sq mi)
Capital New Delhi Islamabad
Largest city Mumbai Karachi
Government
Federal republic, Parliamentary
democracy Islamic Parliamentary Republic
Official languagesHindi, English and 20 other
official languagesUrdu, English
Main religions
80.5% Hinduism, 13.4% Islam,
2.3% Christianity, 1.9%
Sikhism, 0.8% Buddhism, 0.4%
Jainism
95-98% Islam (80-95% Sunni,
5-20% Shi'a), 1.6% Christianity,
1.6% Hinduism, others
GDP (nominal)$1.537 trillion ($1,265 per
capita)
$174.866 billion ($1,049 per
capita)
GDP (PPP)$4.06 trillion ($3,339 per
capita)$464 billion ($2400 per capita)
Military expenditures $36.03 billion (1.83% of GDP) $5.1 billion (2.8% of GDP)
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Social relations
Cultural links
similar cultures, cuisines and languages
Pakistani singers, musicians, comedians and
entertainers
Indian music and film are very popular in PakistanThe Punjabi people are today the largest ethnic
group in Pakistan- city of Nankana Sahib
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Linguistic ties
Hindustani is the lingua franca of North Indiaand Pakistan
Matrimonial ties
cross border loveVeer Zara-SRK
shoaib malik weds sania mirza
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Sporting ties
Sports diplomacy#Cricketziya ul haq,sardari,musharaf
Rohan Bopanna of India and Aisam-ul-Haq Qureshi of
Pakistanindo pak express
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Indo-pak trade relation
why India and Pakistan trade so little with eachother despite the existence of common history,language, culture, and long borders.?
Both member of SAFTA AND SAPTA but tradebetween the two countries is unnaturally small
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?
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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 withrespect to sterling
Commonwealth, including India, imposed a trade
embargo on Pakistan from 70 percent in 1947 to 18 percent in 1949.
Almost negligibledue to 1965 & 1971 war
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30 November 1974- shimla agreement- liftingembargo
15 July 1976- Pak Govt. permitted its privatesector to trade with India
June 1983, Joint Business Commission
1986- SAARCJuly 1989- Pakistan agreed to import 322 Indian
items- shariff
SAPTA-5550 tariff lines- for concession
1996- India offered MFN to Pakistan-Pakistanincreased its positive list to 600 items (importsfrom india)
Kargil war
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2005- musharafmanmohan
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.
2009Mumbai terror attack
2013Pak granted MFN status to india
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Trade Potential
stimulated by the removal of existing barriers10 to 20 times the current level
$2.5 billion to around $50 billion
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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
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Banks from both countries can open branches in
the other by 2013
Opening up the 11 historical trade routes
between the two countriesinstead 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
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NonTariff Barriers
Due to lack of reciprocityin 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
marketIndian 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 muchmore weight, the effective duty is larger.
Export bans by India2011- 2011 cancellation of 1.5 million
bales of cotton
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lack of infrastructure in both countries
necessary for expanded tradeonly 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 tonscapacity.
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Winners & losers issue
PITADnegetive list
Pakistan revealed comparative disadvantage in about two-
thirds of the 926 product lines looked.
639 of the 926 products be put on the negative list
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impact
Pakistan will gain from access to advanced technology andmachinery 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
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Field-level or lower bureaucracy on both sides of theborder as a major NTB
Mind-set of field-operating customs officers andother government officials is excessively
bureaucratic and negative about trade between thetwo 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 pakistanAs well as for electricity and diesel,
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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
Benefitto Indian chemical industry - three-fourths of
Pakistans chemical imports would then come from
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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
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Should we promote trade?
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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
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Reference
1. Mohsin Khan (2013);India-Pakistan Trade Relations A
New Beginning
2. Michael Kugelman,Robert M. Hathaway (2013); Pakistan-
India Trade:What Needs To Be Done?What Does It
Matter?;available at:www.wilsoncenter.org/program/asia-
program
3. PHD Research Bureau (2013);India-Pakistan Bilateral
Trade: Past, Present & Future;available at:www.phdcci.in