Moneycontrol
Oct 10, 2016 10:16 PM IST IST | Source: Moneycontrol.com

EXPLAINED: India and Pakistan's bilateral trade relations

Earlier this year, India and Pakistan's bilateral relations looked set for a takeoff on the back of three key events. However, recent skirmishes on the LoC have cast a shadow on a pick-up in trade. And at stake -- for Pakistan -- would be the Most Favoured Nation status that India granted it in good faith. A look at the facts and figures.


Moneycontrol Bureau

Earlier this year, India and Pakistan's bilateral relations looked set for a takeoff on the back of three key events. The Prime Ministers of both the nations had met on the sidelines of the Paris climate summit. In Bangkok, two National Security Advisors rubbed shoulders with each other and Sushma Swaraj made a visit to Islamabad for the Heart of Asia summit. However, recent skirmishes on the Line of Control have cast a shadow on any further pick-up in trade between the nations. And at stake -- for Pakistan -- would be the Most Favoured Nation status that India granted it in good faith.

A look at key facts and figures.

When did India & Pakistan start out as trade partners?
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The two countries began life as trade partners in 2006 when they signed the South Asian Free Trade Area (SAFTA) Agreement.  


What is the quantum of bilateral trade?

Imports from Pakistan into India constituted USD 441 million in fiscal year 2016 while Indian exports into Pakistan stood at USD 2171 million.



Is there an informal trade, too?


Yes, informal trade continues to thrive between India and Pakistan despite measures undertaken by the two countries to normalize trade.


How much is informal trade?


An analysis, carried out on the basis of a survey conducted in India and Dubai, estimates informal trade to be USD 4.71 billion. Of this, India’s exports to Pakistan are estimated to be USD 3.99 billion and imports from Pakistan USD 0.72 billion.


Why does informal trade thrive?


Informal trade is easier because of harassment by custom officals, political tensions between the two countries and ease of routing goods through a third country like Dubai.  

What constitutes the largest share of the trade?


Textiles and clothing (T&C) constitute the largest share of bilateral trade between the countries. Trade in the T&C sector 49 percent in total bilateral trade between the countries.


What is Most Favoured Nation (MFN) status?


India is a member of World Trade Organisation, and it basically says it should treat all other members equally as ‘most-favoured trading partners.’


When did India grant the status to Pakistan?


In 1996, India granted the MFN (Most Favoured Nation) status to Pakistan which is yet to return the favour.


Would it be a loss to India if it revokes the status to Pakistan?


Hardly. If India revokes the MFN status, loss, if any, will be minimal, as India’s bilateral trade constitutes a paltry 0.4 percent of India’s total goods trade worth USD 643.3 billion in 2015-16.


Key Facts of Bilateral Trade


From 2006 till 2012, Pakistan had a positive list that allowed only 767 items to be imported from India. It made a transition from the positive list approach to a more trade-enabling, small negative list of 1,209 items in March 2012.


However, Pakistan continued to restrict road-based trade by allowing only 137 items to be imported from India via road. Following the shift to a negative list, the focus of the trade negotiation has shifted to Pakistan granting the NDMA (Non-discriminatory market access) status to India.


(With data fro ICRIER)

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