Pakistan India trade: Is it beneficial for Pakistan, opportunities and threats.

1. Pakistan India trade: Is it beneficial
for Pakistan, opportunities and
threats.
AFTAB AHMED DAR
M.Phil. Public Policy
Pakistan Institute of Development Economics Islamabad.

2. Introduction
• Pakistan and India are two largest economies of South Asia.
• Common border, common history, culture, languages, geography,
agriculture zones and climate.
• According to World Bank Pakistan and India accounts:
• 92% GDP of South Asia’s, 85% population and 80% surface area but only
20% share in regional trade.
• After six decades they don’t have normalize trade relations.
• The Pakistan economy exported US$ 23.6 billion goods and imports were
US$ 44.92 billion
• India exports of goods are US$ 304.6 billion and imports are US$ 489.4
billion.
• This huge difference between sizes of economy between both countries.

3. Comparison between South Asia and East Asia trade
• The comparison from1980 to 2005.
• In 1980’s South Asia’s trade is US$ 12 billion and in 2005 increased to
US$ 126 billion.
• While the East Asia’s trade in 1980’s is 48 billion and increased to
US$ 1 trillion in 2005.
• There is huge difference between trade in South Asia and East Asia.
• The reason behind the increase in trade between East Asian region is
they focus on trade liberalization and regional cooperation they take
benefits from each other.
• The South Asian Free Trade Area (SAFTA) agreement in 2006.

4. Reasons for small volume of trade
• According to Naqvi and Schuler (2007) three reasons for small
volume of trade:
• Political tension
• Import substitution industrialization
• No regional integration.

5. Methods of Trade
• According to Gull (2009) the current trade among Pakistan and India is conducted
by three different methods:
• Formal trade:
The formal trade between Pakistan and India will increase from US$ 2.25 billion to
US$ 30.4 billion if both countries liberalize trade
• Informal trade:
About US$ 5 billion unofficial trade between Pakistan and India, they use third
country routes like Afghanistan, Dubai, Singapore, Hong Kong, Srilanka and Gulf
States which will increase cost of doing business. The goods from Kolkata has been
shipped through Singapore and Colombo ports.
• Illegal trade (Smuggling)

6. Benefits
• Trade between Pakistan and India can gave remarkable benefits to the
Pakistan. Low cost product and more variety of goods available for
consumers.
• The Pakistan’s government will earn more benefits by formalized
trade in the form of custom duties which are presently lost by illegal
trade Nabi (2013).
• According to an estimate, the liberalized agriculture trade between
Pakistan and India would generate around 2.7 lakh jobs in India and
1.7 lakh jobs in Pakistan Chengappa (1999).

7. Transit Routes
• Land routes are the cost effective and ideal way for mutual trade.
• Because both the countries share 2912 Kilometers land border.
• India can easily trade with Central Asian Republics, Iran, Afghanistan
and China.
• Pakistan easily access to South Asian countries Gill and Madaan
(2015).
• The current development in CPEC (China Pakistan Economic
Corridor) which will gave benefit to whole region.
• China and India are fastest growing economies in the world with
largest population.

8. Gas Pipelines
• According to Pandian (2005) the energy trade as a confidence building
measure between Pakistan and India.
• Energy is one of important need for both Pakistan and India economy
both country faces energy crises.
Two major projects:
• Turkmenistan, Afghanistan, Pakistan and India gas pipeline (TAPI)
• Pakistan Iran Gas pipeline.
• The gas pipeline will grow the income US$ 14 billion in 30 years for
Pakistan, also include 8 US$ 8 billion transit fee and US$ 1 billion in
taxes and Pakistan will save US$ 5 billion Pandian (2005).

9. Most Favored Nation
• A level of status given to one country by another and enforced by the World Trade
Organization. A country grants this clause to another nation if it is interested in increasing
trade with that country. Countries achieving most favored nation status are given specific
trade advantages such as reduced tariffs on imported goods.
• According to Noorani (2012) if Pakistan grants Most Favored Nation (MFN) status to
India
• It will increase imports from India and reduce the profits of Pakistani exporters, and also
have a chance to some local industries knocked out and it will increase unemployment in
Pakistan.
• According to Najib et al. (2012) the overall trade with India would gave benefits to
Pakistan economy, the threat of cheaper Indian products is groundless because India’s
industry less competitive as compared to China’s industry.
• If Pakistan focus to increase in its exports then it will give several benefits to the economy
of Pakistan.

10. Tariff and non-tariff barriers
• The sensitive list between Pakistan and India is preserved 614 and 935
items respectively.
• A sensitive list is a list with every country which does not include tariff
concession
Absence of trade facilitation infrastructure:
• Lack of financial facilities (Banks)
• The communication problem (Mobile roaming)
• Visa restrictions
• Document requirement
• Custom clearance

11. References
• Chengappa, M. B. (1999). India-Pakistan Trade Relations. Strategic Analysis,
23(3), 443-457.
• Economic Survey 2012-13. (2013). Ministry of Finance, New Delhi.
• Economic Survey of Pakistan 2012-13. (2013). Ministry of Finance, Islamabad.
• Gill, S. S., and Madaan, K. D.,. (2015). Understanding Non-tariff Barriers
Between Pakistan and India. Centre for Research in Rular and Industrial
Development.
• Gul, N. (2009). Echancing Indo-Pak trade Prespectives from Pakistan. Institute of
Peace and Conflict Studies, New Delhi.
• Hussain, I. (2011). Prospects and challanges for increasing Pakistan-iIdia Trade.
Atlantic Council, Washington, D.C.
• Hussain, I. (2012). Prospects, Challanges and Risks for Increasing India-Pakistan
Trade. IBA Workin Paper Series.

12. References
• Khan, U. M., and Hussain, T. S.,. (2014). Normalizing India-Pakistan Trade
Relations: India Pakistan Agricultural Trade. LUMS Economics Working Paper.
• Nabi, I. (2013). Pakistan Trade with India: Thinking Strategically. Wilson Center.
• Najib B. W., Baig, A., Ansari, A. (2012). Implication of Trade Liberaliztion
between Pakistan and India. Workin Paper, Punjab Bpard off investment and tarde.
• Naqvi, Z. F., and Schuller, P. (2007). The Challanges and Potential of Pkaitsan-
India Trade. The Worls Bank, Washington, D.C.
• Noorani, T. (2012). MFN status and Trade Between Pakistan and India. PILDAT.
• Pandian, G. (2005). Energy Trade as a Confidence Builfing measure between
India and Pakistan: A Study of the Indo-Iran trans-Pakistan pipeline Project.
Contemporary South Asia, 14(3), 307-32.

13. Any Questions???
THE END