india - pakistan trade relationship

8/12/2019 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

india - pakistan trade relationship

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