Aug 25 - 31, 2008

There is huge volume of illegal trade between India and Pakistan currently underway through land and rail routes. There is undeniable fact that a number of Indian items including cosmetics, cloth, medicines, eatables etc., are easily available in different parts of the country. In the Shahalmi area of Lahore, a number of Indian items are easily available.

Smuggling through the Wagah border crossing has increased during the recent months. Most smuggled goods enter Pakistan from India on the Samjhota Express, while other goods enter via border villages.

Passengers and smugglers continue to bringing in two to three baskets of betel leaf, betel nuts, supari and other Indian products while returning to Pakistan.

A Customs official told PAGE that smuggling was rampant because many Pakistani Customs officials at Wagah Railway Station were easily handled. He alleged that in some cases, travellers smuggled Indian cloth, cosmetics and other banned items to Pakistan with the connivance of Customs officials.

He also claimed border villages exchanged banned goods with each other including alcohol, gold and cosmetics from the Indian side and silver from the Pakistan side. "There is a big difference between the prices of local and imported ''paan'' simply because a duty of Rs 250 per kilo is levied on the import," Rizwan, an importer said. He added that the importer also had to pay 10 percent sales tax and five- percent income tax. Local paan costs Rs 50 to Rs 200 per kilo, while imported paan costs Rs 300 to Rs 550 per kilo. At present, the commodity was being smuggled into Pakistan with the help of Customs officials through Wagah.

Pakistan's tradable list with India was 591 items in 1997 but has been increased to 1938 items in 2008. The government added 302 items in October 2007 and 136 items in July this year. Pakistan has unilaterally announced in the trade policy to encourage Indian investment in manufacturing of CNG buses. Also allowed are imports of duty free CNG Buses, diesel and fuel oil from India.

The government has already withdrawn the 15-percent duty on the import of CNG buses in the budget 2008-09.

Industry sources told PAGE that there exists no law, which barred Indian investment in Pakistan. Pakistan has a liberal investment policy, but generally both countries discouraged bilateral investments.

The sources claimed that Pakistan government has given some signals to welcome Indian investment in different sectors. The Pakistan government has already invited at least three Indian companies - Tata, Reliance and Essar - to a meeting of potential investors in the power sector to discuss the development of the Thar Coal Power Project. 'India is our neighbour and we are gradually liberalising our bilateral trade', the sources said.

Statistics show Pakistan's trade deficit has widened with India to $893 million in 2006-07 from $73.736 million in 1999-2000. The figures for July-March 2007-08 showed Pakistan's trade deficit with India at $1.095 billion. Pakistan exported $200 million worth commodities to India in July-March period of 2007-08 while imported goods value reached $1295 million.

Analysts say Pakistan's exports to India stagnated between $200 million to $400 million despite the fact that New Delhi has granted MFN status to Islamabad. Indian authorities never stressed for the MFN, as they were aware of the fact that the expansion in the positive list would serve their interest. "MFN status has become just a political issue which will lose its importance with the passage of time as Pakistan would keep on expanding the positive list to meet their demand," they added.

The Pakistan government is getting duty-free import of onions, potatoes, tomatoes, garlic and livestock through the re-opened land route while India is free to import lentils, cotton, sugar and dry fruits from Pakistan.

A leading businessman Azhar Saeed Butt said: "Though the land route has been opened for trade, no clear-cut trade policy between the two countries has been spelt out." The opening of the land route for business has initiated the possibility of trade in perishable commodities, earlier dependence was on either the bi-weekly Samjhauta Express or the detour through Dubai, Afghanistan or Iran, he said.

In India, he said the most anticipated import from Pakistan is likely to be cotton -- both raw cotton and cotton fabric -- earlier imported through rail and sea routes. Afghani dry fruit, something else that is imported from Pakistan, is in high demand in India.

Experts say annual free trade between India and Pakistan could reach $8 billion within a year, should trade barriers be removed and illegal trade be legalised.

Though, India and Pakistan do not legally trade in rice, illegal trade in rice and salt is rampant. Both countries export their basmati variety to other countries but do not trade with each other, they added.

They were of the view that bilateral trade between India and Pakistan would bring in economies of scale and open up the job market. However, Pakistan must move forward taking into account interests of local manufacturers.

According to importers, sanitary ware, some categories of automotive components, shoes and cutlery are Pakistani products that could find a big market in India, but "one cannot demand that a smaller economy opens its doors without, in turn, opening its own doors much" with respect to India's formidable trade practice with Pakistan.