Import from India increased by about three times during fiscal year 2003-04 with trade gap titled in favour of India


Nov 29 - Dec 05, 2004





The latest decision of the Government of Pakistan expanding its positive list of importable items from India by another 81 categories of goods will further boost the trade between India and Pakistan as it already increased significantly during the past one year because of improved relations between the two countries.

Most of the new items now included in the positive list are in the nature of raw material required by the local industry. The latest decision is in pursuance of South Asia Preferential Trade Agreement (SAPTA) negotiations concluded some time back. India has already agreed to grant tariff concession to 262 additional items in pursuance of these negotiations. In exchange Pakistan has agreed to grant concessions on 223 items. Out of these 223 items 81 items were not previously included in the list of items importable from India. Therefore these 81 items were required to be included in the positive list of the import policy which has now been done after completing necessary legal and procedural requirements. The positive list now consists of 768 commodity groups as against 687 commodity groups previously.

Import from India increased by about three times during fiscal year 2003-04 with trade gap titled in favour of India. During the current fiscal year, however, Pakistan has shown some increase in exports to India. The balance of trade has, always been in favour of India and likely to be so far obvious reasons. This is despite the fact that India has granted Pakistan the status of Most Favoured Nation (MFN) whereas Islamabad is yet to respond to India request for the same. Major Indian items making their entry into Pakistan to give edge to New Delhi over Islamabad included iron and steel, construction material, glass and glassware, fruits and vegetables, sugar, confectionery, tea, spices, feeding stuff for animals, edible products, oil seed and oleaginous fruits, crude rubber, raw cotton, synthetic textile fibre, wool (including wool tops), all crude minerals ores and concentrates of iron and steel, ores, and consent of non-ferrous metals, crude vegetable materials, coal coke and briquettes, vegetables fats and oils, animals and vegetables oils and fats, chemical elements and compounds, dying tanning and colouring materials, pigments and plants, medicinal and pharmaceutical products and essential oils perfumes and cosmetics.

South Asia, the most populated and deprived region of the world is the least economically and trade wise integrated region. The stumbling block that impedes its economic and trade integration through SAARC or bilaterally is non-trading mindset between India and Pakistan. The reasons are political animosity, vested interests and trade fear. Over past more than five decades except for first 2-3 years soon after the Great Divide, New Delhi as well as Islamabad has been looking outward to serve their national economic and trade interests by avoiding each other. On the contrary, a regional and bilateral approach would have served their economic and trade interests much better and perhaps would have paved way in confidence building, averting wars, which have consumed precious economic resources and would have made conflict resolution between the two countries much easier.



World economic and trading environment have undergone radical changes during the decade of 90s. The changes continue in the direction of regional economic cooperation, liberalization of economies, competition and free trade. It is difficult for nations to protect their economic and trade interests in isolation and through protectionism. They have to be part and parcel of the new world economic and trade order. Its results have been subtle and favourable for those nations, which have exercised the option of relegating interstate political conflict resolution in the backyard of history. It might yield results at some later stage. For example, Mainland China and Taiwan are great trade partners. Their trade link is one of the important factors that inhibit them to take extreme positions that could lead to hostilities between them over Taiwan issue.

India and China are looking forward towards greater economic cooperation and trading and have relegated the border conflict of 1962 in the backyard of history, to be resolved at some appropriate time in future. Despite such visible examples India and Pakistan continue living in the pats. Why? Because, those who matter do not want to face the realities as it might hurt their interests, which are by now so well entrenched, latent, complex and self-serving.

Immediately after the Great Divide of the sub continent, India was Pakistan's the most important trading partner because Pakistan did not have an industrial base for consumer goods and could import the same from India. In 1948-49, 32 percent of Pakistan's total imports came from India and her exports to India stood at 56 percent of total exports. By early 1950s trade between the two countries was reduced to bare minimum, which was further affected because of tension and wars between the two. Nevertheless, the two countries have been making somewhat lukewarm efforts to promote trade. Existing bilateral trade is guided by the principles agreed at secretary level meetings held in 1987. 249 items were listed on import list from India in 1988, which was further beefed up by 322 items.

In July 1982, Pakistan listed 40 items for trading with India, which were to be increased to 250 items but have not been done. India granted Pakistan MFN (Most Favoured Nation) status in 1996 and listed 600 items that Pakistan could import. Pakistan so far has remained reluctant to grant MFN status. India being a larger economy with cheaper products have appetite for Pakistani market where as Pakistan has fears about enlarging the list of trading items and granting MFN status. There is no harm in improving trade relations because there is always brighter side of the story; there may be realization of resolving the conflicts to reap economic benefits for the million of down trodden who live in India and Pakistan and hope against the hope to have a better life in future.

One of the important reasons as to why investment particularly foreign investment has not picked up in the country is tension-ridden relation between India and Pakistan. It deprives Pakistan from other side benefits of investment such as import of sophisticated technology to manufacture value-added products. Liberalizing trade between the two will help in addressing the investment scarcity.