Trade Relation between India and Pakistan.
India and Pakistan have been trying, though not very successfully, since the Shimla Agreement, 1972, to create political harmony. Several attempts later, the political and security issues have only become worse.
It is imperative to explore the bilateral trade relations between India and Pakistan, so as to seek a way towards a deeper engagement, as these two countries have the potential to change the geopolitical dynamics of Asia.We shall first explore the history of bilateral trade relations between the two nations.
History of Trade between India and Pakistan
Bilateral trade between India ...view middle of the document...
Overall, it took four long decades before trade volumes (measured in nominal terms) between the two countries exceeded the levels of the early 1950s.
A historical review showed that at the time of independence, India and Pakistan were heavily dependent on each other.
In fact, India’s share in Pakistan’s global exports and imports accounted for 23.6 per cent and 50.6 per cent respectively in 1948-1949 which declined to 1.3 per cent and 0.06 per cent respectively in 1975-1976. Pakistan’s share in India’s global exports and imports was 2.2 per cent and 1.1 per cent respectively in 1951-1952 which gradually went down to 0.7 per cent and 0.13 per cent in 2005-2006.
Table-1 India’s Trade Balance with Pakistan (US $ million)
Year | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
Exports | 164.6 | 187.7 | 183.6 | 522.1 | 593.1 | 1235.0 | 1584.3 | 1772.8 | 1455.8 | 2235.8 |
Imports | 69.9 | 33.9 | 68.1 | 79.1 | 165.9 | 286.5 | 286.7 | 372.0 | 272.1 | 248.4 |
Trade | 94.7 | 153. | 115. | 442. | 427. | 948.6 | 1297. | 1400 | 1183. | 1987. |
Balance | | 8. | 5 | 9 | 1 | | 6 | 8 | 7 | 4. |
Source : “A Win Win Trade for India and Pakistan, Financial Express, New Delhi.
In 2001, India’s exports to Pakistan accounted for US $164.6 million which increased to US $2,235.8 million in 2010. The imported value of goods from Pakistan was US $69.9 million in 2001, which increased to US $248.4 million in 2010.
This clarifies that the two nations have not been able to harness their true potential. India has been consistently enjoying a positive trade balance with Pakistan, India’s trade balance with Pakistan, which was US $94.7 million in 2001 had increased to US $ 948.6 million in 2006 and currently stands at US $ 1987.4 million as of 2010. Furthermore, the share of Pakistan’s import from India in its global imports has increased from 4 per cent in 2008 to 6 per cent in 2010. On the other hand, India’s imports from Pakistan remain negligible. This often results in political rhetoric, further hindering cross-border trade.
Though the statistics reveal a definite growth in favour of India, yet it does not define the true potential that can emanate from strong bilateral relations. Owing to high trade costs, an estimated US $ 3 billion of informal trade happens between the two countries, which can well be brought into the mainstream economy through better trade facilitation measures.
Region Geo-Economics and Prospects of Bilateral Trade.
India and Pakistan are looked upon as arch rivals. Adverse political factors have badly affected bilateral economic relations between the two countries. In order to enhance peace and harmony, the two nations are taking measures to have closer economic ties with each other. India granted MFN status to Pakistan in 1996 under the WTO agreement, which, however, was not reciprocated by Pakistan.