International trade is considered an important factor in the economic development of all developed and developing countries. Most countries have liberalized their trade over the past few decades, particularly during the 1990s and 2000s, as part of the economic reforms adopted by them. India has also made a lot of efforts in this area, due to which the total global trade of India reached $ 769 billion in the financial year 2017-18. Along with global trade, India also has a very good trade relationship with its neighbors. In the same period (ie FY 2017-18), India did a total trade of $ 12 billion with all its neighbors, which is 1.56 percent of India’s total trade. But if Indo-Pak trade is specifically talked about, it still remains a topic to consider. Talking about the financial year 2017-18 figures, the total trade between the two countries during this period was just $ 498 million, while our total trade with another neighboring country Bhutan was $ 728 million in the same period.
Indo-Pak Business – Current Scenario
- According to the report of the Indian Council of Research on International Economic Relations (ICRIER), the volume of trade between India and Pakistan is very small.
- Statistics show that in the fiscal year 2018-19, exports from Pakistan to India were just $ 2.17 billion, which is 0.83 percent of India’s total exports.
- India’s total imports from Pakistan during the same period were also less than $ 500 million, which is just 0.13 percent of India’s total imports.
- About 138 items are exported and exported by road between India and Pakistan.
Presently, there are two important routes of trade between India and Pakistan –
- Seaway: Mumbai to Karachi
- Land route through Wagah border
- However, there was considerable trade between the two countries through Chakan-da-Bagh in Poonch district and Salamabad in Uri.
- Indian exports mainly comprise about 33 percent textile products and 37 percent chemical products.
- On the other hand, Indian imports mainly comprise 49 percent mineral products and 27 percent fruits.
- When the Pulwama attack took place in February 2019, India withdrew Most Favored Nation (MFN) status from Pakistan and subsequently imposed 200 percent customs duty on all Pakistani goods arriving in India.
- In April this year, India suspended trade across Jammu and Kashmir citing the misuse of the trade route by Pakistan across the Line of Control (LoC).
- Pakistan has completely ended diplomatic and economic relations with India after the recent Jammu and Kashmir Reorganization Bill.
Indo-Pak trade – how was it started?
- Between 1948-49, more than 70 percent of Pakistan’s transactions were with India and the export from India to Pakistan was 63 percent.
- By the end of 1949, however, trade between India and Pakistan had started to decline.
- By the financial year 1965-66, trade between the two countries had reduced significantly. While there was a total bilateral trade of Rs 184.06 crore between the two countries in the financial year 1948-49, by the financial year 1965-66 it reached Rs 10.53 crore.
- After the Indo-Pakistan War of 1965, the Trade Embargo started between the two countries and it continued till 1974. During this period, India made several attempts to revive trade, but nothing more could be achieved.
- The Simla Agreement was signed on November 30, 1974 with the objective of ending the Trade Embargo.
- In an effort to diversify trade, the government of Pakistan in 1976 allowed its private sector to do business with India.
- In 1981, Pakistan attended the International Trade Fair in Delhi and after that the trade negotiations between the two countries started rapidly.
- The Joint Trade Commission was formed in the year 1983, with the main objective of facilitating bilateral trade between the two countries.
- In July 1989, Pakistan agreed to import a total of 322 items, after which the coming of Nawaz Sharif government in Pakistan in 1991 greatly helped to increase bilateral trade of both countries and in 1992-93 the total trade of both countries was 522.59 crores. Reached Rs.
- Subsequently, SAPTA came into existence in December 1995, which introduced integrated trade arrangements in the region.
- India granted Pakistan Most Favored National (MFN) status in the year 1996 and in the same year Pakistan also reduced the number of items imported to 600. In the year 2003, the Pakistani Prime Minister announced the addition of 78 other items to this list, which included chemicals, minerals and metal products etc.
- On 7 April 2005, the then Indian Prime Minister introduced the first cross-LoC bus ‘Karwa-e-Aman’ from Sher-e-Kashmir Stadium in Srinagar towards Muzaffarabad.
In May 2008, the Foreign Ministers of India and Pakistan decided to finalize the modalities of inter-Kashmir trade and truck service.
India-Pakistan informal trade
- A large part of the trade between India and Pakistan is through informal route, which means that trade between the two countries takes place through a third country.
- According to a recent report by ICRIER, the total formal exports from India to Pakistan were around $ 2 billion in FY 2018-2019, while the total informal exports between the two countries were about $ 3.9 billion.
The start of business is necessary
- Statistics show that between 2008-2018, there was a trade of around Rs 7,500 crore across the Line of Control and due to which Jammu and Kashmir generated a total of 1.7 lakh working days and estimated revenue of Rs 66.4 crore.
- During the same period (2008-2018) for the purpose of trade, movement of about 75,114 trucks was recorded and 90.2 crore rupees were paid as wages.
- If you look at the above figures from the overall business of India, then it seems very small, but for the local economy of that region, this figure is quite large.
- Amritsar is another important route of trade between India and Pakistan and the local economy here largely rests on this trade, as Amritsar has no traditional industry.
- Due to this, any decision taken on trade between India and Pakistan has a direct impact on the local economy of Amritsar. Statistics show that a total of 5000 families have so far been directly affected by bilateral trade stops between the two countries, including merchants from their employees, custom house agents (CHAs), freight forwarders, truck operators, dhaba owners and fuel stations. People involved are involved.
- Apart from this, the two countries have been growing in tension since the middle decades and from time to time tension has been seen mainly in the areas near the border. In such a situation, many scholars of both countries consider trade as one of the main means of establishing peace.
- The business at LoC has sentiments of people living on both sides and if it had not, the effort would have failed in its early days.
- This trade is more important than the exchange of goods in both areas, it acts as a bridge connecting the two communities.
What should be done
- Given the current state of Jammu and Kashmir, it is necessary that India plans to connect all stakeholders of cross-LoC trade so that trade revival efforts can be made.
- In the last few years, concerns related to transparency have affected business negatively and hence these concerns need to be addressed at the earliest in the entire ecosystem of business.
- This includes GST invoicing and merchant registration etc.
- In order to avoid mis-description of items, other details including their names should be clarified.
- A policy should be formulated for registration of traders, so that fraud can be avoided.
The volume of informal trade between the two countries is much higher than formal trade, so the authorities of both countries should pay attention to it and try to convert informal trade into formal trade.
- In order to promote trade and commerce in this area, it is also mandatory to provide efficient and effective transportation.
- Reducing the complexities of the visa process can also be helpful for this task.
- The digitization of trade facilitation centers in Uri and Poonch can also be an important step in this direction.
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