Pakistan Forced to Open Up to Neighbour Due to Rise in Affordable Indian Imports
Published on: March 30, 2024.
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Pakistan Looks to Resume Trade Ties with India After Four and a Half Year Suspension
At a recent press conference, Pakistan’s Foreign Minister Ishaq Dar expressed a desire to seriously examine the possibility of resuming economic ties with India. This comes after a suspension of trade between the two countries for over four and a half years. The business community in Pakistan has been appealing for the resumption of trade, as they have been importing Indian goods via Dubai or Singapore at higher freight costs.
Regional trade has the potential to benefit both India and Pakistan, according to Zubair Motiwala, CEO of the Trade Development Authority of Pakistan. With a combined population of over two billion people, the South Asia region remains the least integrated economic region in the world, largely due to unresolved political issues such as the dispute over Kashmir.
The suspension of trade between India and Pakistan began in August 2019, when Pakistan cut off all economic ties in response to India’s actions regarding the constitutional status of Kashmir. Bilateral trade was already at a historic low prior to this event, with India imposing a 200 percent customs duty on all goods originating from Pakistan. This decision was made in response to the Pulwama attack, which India accused Pakistan of orchestrating.
While there is a desire to restart trade, India has not shown any interest thus far. Ehsan Malik, CEO of the Pakistan Business Council, believes that India is unlikely to engage in trade discussions until after its general elections. Non-tariff barriers and the aversion of politically motivated groups within India pose obstacles to Pakistan’s exports. The informal trade that takes place between the two countries through third-party countries like the United Arab Emirates is also not fully captured in official data.
Despite the challenges, there is still significant trade potential between India and Pakistan. Informal trade is estimated to be more than twice the value of formal trade, indicating the demand for Indian products within Pakistan. Both countries have maintained restrictive trade regimes in the past, but there is potential for growth if trade ties are restored.
Pakistan has a limited basket of exportable goods, but Dr. Aadil Nakhoda, an assistant professor at Karachi’s Institute of Business Administration, believes that Pakistan can benefit from affordable raw materials sourced from the Indian market. With a potential trade volume ten times larger than the pre-2019 level, there are opportunities for both countries to strengthen their economic ties.
Source: [TRT World](https://www.trtworld.com)
