Trade suspension to hurt Pakistan more, say experts

PTI, Aug 8, 2019, 9:39 AM IST

New Delhi: Pakistan’s decision to suspend bilateral trade ties with India would hit the neighbouring country more as they import essential items like onion, tomatoes and chemicals, according to experts.

“The suspension of trade relations will hit Pakistan more badly as India is less dependent on Pakistan while the latter is more,” Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said.

India’s export basket to the neighbour consists of limited products as Pakistan has not given ‘most favoured nation’ status to New Delhi and such goods have ready market in South Asia and the Middle East, he said.

Pakistan on Wednesday decided to downgrade diplomatic relations with India and suspend bilateral trade after New Delhi revoked the special status of Jammu and Kashmir.

Vikramjit Singh Sahney, President, International Chamber of Commerce (ICC) – India said that it was a ‘very sad’ development.

He said that the decision of Pakistan would further impact trade ties between the countries.

Professor at Indian Institute of Foreign Trade (IIFT) Rakesh Mohan Joshi said that Pakistan’s decision is going to impact its businesses.

Professor Biswajit Dhar of Jawaharlal Nehru University too said that both in long and short term, Pakistan would be impacted from their decision as they also import basic agri commodities like onion and tomatoes.

India on Monday abolished Article 370 of the Constitution that gave special status to Jammu and Kashmir and bifurcated the state into two Union Territories — Jammu and Kashmir, and Ladakh.

Trade relations between India and Pakistan were already strained following the Pulwama terror attack in February as India imposed 200 per cent customs duty on all goods imported from the neighbouring nation.

While India’s exports to Pakistan stood at USD 2 billion, imports were about USD 500 million per year. Imports from Pakistan declined by 92 per cent to USD 2.84 million in March this year compared to USD 34.61 million in March 2018, according to the commerce ministry data.

India imported goods such as cotton, fresh fruits, cement, petroleum products and mineral ore from Pakistan. During April-June this fiscal, imports stood at to USD 7.13 million.

India’s exports to Pakistan too have dipped by about 32 per cent to USD 171.34 million in March. However, exports had increased by 7.4 per cent to USD 2 billion during 2018-19.

During April-June this fiscal, India’s exports stood at USD 314.7million. The main products being exported by India include organic chemicals; cotton; nuclear reactors, boilers; plastic products; tanning or dyeing extracts; cereals; sugar; coffee, tea; articles of iron and steel; copper and footwear.

India had also revoked the MFN (most favoured nation) status to Pakistan in the aftermath of the terror attack. The country has repealed a security exception clause of the World Trade Organisation (WTO) to withdraw this status. Both countries are member of this body.

India can also restrict trade of certain goods and impose port-related restrictions on Pakistani goods. India had granted the MFN status to Pakistan way back in 1996, but the neighbouring country had not reciprocated.

Under the MFN pact, a WTO member country is obliged to treat the other trading nation in a non-discriminatory manner, especially with regard to customs duty and other levies.