Pak-India trade deficit
AWorld Bank report says trade between Pakistan and India is only valued at a little over $2 billion but it has a potential of $37 billion. The bilateral trade, which is much below its full potential, could only be harnessed if both countries tear down artificial barriers. While the estimate of Pakistan's potential trade with South Asia is at $39.7 billion against the actual current trade of $5.1bn.
The report, "Glass Half Full: Promise of Regional Trade in South Asia", released Wednesday unveils four of the critical barriers to effective integration. The four areas are tariff and para-tariff barriers to trade, complicated and non-transparent non-tariff measures, disproportionately high cost of trade, and trust deficit. World Bank lead economist and author of the document, Sanjay Kathuria believes trust promotes trade, and trade fosters trust, interdependency and constituencies for peace. Pakistan and India must realize the importance of the trade potential and radical steps should be taken on side to break the ice.
In this context the opening of the Kartarpur corridor by governments of Pakistan and India would help minimise trust deficit. For realising the trade potential, the two countries start with specific products facilitation in the first phase. Pakistan had least air connectivity with South Asian countries, especially India. Pakistan has only six weekly flights each with India and Afghanistan, 10 each with Sri Lanka and Bangladesh and only one with Nepal, but no flight with the Maldives and Bhutan. Compared to this, India has 147 weekly flights with Sri Lanka, followed by 67 with Bangladesh, 32 with the Maldives, 71 with Nepal, 22 with Afghanistan and 23 with Bhutan.
With India in fact Pakistan is sitting on a huge trade potential that remains largely untapped. A favorable trading regime that reduces the high costs and removes barriers can boost investment opportunities that are critically required for accelerating growth in the country. The two need to promote export promotion policies to ensure sustainable growth. Trust promotes trade, and trade fosters trust, interdependency and constituencies for peace. The two nuclear rivals have barely scratched the surface of their bilateral trade potential that stands somewhere around $37 billion, due to the absence of a normal relationship between them almost all through the seventy-plus years of the existence of both.
The continued political tensions and lack of normal trade relations between Pakistan and India have cast a shadow over cooperation efforts within South Asia, contributing to the lack of progress in the regional cooperation agenda of Saarc and Safta [South Asian Free Trade Area]. Both Pakistan and India are struggling in the context of balance of trade has no two opinions. Pakistan's trade deficit rose to $37.7 billion in the fiscal year 2017-18 from $32.5 billion in the previous fiscal year. Similarly, India's trade deficit widened to $156.8 billion in 2017-18 as compared to $108.5 billion in the previous fiscal. Bridging the trust deficit can certainly help the two countries bridge their trade deficit, to the benefit of the whole region.