Indo- Pak Trade

Trade be­tween the neigh­bours has surged of late, but ris­ing ten­sions may con­tinue to play spoil­sport

Business Today - - CONTENTS - By ANILESH S. MA­HA­JAN

On Au­gust 15, Prime Min­is­ter Naren­dra Modi an­nounced a shift in the coun­try’s strat­egy to tackle Pak­istan by rais­ing the is­sue of hu­man rights vi­o­la­tions in Balochis­tan and Pak­istan-Oc­cu­pied Kash­mir or POK. The aim was to counter Pak­istan’s in­ter­fer­ence in Kash­mir and its back­ing of the in­sur­gency there. How­ever, in far­away Mum­bai, cot­ton traders were work­ing out the nitty- grit­ties of ship­ping cot­ton to Pak­istan. The rea­son – cot­ton pro­duc­tion in Pak­istan has fallen 35 per cent this year and im­ports from In­dia turn out to be much cheaper than from Aus­tralia and Africa. In­ci­den­tally, Pak­istan was the largest buyer of In­dian cot­ton in the 2015/ 16 sea­son ( Oc­to­ber- Septem­ber). It bought 2.5 mil­lon bales (one bale is 170 kg); In­dia's to­tal cot­ton ex­ports were 6.5 mil­lion bales. Tra­di­tion­ally, the big­gest buyer of In­dian cot­ton has been China. How­ever, this year, things are dif­fer­ent, partly due to the eco­nomic slow­down there and partly due to its tex­tile ex­ports be­com­ing less com­pet­i­tive due to ris­ing wages and other fac­tors.

Terms of Trade

Trade, it seems, is the only as­pect of Indo-Pak re­la­tions that has not been hit by the de­te­ri­o­rat­ing ties be­tween the two coun­tries. It rose 6.1 per cent to $409.96 mil­lion in the first quar­ter com­pared to the same pe­riod last year. In 2015/16, both coun­tries had traded goods worth $5.31 bil­lion, down from $6.71 bil­lion in 2014/15. This year, though the trade may not sur­pass the 2014/15 num­bers, it is pro­jected to cross last year's level com­fort­ably. It usu­ally

TRADE ROSE 6.1 PER CENT TO $409 MIL­LION IN THE FIRST QUAR­TER COM­PARED TO THE SAME PE­RIOD LAST YEAR

surges in win­ter when de­mand for fresh fruit, meat, nuts and other agri­cul­ture prod­ucts in­creases on both sides.

There are good rea­sons for this op­ti­mism. Just as Pak­istan is fac­ing a cot­ton cri­sis, In­dia has of late been un­able to pro­duce suf­fi­cient ce­ment due to short­age of fly ash sup­plied by ther­mal power units. This has trig­gered a surge in ce­ment im­ports from Pak­istan. Ce­ment from Pak­istan turns out to be cheaper. The av­er­age price of a sack of an In­dian brand is around `550 but Pak­istani sup­plies are sold at ` 480- 500. Ce­ment im­ports do not at­tract ba­sic Cus­toms duty but all ma­jor in­puts such as lime­stone, gyp­sum and pet coke do. In­dian ce­ment mak­ers have been push­ing for ad­di­tional du­ties on im­ported ce­ment.

A com­merce min­istry re­port says more than one mil­lion tonnes of ce­ment is ex­pected to be im­ported from Pak­istan this year; the do­mes­tic pro­duc­tion is 280 mil­lion tonnes. The sup­ply from Pak­istan is mostly sold in three- four dis­tricts of Pun­jab and some ar­eas of Hi­machal Pradesh.

In­dia has also seen a surge in de­mand for its sugar. In 2015/16, In­dian mills had ex­ported sugar worth $ 46.46 mil­lion to Pak­istan. In the first three months of 2015/ 16 it­self, the ex­ports had touched $31.78 mil­lion.

In­dia has been tra­di­tion­ally sup­ply­ing meat, chem­i­cals, arte­facts, medicines and agri­cul­ture prod­ucts to Pak­istan. This year, there has been a surge in de­mand for In­dian cot­ton, dairy prod­ucts and sugar, too. In­dia buys nuts, fruit, ce­ment, leather prod­ucts, some chem­i­cals and rare earth ma­te­ri­als from Pak­istan.

Trade Ties

In­dia has been push­ing Pak­istan for nor­mal­i­sa­tion of trade on the ba­sis of the Septem­ber 2012 roadmap that men­tioned re­moval of all re­stric­tions on trade through the At­tari/Wa­gah bor­der and grant of the Most Favoured Na­tion ( MFN) sta­tus to In­dia by De­cem­ber 2012. Pak­istan, how­ever, did not ad­here to the time­line. In­dia has al­ready given Pak­istan the MFN sta­tus – which is noth­ing but a prom­ise not to dis­crim­i­nate against im­ports from the coun­try that has got the sta­tus. Afghanistan also wants to use the Pak­istan route to trade with In­dia. How­ever, Pak­istan has clar­i­fied that it can al­low Afghanistan to bring its goods but will not give ac­cess to In­dian traders. In­dia and Pak­istan trade from two routes – the Mum­bai- Karachi sea route and the At­tari/ Wa­gah land route. There are two other points – Chakan Da Bagh in Poonch and Salam­abad in Uri – but they are used only for trade be­tween Kash­mir and POK.

ICRIER re­cently said that in­for­mal and in­di­rect trade be­tween the two coun­tries is worth more than $10 bil­lion. The prod­ucts that are traded in­clude di­a­mond/gold jew­ellery, scrap, ma­chin­ery, elec­tron­ics items and pa­per. These usu­ally travel through a third coun­try such as Dubai. Both coun­tries lose out on Cus­toms and other du­ties. Pak­istan had agreed to com­ply with the tar­iff lib­er­al­i­sa­tion plan of the South Asian Free Trade Area, which would have low­ered tar­iffs, but not much move­ment has hap­pened on this till date.

How­ever, any big change in the sit­u­a­tion is un­likely due to grow­ing po­lit­i­cal ten­sions. Both coun­tries have a re­stricted visa regime, high tar­iffs and in­ad­e­quate trade in­fra­struc­ture. Pak­istan's neg­a­tive list, for in­stance, has 1,209 items. In­dia’s has 614 items. Lack of di­rect bank­ing chan­nel, lim­ited con­nec­tiv­ity and hos­tile po­lit­i­cal en­vi­ron­ment also play spoil­sport. ~

IN­DIA HAS BEEN PUSH­ING PAK­ISTAN FOR NOR­MAL­I­SA­TION OF TRADE ON THE BA­SIS OF THE SEPTEM­BER 2012 ROADMAP THAT MEN­TIONED RE­MOVAL OF ALL RE­STRIC­TIONS ON TRADE THROUGH THE AT­TARI/ WA­GAH BOR­DER AND GRANT OF THE MOST FAVOURED NA­TION STA­TUS

In­dia & Pak­istan trade from the Mum­bai-Karachi sea route and the At­tari/Wa­gah land route

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