Pak-In­dia trade deficit

The Pak Banker - - FRONT PAGE -

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.

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