Indo-Pak Economic Relations: Importance

Indo-Pak Economic Relations: Importance

Question: India and Pakistan are the two largest South Asian economies. Discuss the importance of Indo-Pak economic and trade relations in this context.

- India and Pakistan are the two biggest economies in South Asia accounting for 90% of the GDP and 85% of the population of the region

- Indo-Pak economic and trade relations have been restricted so far, with neither of the two countries targeting each other as top trading partners

- Low level of bilateral trade can be associated with the border disputes and tensions

- Both nations share the 11th lengthiest international border in the world, bilateral trade between India and Pakistan remain low(USD 2.6 billion in 2013)

- Longest international border of 8893 km is shared by US and Canada and trade between the two equals USD 632 billion

- Two way merchandise trade between India and Pakistan has been an increase from USD 250 million in 2000-2001 to USD 2666.13 million in 2010-2011

Main items of export from India to Pakistan include the following :

- Cotton,

- Organic chemicals,

- Food products including prepared animal fodder,

- Vegetables,

- Plastic articles,

- Man-made filament,

- Coffee,

- Tea and spices,

- Dyes,

- Oil seeds.

- Main items of import include copper and copper articles, fruits and nuts, cotton, salt, sulphur and earths and stones, organic chemicals, mineral fuels, rubber, plastic products, wool etc.

- Cooperation and increased bilateral trade would yield mutual benefits for both countries

- Political understanding and removal of trade barriers create tremendous potential for trade and economic progress, if impacted

- Reforms led economic liberalisation notwithstanding, India and Pakistan use tariff and non tariff barriers to protect domestic producers

- Other barriers are lack of infrastructure and poor trade logistics

How to Improve Bilateral Trade?

- Easing travel visa restrictions should be the first step

- There should also be a regulatory framework for facilitating investments across both nations

- If both countries open more points of trade through the land route, there will be greater benefits

- From geo-strategic as well as political viewpoint, both nations need to have close and cordial relations

Facts and Stats

- Share of top 5 export items from India to Pakistan accounted for 70% of the total exports

- Share of top 5 imports from Pakistan to India accounted for 65% of the total exports

- India’s share pf Pakistan’s total export has been lower than 1% during the past one decade since the turn of the 21st century

- Pakistan’s share of total Indian export has remained the same except during 2006-2007 and 2007-2008 when it was little over 1%