Trade between India and Pakistan has been continuously rising despite recurring border tensions but is yet to tap its estimated potential of USD 12 billion, according to a study compiled by the SAARC Chamber of Commerce and Industry.
According to the SAARC Chamber’s research report, the two nations have been trade partners since the beginning but the trade potential has remained under-utilised due to conflicts.
The study shows that bilateral trade was just USD 132 million till 1995 but increased in the coming years after India granted the Most Favoured Nation (MFN) status to Pakistan in 1996 immediately taking bilateral trade to USD 180.
Pakistan responded by increasing the tradable items list to 600 but has refused to give MFN to India due to political and economic reasons.
At present, of the total 7,200 tariff lines, 1,209 items are on the negative list. Their trade volume stands at an improved USD 2.4 billion which is just a fraction of the informal trade between the two countries.
“They indulge in informal trade to the tune of USD 13 billion per annum through avenues like cross-border smuggling and personal baggage,” the study said. “Their formal trade potential is estimated at USD 12 billion,” it said.
Pakistan will greatly benefit through increased trade activities between the two countries as its gross domestic product (GDP) will grow by a further 2 per cent in the next three years and exports to India will rise to Rs 250 billion in a short time, an increase of 733 per cent from the current level of Rs 30 billion, the study is quoted by a local newspaper as saying.
Apart from these, Pakistan could save Rs 100 billion in import of goods from India, which are currently sourced from other countries, mainly due to the low transport costs, the study said. Cheap raw material imports from India could also help in boosting exports of finished goods to Rs 200 billion, it said.
The study shows that bilateral trade will generate 500,000 new jobs in different sectors in three years.
