The formal bilateral trade between two countries might have grown four fold to $2.7 billion during 2010-11 in seven years but it is still one fourth of the informal trade of over $10 billion between the two countries According to Ficci study, informal trade through third countries or circular trade as it is called is mainly conducted via agents operating in free ports like Dubai or Singapore and Central Asian Republic (CAR) countries. The size of circular trade underlines the potential of flourishing bilateral trade between the two countries. Converting this into direct trade between the two countries would help Pakistan immensely as it would enable it get Indian goods at cheaper price due to reduced transportation cost.
Despite India and Pakistan being two most populous and largest economies of the South Asian region, official bilateral trade remains negligible and neither country falls in the category of top ten trading partners of each other. Pakistan’s share in India’s total exports increased from 0.45 per cent 2003-2004 to 0.78 per cent in year 2008-09 and imports from Pakistan as percentage of total imports of India, marginally increased from 0.07 per cent in 2003-04 to 0.12 per cent in 2008-09.
While Pakistan exports a host of items to India, it has maintained a positive list of 1938 items vis-à-vis imports from India. On the other hand, India does not impose equivalent formal restrictions on exports to or imports from Pakistan as it had unilaterally granted MFN status to Pakistan decades ago in accordance with theWTO rules. India and Pakistan have no formal trade agreement.
Though India has accorded MFN status to Pakistan in 1995-96, Pakistan is yet to grant MFN status to India for which extraneous political, economic and other reasons have been cited by Pakistan, the Ficci study said.
Lately Pakistan recognized that granting MFN status to India would help in expanding bilateral trade relations and as a step towards this end, it has agreed to replace its present ‘positive list’ with ‘negative list’ by October this year. This virtually amount to granting MFN status.
During his three-day visit beginning on Monday, India Inc is expected to impress upon Faheem the need for granting MFN status early that would not only pave the way for manifold increase in bilateral trade but also possible investments. Faheem, who heads an 80-member Pakistan business delegation, will have an interactive session with Indian businessmen in Mumbai on September 26.
Faheem is slated to meet Sharma on September 28 in Delhi. Pakistan government has invited Indian Investors including Tata, Reliance and Essar to discuss the development of Thar coal power projects.
India and Pakistan have mostly common multinational companies operating in their respective countries. According to a Ficci study these can act as meaningful conduits for trade and investment if they source raw material from each other.
Creation of exclusive economic zones in Pakistan for Indian-based investors may be a good option to attract their investment.
Pakistan is the only country in Saarc region where Indian investments do not take place. Saarc Chamber of Commerce and Industry has identified Indian investment possibilities in Pakistan in sectors such as fish processing, chemicals and pharmaceuticals, automobile components and information technology. Pakistan has huge potential to export cement and textiles to India.
Pakistan had linked granting of MFN status to trade concessions given to Pakistan by European Union (EU). EU offered a timebound tariff concession on 75 textiles product lines.