Economic differences between india and pakistan relationship

India–Pakistan relations - Wikipedia

economic differences between india and pakistan relationship

Jan 29, A question frequently raised is why India and Pakistan trade so little with For India, trade with Pakistan is not only advantageous in itself, but would also . [iv] By way of comparison, India and Sri Lanka have had a free trade. Oct 4, But unlike in India, where economic growth rather than security has India has worked to rebuild relations with most of its other South With India's employment of a different set of tools against Pakistan, paired with the Sept. Oct 27, Analysis. Bilateral trade ties between India and Pakistan have undoubtedly disagreements between India and Pakistan even when trade was.

India argued that the combination of higher raw jute prices, coupled with the devaluation of its currency, would price jute beyond its reach. Pakistan retaliated by imposing restrictions on the importation of some Indian manufactured goods.

I regard it as highly unfortunate that, instead of facilitating the normal flow of trade between the two countries, the Government of India should have embarked on a boycott of trade with us.

While fixation of the rate of currency is entirely a question for each country to decide with reference to its circumstance, trade is a matter of prices. India, however, has taken the extraordinarily unfriendly step of boycotting trade with us. Pakistan had developed an import substitution policy in the s, effectively the creation of a manufacturing base.

Bilateral trade was truncated, however, first by the war of and then the war.

EXPLAINED: India and Pakistan's bilateral trade relations -

These two wars and, later, the civil unrest in Kashmir in the s had a very detrimental effect on bilateral trade because they introduced a military element into what had been, until then, a purely commercial paradigm. They persuaded the precursor to the World Trade Organisation, the Generalised Agreement on Tariffs and Trade, to insert an India-Pakistan-specific special clause into the Text of the Generalised Agreement on Tariffs and Trade that relates to international trade to reflect this circumstance.

Taking into account the exceptional circumstances arising out of the establishment of India and Pakistan as independent states and recognising the fact that they have long constituted an economic unit, the contracting parties agree that the provisions of this Agreement shall not prevent the two countries from entering into special arrangements with respect to the trade between them, pending the establishment of their mutual trade relations on a definitive basis.

The situation turned completely in the early s when, following the collapse of its strategic partner, the Soviet Union, and realising that it would need to enter fully into the international community if it were not to become a failed state, India embraced international trade with both arms and, subsequently, saw its economy grow rapidly.

This step was taken as part of the attempt by the two countries to lay the Kashmir issue to rest by the thirtieth anniversary of their independence.

New Delhi terminated all air- and land-borne trade with Pakistan following the attacks on its Parliament in Decemberwhich it alleged were carried out by Pakistani-based militants. That imposition remained in force until A restrictive maritime trade regimen was also implemented. As a consequence, informal trade between the two countries began, with trade occurring via third parties like Dubai, albeit at increased cost.

economic differences between india and pakistan relationship

Inthe two sides came together for a dialogue on trade. That dialogue would eventually extend over four more rounds of talks but culminated in three outcomes in The ongoing dialogue was halted in the wake of the terrorist attacks on Mumbai and only resumed in It is interesting to note, however, that no drastic measures were enacted to stop or decrease bilateral trade over that period.

economic differences between india and pakistan relationship

In AprilPakistan initiated measures to grant MFN status to India and, in November of the same year, produced an itinerary to phase in that status. A major part of that process was for Islamabad to move from a positive list approach to a negative one, which would list only those items that could not be imported from India — around 1, products and items; for its part, New Delhi curbed its list of restricted imports from Pakistan to just over in September From the Indian perspective, this is a very small part of its overall trade.

It could be perceived, nevertheless, as a measure of the importance of trade in the bilateral relationship that the two sides persist in ensuring that it continues. In the most recent instance of alleged cross-border violence, eighteen Indian soldiers were said to have been killed by militants who crossed the border from Pakistan in late September While these actions caused much debate and calls for action against the other on both sides of their common border, it is noteworthy that even after the Indian Government said it would review trade relations, the MFN status it has given Pakistan and the terms of the Indus Water Treaty, nothing of the kind has eventuated.

The volume of trade may be expected to fall in the aftermath of the September incident but, as the previous diagram demonstrates, the general trend of trade between the two countries remains upwards.

This is borne out by the following diagram, which also indicates that while political events such as the one described can cause a downturn in trade between India and Pakistan, those ties resume and even grow once the initial anger and furore has died down.

The need to maintain the basis of a good relationship and the impact of violence on bilateral trade aside, pragmatism prevails.

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Beguiling though that thought may be, Pakistan has found it difficult to reduce its negative list, partly due to the influence of its manufacturing sector. It, furthermore, wants India to reciprocate for the MFN status that Islamabad has offered it by reducing the so-called non-tariff barriers that include strict licensing rules, inspection rules and the subsidies offered to Indian farmers. Given the delicacy of the current situation in India, particularly in terms of farmer suicides due to crop losses, it is difficult to see how the Modi Administration could satisfy that particular condition.

Recent events have brought another impediment to potentially closer trade ties between the two neighbours. A question frequently raised is why India and Pakistan trade so little with each other despite the existence of common history, language, culture, and long borders.

EXPLAINED: India and Pakistan's bilateral trade relations

While both countries are aware of the merits of trade, a variety of political and infrastructural—physical, legal, and regulatory—impediments have virtually paralyzed bilateral trade relations between the two neighbors. Facing diminishing marginal returns to traditionally growth-leading sectors, Pakistan is in need of larger and growing export markets to tap the potential of industrial hubs in the south and west Baluchistan coastline and Karachi in Sindhin the central belt Multan, Lahore, Gujrat, Gujranwala, and Sialkot in Punjaband in the north Peshawar in Khyber Pakhtunkhwa.

Trade with India, with its large and growing market, can be an important factor in realizing this goal. For India, trade with Pakistan is not only advantageous in itself, but would also facilitate trade with Afghanistan, China, Iran, and the Central Asian countries.

Thus, for both countries, increased trade with each other would be a win-win outcome.

economic differences between india and pakistan relationship

The paper first discusses in Section 2 the initiatives taken since early by the two countries to improve these relations. Meetings have been held between Pakistani and Indian government officials at various levels, and between business people from both sides of the border, to work out a common strategy for enhancing trade between the two countries.

India-Pakistan Trade Relations

Inside Pakistan, there have been discussions involving the most important stakeholders—politicians, business people, and the military.

Essentially this meant that as ofrestrictions on imports from India would have to be eliminated and the same tariff rates would apply to Indian imports as are imposed by Pakistan on imports from other countries. Section 3 estimates the potential for trade between the two countries once the process of trade liberalization is underway.

A number of studies have shown that trade could be significantly higher if the policy-determined and physical barriers were reduced.