In News:

• Pakistan’s finance minister said the government can consider importing vegetables and other edible items from India following the destruction of standing crops due to massive floods.
• Pakistan had suspended bilateral trade with India in 2019 after India abolished Article 370 thereby ending the special status accorded to J&K.

What’s in today’s article:

• Trade and economic relationship with Pakistan – Statistics, reasons for low volume of trade, suspension of bilateral trade, LoC trade, MFN status
• News Summary

Trade and Economic Relations between India and Pakistan

Statistics

• Bilateral trade reached its peak of $ 2.7 billion in 2013-14. Since then, it gradually declined till Pakistan decided to suspend bilateral trade with India in 2019.
• In FY19, total exports to Pakistan were $2.06 billion, while imports were $495 million.
  • In the first quarter of FY20, India’s exports to Pakistan were $452.5 million and imports were $7.13 million.
• India’s major items of export are organic chemicals, cotton, plastics and dyes, while imports are fruit and edible nuts, and mineral fuels.
  • Export of tomatoes to Pakistan had stopped long ago.

Reasons for low volume of trade

• Border tensions
• Pakistan’s reluctance to accord India the MFN status,
• Pakistan allowing only 137 items for trade through Wagah/ Attari land route,
• Failure to provide Non-Discriminatory Market Access (NDMA) on a reciprocal basis etc.

Suspension of bilateral trade

• In August 2019, Pakistan decided to suspend trade relations with India in a five-point plan.
• Pakistan's share of exports to India has been less than 2% of its total exports, and for India, imports from Pakistan are not even 0.5% of its total imports.
• Since then, Pakistan had made only two exceptions. These were:
  • for the import of pharmaceutical products during the COVID-19 pandemic
  • for India to ship 50,000 tonnes of wheat as humanitarian aid to Afghanistan.

LoC Trade between J&K and PoJK

• The LoC trade was meant to facilitate exchange of goods of common use between local populations across the LoC in Jammu & Kashmir.
• This allowed trade through two Trade Facilitation Centres located at Salamabad, Uri, District Baramulla and Chakkan-da-Bagh, District Poonch.
• It was based on Barter system and zero duty basis.
• However, in April 2019, India suspended LoC trade in Jammu & Kashmir.
  • This action was taken based on reports that the Cross LoC trade routes are being misused by the Pakistan for funnelling illegal weapons, narcotics and fake currency etc.

Most Favoured Nation (MFN) Status

• A Pakistan cabinet decision of November, 2011 to accord India the MFN status remains unimplemented.
• Pakistan, however, substituted, in March 2012, a positive list of a little more than 1950 tariff lines, permitted for import from India, by a Negative List of 1209 lines that cannot be imported from India.
• India, on the other hand, had accorded MFN status to Pakistan in 1996. However, in February 2019, after Pulwama terror attack, India decided to withdraw the status.

News Summary

• Given the extent of the calamity, the Pakistani government could consider reversing its three-year-old ban on trade with India, and open trade routes for vegetables and other essential commodities.
• Pakistan is witnessing a massive surge in the prices of vegetables and fruits as the supply from Balochistan, Sindh and south Punjab has been badly affected.
  • As per the govt officials of Pakistan, nearly a third of the country is under water due to the incessant rain.

India’s response

• In a rare outreach to the neighbouring country, PM Modi has extended heartfelt condolences to victims of the floods in Pakistan.
• Pakistan had so far not requested aid from India, nor had it been offered unilaterally by India.
• Currently, it is unclear whether the Indian government will take forward the suggestion to reopen trade or extend aid to Pakistan as it had done with Sri Lanka and Afghanistan in recent months.
• However, highlighting India’s strong support for regionalism and its policy of being more generous and more non reciprocal, experts feel that India might extend help to Pakistan.