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Indo-Pak ties: Hopes high on trade front

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COMING CLOSER: The Pakistan President, Gen Pervez Musharraf, and Begum Sehba Musharraf arriving at Delhi airport on Saturday. - Kamal Narang
COMING CLOSER: The Pakistan President, Gen Pervez Musharraf, and Begum Sehba Musharraf arriving at Delhi airport on Saturday. - Kamal Narang

Alok Mukherjee

New Delhi, April 16

WITH the Pakistan President, General Pervez Musharraf, arriving in the Capital today and official level talks scheduled with the Prime Minister, Dr Manmohan Singh, on Sunday, there is expectation that India and Pakistan could soon move forward on the bilateral trade front.

Though no formal announcements are expected immediately, talks between the two leaders are expected to pave the way for the next round of `confidence building measures', which could be on trade issues.

Interestingly, the Pakistani Commerce Minister, Mr Humayun Akhtar Khan, is part of the President's delegation, along with the Foreign Minister, Mr Khurshid Kasuri, and the Information Minister, Mr Sheikh Rashid. Mr Khan was in India less than a month ago for the G-20 meeting on WTO issues. There has been considerable forward movement in bilateral relations since last January when the then Prime Minister, Mr Atal Behari Vajpayee, visited Islamabad for the SAARC summit.

The Delhi-Lahore bus service has been resumed and now the bus service across the Line of Control in Kashmir has been flagged off. Extensive people-to-people contacts have been established with members of Parliament, artists and heads of political parties from both countries exchanging visits. Sporting ties have taken off in full flow, particularly cricket and hockey. The next big movement is expected on the economic front. The ground has already been prepared in both the countries with the talk of Pakistan cooperating in the flow of gas from Iran to India. Pakistan has also invited India to join the gas pipeline from Turkmenistan to Pakistan, which could then carry on to India.

Experts following the development on the Indo-Pak bilateral relation feel that trade facilitation could begin under the SAARC umbrella with the proposal for the SAARC Area Free Trade Arrangement (SAFTA).

Once SAFTA takes shape, bilateral trade between the two countries could take off simultaneously.

However, there are some serious issues between the two countries, which need to be sorted out before bilateral trade can take off in right earnest. Currently, Pakistan restricts imports from India to a list of 768 items, the rest being totally banned. The permitted items are basically confined to minerals, chemicals and other raw materials and most manufactured finished goods, machinery, bulk drugs and pharmaceuticals, textile products and food items are out of the list. Still, the trade is heavily tilted in favour of India with April-November 2004 figures showing Indian exports to Pakistan at $314 million and Indian imports from Pakistan at $ 66 million only.

Despite extensive interaction between the private sector in India and Pakistan in the recent past, there are apprehensions among Pakistani industrialists that Indian imports could swamp the Pakistani industry both in terms of quality and price competitiveness. Hence, India would have to agree to some quantitative safeguards before bilateral trade can take off.

Though officially Pakistan still maintains that the grant of most favoured nation treatment to India is tied to some political issues, observers believe that if there is agreement among the top leadership, there could be a gradual expansion of the permitted list of items by Pakistan while India would have to indicate its willingness to import more from Pakistan to bring about some sort of parity in the trade balance.

(This article was published in the Business Line print edition dated April 17, 2005)
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