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India has decided not to “suspend’’ trade talks with Pakistan in reaction to the violence at the Line of Control last month, but further movement in the liberalisation process has to be initiated by Islamabad, an Indian Government official has said.
“The Ministry of External Affairs has informed the Commerce Department that it has no problems with the on-going two-way trade dialogue and the process should continue,” the official told Business Line .
Pakistan is yet to accord the most favoured nation (MFN) status to India by lifting ban on all Indian products despite the deadline for it lapsing on December 31, 2012.
It has also not allowed trade of all goods through the land route as promised.
Although Pakistan more than trebled the number of goods it allows from India to 6,800 items earlier this year from 2,000 items, it still bans 1,209 items.
Most of the banned items, which are from sectors such as pharmaceuticals, agriculture, automobiles and textiles, are of great export interest to India, according to a recent research paper by Nisha Taneja from research body ICRIER.
India, which gave MFN status to Pakistan in 1995, has agreed to phased reduction of tariffs for 264 items from the neighbouring country, under the South Asia Free Trade Agreement (SAFTA).
Pakistan officials, however, claim that Prime Minister Mammohan Singh’s statement following the LoC violence asserting that it cannot be business as usual between the two countries gave a negative signal to the talks.
“What the Indian PM said was very discouraging and gives the impression that India is not interested in carrying the talks forward,” a Pakistani Trade Ministry official told Business Line .
An official in India’s negotiating team rubbished the apprehensions and said that Pakistan had to first keep its part of the bargain before raising further concerns.
“We have done whatever we had promised to do including giving preferential access to more products from Pakistan under the South Asia Free Trade Agreement. The onus is now on Pakistan to give us MFN status and allow all products to be traded through the land route,” the official said.
India has also agreed to allow investments to and from the country by removing Pakistan from the negative list maintained under the Foreign Exchange Management Act (FEMA).
“The ball is certainly now in Pakistan’s court and we have to see how soon they deliver,” the official added.
India’s exports to Pakistan increased 16.7 per cent in the April-December 2012 period to $1.31 billion while its imports from the neighbouring country rose 66 per cent to $460 million.
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