You will be redirected back to your article in seconds
Skip to main content

India, Pakistan Inch Toward Expanded Economic Ties

Recent changes in Pakistan’s policy regarding trade with India have led the latter country to speculate that Pakistan will soon be importing more Indian goods, a trend that seems likely to continue as Pakistan expands its trading relationship with India even further in the coming months.

This March, Pakistan overhauled its import/export rules regarding India, abandoning its “Positives List” of 1,974 items that could be imported from India and replacing it with a “Negative List” of 1,209 items that are forbidden to pass between the two countries. The practical upshot of this change has been an increase in the amount of textiles, chemicals, produce and automotive parts being exported from India to Pakistan.

Now, Pakistan is looking to solidify trading ties with its neighbor even further. Rumors of an incipient FTA between the two countries have been gaining momentum throughout the past year, though all action undertaken so far has been incremental.

India granted Pakistan most-favored nation (MFN) status back in 1996, though Islamabad has resisted making a converse declaration, citing non-tariff barriers that it claims India uses to block Pakistani imports.

While this impasse has held thus far in theory, India and Pakistan have made significant progress during the past year in their attempts to bilaterally eliminate trade barriers. In addition to Pakistan’s adoption of the “Negative List,” trade relations between the two countries have benefited from India’s reduction of “sensitive list” import items from Pakistan to 614, a curtailing of 30%. Both countries are signatories to the South Asian Association for Regional Cooperation (Saarc) treaty, which will become operational once Pakistan grants India MFN status.

These incremental drawbacks have set the stage for a round of commerce-secretary level talks, due to take place midway through September in Islamabad. The talks are expected to yield further trading concessions, with special attention given to the passage of goods through the Wagah border.

As of 2010, trade between India and Pakistan stood at roughly USD2.7 billion per year, with the trade balance heavily favoring India. However, some analysts have speculated that trade between the two countries via third-party nations reaches as high as USD10 billion per year.