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G. Srinivasan

Exports to Pakistan during first eight months of the current fiscal amount to $869.15 m

New Delhi March 27 India's trade with Pakistan has been growing at a scorching pace with exports during the first eight months of the current fiscal amounting to $869.15 million. In the whole of 2005-06, the figure was $689 million.

Official sources told Business Line here that in the current fiscal, India's trade with members of SAARC (South Asian Association for Regional Cooperation) has been booming, particularly with Bangladesh and Sri Lanka and with Pakistan too, thanks to the latter's expansion of its List of Importable Items from India. The list was recently expanded by 302 items to take the total to 1,075.

Though Islamabad has expanded the list in recent months, the basket of major items from India to Pakistan consists of a very few principal products such as machinery and instruments, drugs, pharmaceuticals, fine chemicals, transport equipment, other commodities, primary and secondary iron and steel, paper and wood products and footwear. In fact, according to the export data maintained by the Department of Commerce, out of the export figure of $869 million to Pakistan during Apr-Nov, 2006, footwear, electronic goods and primary and secondary iron and steel constitute the bulk of items.

When contacted about the high velocity of India's trade with Pakistan despite the denial of MFN (most favoured nation) status by Islamabad and its partial accession to the South Asian Free Trade Area (SAFTA) Agreement, the Commerce Secretary, Mr Gopal K. Pillai, told Business Line, "In the items which are in positive list, trade has improved on both sides. In the positive list, tariffs have come down as agreed to in the SAFTA and this has encouraged more trade." However, Mr Pillai said the question is "whether you want to have India-Pakistan trade or India-Pakistan via Dubai trade — both are increasing."

Officials contend that since Pakistan permits only a limited number of items to be imported from India, those not on the permissible list are being traded through third countries. Thus goods are transported by ship from Mumbai to Dubai and then to Karachi.

A study by the Indian council for Research on International Economic Relations (ICRIER) financed by World Bank shows that transportation links between the two countries continue to be weak with one or two operational routes viz., the Mumbai-Karachi sea route and Attari/Wagah land border. Heavy transaction costs on these routes make the indirect routes viz., Mumbai-Dubai-Karachi sea route and the Delhi-Mumbai-Karachi land-cum-sea route more efficient than the direct Mumbai-Karachi and Delhi-Attari routes. That is why it said the first step towards reducing transaction cost would be to move towards a negative list approach so that goods could move freely on the direct routes.

The Minister of State for Commerce, Mr Jairam Ramesh, too echoed the same sentiment when he said that "having positive list" for trade as is being done by Pakistan is "a violation of the letter and spirit of SAFTA" which enjoins phased trade liberalisation programme and a negative list under which tariff concessions are not exchanged. He said that even at the land border in Wagah, Pakistan allows only restricted items of trade, which again is a contravention of the SAFTA spirit.

As India is hosting the SAARC summit in April 3-4, 2007 here, the Union External Affairs Minister Mr Pranab Mukherjee has on more than one occasion said that India has accorded all SAFTA concessions to all members including Islamabad but Pakistan has not done the same to India. Pakistan, officials say, is also expected to reciprocate similar concessions under SAFTA to India in full and "without any India-specific restrictions."

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