Bilateral Trade Between Pakistan and India - rcci.org.pk · Japan with 4,057,787 Million USD, (IMF 2010) (Pakistan is 27th with 467,197 Million USD, ... Agreement on Economic Cooperation

Shumaila Khalid (Senior R&D Officer)

Bilateral Trade

Between Pakistan and India

Compiled By

Research and Development Department

The Rawalpindi Chamber of Commerce & Industry

39-Civil Lines Mayo Road Rawalpindi

Ph: 051-5111051-54 Fax: 051-5111055 E-mail: [email protected]


Contents

INTRODUCTION ........................................................................................................................................ 3

INDIA BREIF ECONOMIC OVERVIEW .................................................................................................. 4

MAJOR INDUSTRIES OF INDIA .......................................................................................................... 4

MAJOR SERVICE SECTOR ................................................................................................................... 4

INDIA TOP 5 COMMODITIES OF EXPORTS ...................................................................................... 4

TOP COMMODITIES OF INDIAN IMPORTS .................................................................................... 4

INDIA REGIONAL EXPORTS ............................................................................................................... 5

INTERNATIONAL AGREEMENTS (CONCLUDED) .......................................................................... 6

CURRENT ENGAGEMENTS AND NEGOTIATIONS ......................................................................... 6

TRADE BETWEEN PAKISTAN AND INDIA .......................................................................................... 7

CURRENT VOLUME OF TRADE: ............................................................................................................ 9

MAJOR EXPORTS OF PAKISTAN TO INDIA (1.3% OF PAKISTAN TOTAL EXPORTS TO

INDIA) ...................................................................................................................................................... 9

IMPORTS FROM INDIA (SHARE IN PAKISTAN IMPORTS ----4.2%) ............................................. 9

WHY TRADE WITH INDIA ..................................................................................................................... 11

NON-TARIFF BARRIERS ........................................................................................................................ 12

RECOMMENDATIONS ............................................................................................................................ 15


Introduction

The Economy of India is the ninth largest in the world by nominal GDP and is known for being

the fourth largest in terms of Purchasing Power Parity (PPP) listed after United States, China and

Japan with 4,057,787 Million USD, (IMF 2010) (Pakistan is 27th

with 467,197 Million USD,

IMF 2010) The country's per capita GDP (PPP) is $ 3,408 (IMF ranked 129th) in 2010.

Following strong economic reforms from the post-independence, the country's economic growth

progressed at a rapid pace.

China and India are projected to be the two fastest growing economies of the world over the next

several decades. Pakistan is blessed by its location being neighbor to both these large economies.

Our national economic interests dictate that we should expand our trading relations with both

these countries and penetrate their markets.


INDIA BREIF ECONOMIC OVERVIEW

Major Industries of India

Food Processing

Mines

Gems and Jewelery Oil and Gas

Heavy Industry Pharmaceuticals

Steel

Textiles

Source: Department of Commerce: System on Foreign Trade Performance Analysis (FTPA)

Major Service Sector

Information Technology Media and Entertainment

Insurance Retailing and tourism


India Top 5 Commodities of Exports

Rank Commodity %share 1 Petroleum (crude & products) 21.09 2 Transport equipments 10.29 3 Gems & jewellary 5.30 4 Machinery and instruments 5.02 5 Manufactures of metals 4.93


Top Commodities of Indian import

Rank Commodity %share

1 Petroleum, crude & products 35.94 2 Gold 12.00 3 Perls prcus semiprcs stones 7.63 4 Machry excpt elec & electronic 6.22 5 Electronic goods 6.15 6 Coal,coke & briquittes etc. 3.16

7 ORGANIC CHEMICALS 2.80 8 METALIFERS ORES & METAL SCRAP 2.74


http://www.indiainbusiness.nic.in/industry-infrastructure/service-sectors/it.htm

http://www.indiainbusiness.nic.in/industry-infrastructure/service-sectors/retailing.htm


India Regional Exports


Region/Countries Apr-Apr

2010

Apr-Apr

2011(P)

%Growth %Share

1) Europe 4,902.74 6,828.45 39.28 18.89

2) Africa 2,125.95 2,360.97 11.05 6.53

3) America 3,610.56 3,166.79 -12.29 8.76

4) Asia & ASEAN 18,550.53 22,863.31 23.25 63.23

4.1 East Asia 1,259.21 1,030.71 -18.15 2.85

4.2 ASEAN 2,502.46 2,766.69 10.56 7.65

1) INDONESIA 768.55 896.20 16.61 2.48

2) SINGAPORE 718.63 804.44 11.94 2.22

3) MALAYSIA 452.48 526.22 16.30 1.46

4) THAILAND 317.25 364.07 14.76 1.01

5) VIETNAM SOC

REP

71.39 90.60 26.91 0.25

6) MYANMAR 94.22 59.07 -37.31 0.16

7) PHILIPPINES 79.48 25.48 -67.94 0.07

8) CAMBODIA 0.45 0.61 34.29 0.00

9) BRUNEI 0.00

4.3 WANA 9,071.70 11,994.98 32.22 33.17

4.5 South Asia 149.76 168.87 12.76 0.47

1) SRI LANKA DSR 37.08 50.53 36.28 0.14

2) BANGLADESH PR 19.77 42.02 112.57 0.12

3) NEPAL 39.51 26.51 -32.90 0.07

4) PAKISTAN IR 26.75 17.76 -33.62 0.05

5) BHUTAN 19.48 17.02 -12.63 0.05

6) AFGHANISTAN

TIS

6.81 14.25 109.27 0.04

7) MALDIVES 0.36 0.78 118.59 0.00


INTERNATIONAL AGREEMENTS (CONCLUDED)

Agreement of co-operation between government of India and the government of Nepal to control

unauthorized trade

Agreement on Economic Cooperation between India and Finland

Agreement on South Asia Free Trade Area SAFTA

Asia Pacific Trade Agreement APTA

CECA between The Republic of India and the Republic of Singapore

India Bhutan Trade Agreement

India Korea CEPA

India MERCOSUR PTA

India Sri Lanka FTA

SAARC Agreement on Trade in Services SATIS

Treaty of Transit between India and Nepal

Global System of Trade Preferences GSTP

India Japan CEPA

CURRENT ENGAGEMENTS AND NEGOTIATIONS

Association of South East Asian Nations (ASEAN) and India Free Trade Agreement (FTA)

negotiations

India-Sri Lanka Comprehensive Economic Partnership Agreement (CEPA) negotiations

India-Thailand Comprehensive Economic Cooperation Agreement (CECA) negotiations

Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free

Trade Agreement (FTA) negotiations

India-Gulf Cooperation Council (GCC) Free Trade Agreement (FTA) negotiations

India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA)

negotiations

India-SACU Preferential Trade Agreement (PTA) negotiations

Second Review of India-Singapore Comprehensive Economic Cooperation Agreement

Expension of India-Chile Preferential Trade Agreement (PTA)

India-MERCOSUR Preferential Trade Agreenent (PTA) Negotiations

India-Pakistan Trading Arrangement

India-EU Board Based Trade and Investment Agreement negotiations

India European Free Trade Association (EFTA) Negotiations on broad based Bilateral Trade and

Investment Agreement

Global System of Trade Preferences (GSTP)

Asia Pacific Trade Agreement (APTA)

India -New Zealand Free Trade Agreement / Comprehensive Economic Cooperation Agreement

India-Canada Comprehensive Economic Partnership Agreement (CEPA)

India-Australia Comprehensive Economic Cooperation Agreement (CECA)

India-Indonesia Comprehensive Economic Cooperation Agreement (CECA)

Source: Department of Commerce: India

http://www.commerce.nic.in/trade/bhutan.pdf

http://www.commerce.nic.in/trade/INDIA%20KOREA%20CEPA%202009.pdf

http://www.commerce.nic.in/trade/international_ta_indmer.asp

http://www.commerce.nic.in/trade/international_ta_indsl.asp

http://www.commerce.nic.in/trade/SAARC%20Agreement%20on%20Trade%20in%20Services%20SATS.pdf

http://www.commerce.nic.in/trade/TransitTreaty_NEPAL.pdf

http://www.commerce.nic.in/trade/GSTP.pdf

http://www.commerce.nic.in/trade/IJCEPA_Basic_Agreement.pdf

http://www.commerce.nic.in/trade/international_ta_current_details.asp

http://www.commerce.nic.in/trade/international_ta_current_details.asp

http://www.commerce.nic.in/trade/international_ta_current_details.asp#b22










http://www.commerce.nic.in/trade/international_ta_current_details.asp#b7a

http://www.commerce.nic.in/trade/international_ta_current_details.asp#b18a











TRADE BETWEEN PAKISTAN AND INDIA

Source: Federal Board of Statistics1

The following table shows the year wise figures of bilateral trade between India and Pakistan.

Million US$

Years Total Trade Balance

2003-04 476.05 (-) 288.69

2004-05 835.60 (-) 259.33

2005-06 1095.32 (-) 508.70

2006-07 1578.81 (-) 892.98

2007-08 1956.303 (-) 1446.587

2008-09 1514.224 (-) 874.986

2009-2010 1493.899 (-) 957.235

2010-2011 (July-Dec) 966.203 (-) 691.435

2

The above figures indicate that though bilateral trade over the last five years has increased

significantly, the growth in exports from Pakistan is nominal. On the other hand imports from

1 Provided by the export department : Ministry of Commerce, Pakistan

2 Federal Bureau of Statistics

0

200

400

600

800

1000

1200

1400

1600

1800

2003-2004

2004-2005

2005-2005

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011(july-Dec)

Exports 93.68 288.134 293.31 342.918 254.858 319.619 268.332 137.384

Imports 382.367 547.458 802.002 1235.889 1701.445 1194.605 1225.567 828.819

mill

iom

US$

Chart Title


India have increased substantially during this period. The trade balance is tilted largely in India’s

favor.

Imports from India have increased primarily due to expansion in the List of importable items,

which currently consists of 1946 items (Appendix ‘G’ of Import Policy Order 2009-10). On

the other hand our exports are stagnating because India is maintaining a number of Non-Tariff

and Para-Tariff Barriers and the continuance of high tariffs in areas of our export interest,

mainly, textiles and fresh fruits.

While we may continue to agitate on this imbalance with the Indian government as a bargaining

tool, it is also important to analyze the composition of our imports in order to view the matter in

its true perspective. The major imports from India comprise intermediate goods that being

cheaper than alternate sources of imports enhance the competitiveness of our industry and have

been included in the List of importable items on their demand (Ministry of Commerce, Pakistan)

The need is to see that list of importable item must be analyzed to see and compared how it is

affecting our domestic industry.

A small number of items having export potential from India are on the positive list adopted by

Pakistan. At the same time there are several items that India is importing from other countries

but not from Pakistan. This indicates that there is a huge information gap on both sides on items

that can be imported by India from Pakistan.

Almost 1,9003 Indian items allowed by Pakistan are imported regularly. Pakistan’s exports are

still restricted to a few items as the non-tariff barriers discourage imports. India’s tariff rates

remain high, especially for goods of particular interest to Pakistan, such as textiles, leather, and

the mineral onyx, and nontariff barriers are substantial. Non-Tariff Barriers include all

measures, other than tariffs, that are used to protect domestic industry and discourage imports.

According to official data, Pakistan’s exports to India were 30 per cent of what India exported to

Pakistan in 2009 which fell to 24 per cent in 2010 and further shrank to 20 per cent in 2011.

In terms of dollar, exports to India stood at $313 million, $260 million and $286 million in 2009,

2010 and 2011 respectively while Indian exports to Pakistan stood at $1.032 billion, $1.061

billion and $1.445 billion in 2009, 2010 and 20114

3 Import policy 2009-10: Ministry of Commerce ,Pakistan

4 http://www.dawn.com/2011/09/30/pakistans-exports-to-india-declining.html


Current Volume of Trade:

Pakistan and India agreed to boost bilateral trade to $6 billion, more than double of current

volume of $2.7 billion, during the next three years. (Source: Based on Makhodoom Amin Fahim

statement)

Year 2010

Import Range: 268.332- 274.988 million USD

Exports Range: 1225.567- 1559.921

Major Exports of Pakistan to India (1.3% of Pakistan Total Exports to India)

Item of export

Share in

Pakistan

export %

Item of export Share in

Pakistan

exports

Edible fruit, nuts, peel of citrus fruit,

melons

16.4% of our exports to India

17.8

Organic chemicals

9.36% of our exports to India 61.4

Cotton

13.9% of our exports to India 1

Plastics and articles thereof


4.6

Salt, sulphur, earth, stone, plaster, lime

and

Cement


6.3

Raw hides and skins (other

than furskins) and leather


3.1

Mineral fuels, oils, distillation products,

etc

9.58% of our exports to India 2.2

Inorganic chemicals, precious

metal compound, isotopes


37.9

Source: World Trade Map

Imports from India (Share in Pakistan Imports ----4.2%)


Commodities Share In

Pakistan

Imports %

Commodities Share in

Pakistan

imports %

Cotton 40.7 Miscellaneous Chemical products

3.26% of our imports from India

9.2



NOTE:

Import Statistics Calculations

The calculation are performed on the basis of trade map import statistics for the year 2010=

1559921000 US Dollars or 1559.921 Million USD of Imports from India)

Import of Trade of the major commodities mentioned above: 1278.361 million USD that is

nearly 80%

EXPORT STATISTICS CALCULATIONS

The calculation are performed on the basis of trade map Export statistics for the year 2010 that is

274,983000 USD OR 274.988 million USD = US Dollars of exports from India)


Organic Chemical


15.1 Ships boats and other floating

structure


5.1

Sugar and sugar confectionary

10.044%

18.1 Machinery, boilers.


14

Waste of food industry, residual


81.6 Tanning /dyes extracts


13.3

Vegetables


24.3 Plastic and articles


2.6

Coffee, tea, etc ,meat


12.8


WHY TRADE WITH INDIA

At a highly disaggregated level it was found that there are 2,646 common items of Pakistan’s

imports that India exports worth over $15 billion. For half of these items, the unit value of

Pakistani imports is more than the unit value of Indian exports. Pakistan can import these items

cheaply from India. At the same time 1,181 items worth $3.9 billion are common between

India’s imports and Pakistan’s exports. About 70 percent of these common items have unit

values less or equal to the Indian import unit value. This suggests that these exports from

Pakistan can be supplied to India at a lower cost than what they are getting from other countries

(Dr Ishrat Husain, 2011)

It should also be kept in mind that bilateral trade balance with any particular country does not

have to be positive. There would be no trade in that case. Pakistan would run a trade deficit with

India just as it does with China and surpluses with others. India is a larger, more diversified

economy and also produces goods that Pakistan exports. The determining factor is whether the

cost of imports from India is less than comparable quality imports from other sources.. (Dr Ishrat

Husain, 2011)


NON-TARIFF BARRIERS

Regardless of the fact that both countries having liberalized their import regimes, Pakistan

continues to follow a positive list approach towards Indian imports

Following is a brief description of non-tariff barriers faced by Pakistani traders towards India5.

1. Lack of Land Trade Facilitation

a) Unavailability of infrastructure such as rail wagons, sheds, X-rays machines etc.

b) Restrictions on cargo train through Sindh route increases huge amounts to be paid as ocean

Freight to the shipping lines. It also takes almost 10 days of loading and unloading. Using

Sindh route can reduce the handling cost as well as time up to 24 hours.

c) Limited no of items are traded via road route and lack of warehousing and cold storage

facility at on either side of the boarder.

2. Technical Barriers To Trade

a. Strict Indian certification requirements by the bureau of Indian standards especially for

textile vegetables and cement

b. Multiplicity of standard setting bodies (24, for example export inspection council, Indian

institute of foreign trade, Indian institute of packaging, commodity boards etc.) creates

confusion.

c. Multiplicity of rules and regulations

d. No single publication that cover information on tariffs , fees, taxes and legislation making

whole system time consuming, cumbersome and ambiguous.

e. Applicant of BIS license have to pay processing charges expenses of the inspection visit,

testing cost, annual marking fee for the license and license fee have to be paid separately

f. License issued for any product valid for 1 year.

5 Federation of All Pakistan Chambers of Commerce and Industry


Non Transparent and cumbersome Administrative Procedures and Government

Policies and Regulations

Lack of transparency, market imperfections and information asymmetries on both sides raise

transaction costs and restrict market access for several other aspiring traders. Even the Indian

importers are haunted by the law-enforcement agencies for their trade ties with Pakistan.

Pakistan has an export interest in textiles, cement, food, jute, and other agricultural products

which also happen to be sectors where import restrictions/standards are most rigorously applied

by India.

For Example:

Pakistan is in a position to market its textiles in India but the strict conditions laid down under the

Textiles (Consumer Protection) Regulation of 1988, are a major barrier.

Pakistani fabric exporters are required to obtain a pre-shipment certificate from a textile testing

laboratory in Pakistan certifying non-use of hazardous dyes. In some cases even the EU accredited

labs have been rejected by Indian customs making zero rate exports impossible.

Cement exports to India from Pakistan have decreased from 60,000 tones monthly average to

a mere 15,000 tones mainly due to the delay in renewal of quality certification by BIS.

Pakistan jute has potential in India but Indian government tenders are restricted to local

manufacturers.

Trade in energy and IT and service is heavily restricted

No foreign direct investment between the two countries.

.

Lack of Adequate Banking Relations:

Some Indian banks do not recognize L/Cs from all Pakistani banks and the confirmation of L/C’s

may take a month. There is no formal mechanism for the settlement of disputes.

Indians banks are not allowed to have branches in India as well Pakistan has no branches in

India.i

Visa Restrictions:


It is also found that due to a restrictive visa regime only selected traders have access to trade-

related information; Visas are to be obtained only for specific cities prior to entry into Pakistan.

Trade Logistics:

Road routes for trade are nearly non-existent, rail and air connectivity between the two countries

has been inconsistent that is still a barrier in bilateral trade.

Strict Security Checks

Pakistani consignments are subject to more stringent checking and detailed security checks in

India (e.g. Pakistani Molasses is allowed in 1 ton packs only because of security reasons). The

Indians this year took Pakistan-specific measures to deprive its industry of one million cotton

bales.

Strict Customs Clearance and Customs Valuation

Excessive checks on security grounds. Goods may be held up for several days before they are

cleared.

Food Product has to be referred to port health officers, the unavailability of at various ports

requires test from food central laboratories. Delays in such may affect the perishable food items

and are usually common. Earlier packed food materials were released on the basis of health

certificates issued by the countries of origin. The goods detained for long time leads to heavy

damages as well as port charges.


Recommendations

Following are the recommendations/suggestions for improving trade between Pakistan and India;

The most important recommendation pertains to easing visa restrictions so that trade can be

carried out in a freer environment. A liberal visa regime would serve as an effective channel

for information exchange on trade related matters between the two countries.

More rail and road routes should be opened up while the existing capacities on operational routes

need to be expanded.

Allowing branches of Indian and Pakistani banks to operate in the other country. Banking facilities

need to be improved and facilitated in both countries through appropriate institutional

mechanisms.

Land routes for trade should be opened. Pakistan & India Should Encourage bilateral trade

through road and sea routes to save huge transportation charges that they bear on imported

from other countries.

Custom and Police Inquiries are a big hurdle that waste valuable time, it should be made

easier and exempted for business delegations.

One window operations should be implemented in both countries for trade visits facilitation.

There should be an effective collaboration between Chamber of commerce of countries and

visits/delegations as well as trade fairs should be encouraged by both countries.

India and Pakistan should create adequate testing facilities at the land borders so that no trade

restrictions are imposed on the ground that testing facilities are not available.

i Federation of All Pakistan Chambers of Commerce and Industry

Documents

Bilateral Trade Between Pakistan and India - rcci.org.pk · Japan with 4,057,787 Million USD, (IMF 2010) (Pakistan is 27th with 467,197 Million USD, ... Agreement on Economic Cooperation