Granting MFN status to India could raise GDP By: Mohammad Arifeen - Articles Detail
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Granting MFN status to India could raise GDP  Back
By: Mohammad Arifeen
India is a huge market of over 1.2 billion people which needs to be exploited by aggressive marketing methods. 
Pakistan current bilateral trade level is US$2.6 billion. India's trade with Pakistan is at such a low level when that with its other neighbours Bangladesh and Sri Lanka is much more. Its export to India is merely one-sixth of that imported directly from India.  
Exporters of several items in Pakistan including fruits and vegetables are willing to compete with Indian exporters in their several fields.  For the development of trade Pakistan and India should collaborate in transfer of technology as well as trade in raw materials, IT sector, tourism, agriculture and medical. 
Pakistan's exports to India mainly consist of fresh fruits, cements, polycarboxylic acids, cotton yarn, light petroleum distillates, carbonate, unwrought lead and leather, which are popular in India. These items should be traded with India on a full scale.
Pakistanis can gain a huge by importing life-saving drugs and vaccines which are less expensive and qualitative in India, while Pakistan can also export some medicines to India.
Pakistani lightweight cotton, which has become popular in its home country, is looking to an opening of the Indian market for a big boost in sales.
When India liberalizes its tariff regime for Pakistan, then the local automobile sector will also be in a position to export its two wheelers and tractors to the neighboring country.
On the other hand India can also export its small four-wheelers to Pakistan which will be available at less expensive prices. Before carrying out the same, the Pakistani government will have to look at the interests of the local automobile industry. 
In few years Pakistan's fashion designers have greatly improved designs produced by textile mills, creating a largely quantity popular branded product. Indian consumers have already showed a great enthusiasm for Pakistani design at a trade show in Delhi where many of the lawn retailers were mobbed by crowds.
The infrastructure is the issue that is blocking the growth of the trade between Pakistan and India. The land route is the most competitive and cheap route as carrying a container through Wagah and cost much lower while the same through Mumbai-Dubai-Karachi cost lot of times more.
There is a need to provide better infrastructure to promote trade through the closest route and both the countries should try and explore more ways and means to create a conducive climate for trade.
Improved bilateral ties between India and Pakistan will give boost to South Asia Free Trade Zone. This will open prospects of opportunities for countries of the region. 
Air link between the two sides is vital and Indian government should open up more flights to Pakistan.
There are numerous problems due to Non Tariff Barriers and there should be preferential treatment from Indian authorities so that advantage of greater trade might be greatly shared among the businessmen of both the countries.
Pakistan and India might experience sensible rise in bilateral trade in 2013 as India is most likely to liberalize its Pakistan's specific sensitive list by that time.
 A good sign is that the Indian cabinet has already granted approval to the Mutual Recognition Agreement (MRA) agreement, earlier signed between Pakistan and India. Under this agreement, India will assign any test lab in Pakistan which will allow the items for export to India.
Both the countries have also signed the Customs Cooperation Agreement to relief the importers and exporters at the Wagah border to assure unconstrained trade and this agreement will soon be approved by the Indian cabinet.
 But one thing must be kept in our minds that both the sides will first have to take up significant Confidence Building Measures (CBMs) as no investor would want to loose his investment  just in case the relations were to deteriorate again in the future for any given reason.
The decision announced by the Indian government to lift a ban on Pakistani businesses setting up shops and banks in India has been welcomed as a great effort to boost   trade between the neighboring countries.
After years of hostility and three wars, the amount of trade between the south Asian countries is paltry. There is unanimity among Pakistan's large political parties in favour of normalising trade relations with India, both to encourage the country's frail economy and in the hope that greater business connections may contribute to progress towards harmony. More jobs will be generated as a result of expansion in the production of exportable items.
 On the other side, imports contribute into the country the transfer of technology engrafted in imported goods and services and raise the country's production. Hence, it can be easily understood that increased trade is in the larger economic interest of the country.
 Take the example of China which has beaten Germany to become the largest exporting country and has overtaken Japan to become the second largest economy in the world. China and India are forecasted to be the two fastest growing economies of the world over the next several decades. 
 It must be mentioned here that Pakistan is blessed by its location being neighbor to both these large economies. Our national economic interest shows that Pakistan should expand its trade relations with India and penetrate its markets.
India-Pakistan trade will be in a favorable position. India has a middle class of about 300 million people with high standard of living and rising purchasing power that corresponds that of South Eastern Europe while Pakistan's middle class is more or less 30 million. Even a small entrance into the Indian middle class market would raise the market size for Pakistani companies and businesses.
It should kept in our mind that bilateral trade balance with any particular country does not have to be positive.  Pakistan would run a trade deficit with India just as it does with China and surpluses with others. India no doubt is a larger, more broadened economy and also produces goods that Pakistan exports. 
India and Pakistan trade relations could increase even as tension mounts over the gruesome killing of Pakistani Jawans. Pakistan may announce 'most favored nation' (MFN) status to India in the near future.
Pakistan has step by step allowed more Indian goods to be imported by shifting to trade based on negative list, but has escaped the December 31, 2012 deadline to lift all control by giving MFN status to India. 
There should be no delay granting Most Favoured Nation (MFN) status to India.  MFN status is an obligation under World Trade Organisation (WTO) and Pakistan should grant the status to Delhi for improvement of bilateral trade.
There is some misgiving in Pakistan that normalisation of trade relations with India will lead to oversupplying goods from across the border.  It may be mentioned that Pakistan is a member of the World Trade Organisation; it would have recourse to all trade remedy provisions in the WTO like safeguards and anti dumping clause.
According to study by an independent organization Pakistan's Gross Domestic Product (GDP) could raise by 2 percent per annum if Pakistan grant India the Most Favoured Nation (MFN) status. 
Dr Hafiz Pasha, former finance minister and vice chairman of the Institute of Public Policy said their organization's research shows that granting the Most Favoured Nation (MFN) status to India, will also help cut down inflation on the back of availability of comparatively cheap Indian goods.
 He stated over a period of three years the country would accomplish 700 million dollars in annual gains besides creating 200,000 new jobs. However, in comparison with Pakistan, India will only gain 0.5 percent of its gross domestic product (GDP).
It is hoped that with the recent India's army reaching an "understanding" with Pakistan to "de-escalate" military tension in occupied Kashmir India - Pakistan trade prospects are very much bright.
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