Among many other desperate retaliatory steps, Imran Khan has suspended trade ties with India in a five point response to the abrogation of Article 370 in the Indian state of Jammu and Kashmir and the state’s bifurcation. The trade ties were already low after the Pulwama terror attack in February after which India revoked Most Favored Nation (MFN) status given to the western neighbor and imposed tariffs on imports from Pakistan.
Imports from Pakistan witnessed a major decline of 92 percent to $2.84 million in the month of March this year. Out of the imports worth $2.84 million, $1.19 million accounted for cotton imported by India from its neighbouring country. As per the Commerce Ministry, the figure stood at $34.61 million for the same month in the year 2018.
This came post Pulwama attacks, the Modi government had taken another stern step by raising the customs duty to 200 percent on all goods imported from Pakistan, including products such as fresh fruits, cement, spices, wool petroleum products, and mineral ore. The move was obviously expected to hurt the Pakistani economy which already is in a bad state. This has drastically reduced the volume of imports and export from the debt ridden country.
In the first quarter of FY 20, India’s exports to Pakistan were 452 million dollars and imports were 7.13 million dollars. In FY 19, the total exports to Pakistan were 2.06 billion dollars while the imports were 495 million dollars. Therefore in the first quarter of FY 20, the India’s export to Pakistan remained constant compared to previous years but imports halved due to 200 percent hike custom duty and Pakistan’s exports does not account for even 1 percent of India’s total imports.
“The suspension of trade relations will hit Pakistan more as our exports to them have a very limited profile because they did not give us MFN (Most Favoured Nation) status and violated global trade rules,” said Ajay Sahai, director general, Federation of Indian Export Organisations. India extended the MFN status to Pakistan till as late as February 2019, until after Pulwama terror attacks. However, Pakistan never conferred this status to India.
India exports some major essential commodities like cotton, organic chemicals, plastic and dyes from the western neighbor. Post trade ban, Pakistan would have to import these products from other countries at much higher price which will hurt the common consumer of the country and take the double digit inflation to much higher. India on the hand could easily sell these products to other countries of South Asia and Middle East where a good market for the products exist.
India imports edible nuts, fruits and edible nuts worth only 7 million and a ban on imports will help the domestic producers to get a better price. “This is a unilateral move and a unilateral loss,” said Mohit Singla, chairman, Trade Promotion Council of India.
Therefore the snapping of trade ties will hit Pakistan significantly while its impact on India would be negligible. The size of the Indian economy is almost ten times as big as Pakistan’s and India’s trade volume is also very high compared to Pakistan. The debt ridden country of Pakistan is striking a blow on itself by suspending trade ties with India.
