India-Pakistan Trade: Opportunities and Constraints by Kishore C. Dash

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Kishore C. Dash, Ph.D., is an associate professor of international studies at Thunderbird School of Global Management. He is also a senior lecturer at the University of Delhi in his native India. Before joining Thunderbird, Dr. Dash was a research fellow at the East-West Center in Hawaii and a political science lecturer at the University of Hawaii at Manoa. He served as delegation leader on the International Monetary Fund (IMF) Evaluation Committee on Third World Debt Issues in 1990.


 

"Pakistan’s decision to grant MFN status to India marks a significant policy shift in its trade relations with India..."
 
"Policymakers in both India and Pakistan seem to have embraced the belief that increased trade between the two countries would not only produce economic benefits, but also create common interests that would dissipate political tension..."
 
"Similarly, trade liberalization between India and Pakistan is likely to promote not only increased trade between the two countries, but also to serve as an engine of growth for SAFTA..."
 
"If political and military tension between India and Pakistan remain unresolved, and domestic groups’ support for trade liberalization remains limited, however, growth in bilateral trade will continue to be weak and inconsistent..."

 


Pakistan’s decision to grant India most-favored-nation (MFN) status in November 2011, which came fifteen years after India granted MFN status to Pakistan, represents a significant policy shift in trade relations between India and Pakistan. Despite the existence of a shared history, border, ecology, language, and culture, bilateral trade between these two countries has remained anemic over the past six decades. A World Bank study shows that the share of total trade between India and Pakistan in 2005, measured by the sum of the bilateral exports, amounts to just 0.9 percent of their total exports. The share of their total trade by this measure has increased marginally to 1.3 percent in 2010. This level of trade between India and Pakistan is not just low, but falls far short of its potential. Several recent studies estimate that India-Pakistan trade could be at least ten times larger than its current level if a bilateral free trade agreement were introduced. Given this potential for growth in bilateral trade, this study seeks to explore two questions: What are the opportunities of trade expansion between India and Pakistan? What are the constraints for the growth of bilateral trade between the two countries? (purchase article...)