New Delhi: The Mumbai terror attack—in which India says Pakistani nationals were involved—will take a heavy toll on trade between the two countries, a federal minister said.
“After trying hard to get the India-Pakistan economic engagement on a fast-forward mode, it is a tragedy. It was working to the benefit of both sides and we were making progress,” said Jairam Ramesh, minister of state for power and commerce. “(Now) no new initiatives will be started. We will have to revisit everything,”
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India has dropped trade plans with Pakistan, which it says houses groups that trained and armed terrorists to attack targets in Mumbai. Pakistan, on its part, denies involvement in the terror strikes in India’s commercial capital that left at least 183 people dead.
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India’s recent plans to promote trade included removing Pakistan from the list of countries from where foreign direct investment was not allowed due to security reasons; opening branches of State Bank of India and Bank of India in Pakistan; trading in 1,938 items compared with the current 13; and opening the Skardu-Kargil route in Jammu and Kashmir for commerce.
Though trade between the two has traditionally been a sensitive subject, Prime Minister Manmohan Singh and Pakistani president Asif Ali Zardari—at a historic New York meeting in September—had agreed on several measures such as trade in all permissible 1,938 items—as declared by Pakistan—across the Attari-Wagah border in Punjab.
An agreement was also reached to permit movement of these items by rail through Khokrapar in Sind and Munabao in Rajasthan.
“It was a revolution... With Pakistan denying its links in the Mumbai terror attacks, this will not happen,” Ramesh said.
Commerce between India and Pakistan has grown in recent years, with bilateral trade amounting to $2.231 billion (Rs11,088 crore) in 2007-08—or 0.54% of India’s trade turnover—from $344.59 million in 2003-04.
The banking plans have also taken a hit. The Reserve Bank of India and the State Bank of Pakistan had earlier agreed to grant permission to two branches of commercial banks of India and Pakistan to start services on a reciprocal basis.
The Indian government has also dropped a plan to launch a website prepared by Indian Institute of Foreign Trade that would have contained details of procedures Pakistani exporters have to follow to trade with India.
“It would have given prospective Pakistani exporters awareness about licensing and tariffs, among others. The website was ready to be launched on Monday,” the minister said. “The work on the website was started after my meeting with Pakistan’s commerce secretary in August 2007.”
The Mumbai terror attack has already compelled India to abandon plans to set up border posts to facilitate movement of goods and people to and from Pakistan, Bangladesh, Nepal and Myanmar, as reported by Mint on 5 December.
“Suspension of ties means much more for Pakistan than for India,” said Rajat Kathuria, professor of economics at New Delhi-based International Institute of Management. “Pakistan is not very important in India’s trade. The economic effect on us will be marginal. The Pakistani economy is in a mess. These steps were more of confidence-building measures,” he said.
However, India will continue to allow trade across the Line of Control in Jammu and Kashmir, which is restricted to 21 items that include fresh and dry fruits, spices, honey, Peshawari leather slippers, walnut-wood furniture, wall hangings, embroidery items, tamarind, green gram, carpets, shawls, black mushrooms, pillows and pillow covers, medicinal plants, rice, blankets, rugs, woollen garments, saffron and kadam, a vegetable.