India-Pakistan trade soars in June quarter despite curbs
The development comes amid Pakistan showing a willingness to resume trade with India, albeit for essential items. While Indian exports to Pakistan were led by sugar and pharmaceuticals in the three months ended 30 June, tankers accounted for 98% of India’s imports from the neighbouring nation
PremiumTrade with Pakistan, with which India shares an uneasy relationship, has picked up sharply in the June quarter despite restrictive measures, government data showed.
The development comes amid Pakistan showing a willingness to resume trade with India, albeit for essential items. While Indian exports to Pakistan were led by sugar and pharmaceuticals in the three months ended 30 June, tankers accounted for 98% of India’s imports from the neighbouring nation.
Experts attributed the increase in direct trade to the change in regime in Pakistan and the rising economic challenges it faces, exacerbated by elevated global commodity prices. This has forced it to look at India for cheaper supplies.
On Monday, Pakistan finance minister Miftah Ismail said his government could consider importing vegetables and other edible items from India to address food shortages caused by devastating floods.
Delhi’s exports to Islamabad rose 72% from a year earlier to $205 million in the fiscal first quarter, led by sugar, organic compounds and pharma. In comparison, India exported just $513 million of goods during the previous fiscal. While Pakistan had suspended all imports from India, it allowed supplies of pharma and drugs after the pandemic in 2020.
However, sugar accounted for 53.3% of India’s exports to Pakistan, which was removed from the restrictive list by the neighbouring nation in March, along with cotton. Pakistan’s Economic Coordination Council, a top decision-making body, allowed the private sector to import 500,000 tonnes of white sugar from India to keep domestic prices in check. Organic compounds and raw materials for drugs made up 16.4% of total exports, and pharma accounted for 15.5%. Islamabad permits imports of raw materials for drugs and pharma supplies. About 228 items were exported to Pakistan, including cumin seeds, petroleum products, tea, fruits and vegetables.
Similarly, imports from Pakistan stood at $17.6 million in the June quarter compared with $340,000 in the year-earlier period and $2 million in entire FY22. Tankers accounted for $17.2 million worth of imports from Pakistan in the quarter. This is despite a 200% duty imposed by India on imports from Pakistan. In 2019, India withdrew the most-favoured-nation (MFN) status accorded to Pakistan in 1996, following the Pulwama terrorist attack that killed about 40 Central Reserve Police Force jawans.
The MFN clause requires countries to offer the same trade terms to all trading partners, with notable exceptions under WTO rules. The MFN applied rates are around 32.8% and 10.7%, respectively, for farm and non-farm products.
Queries emailed to the ministry of commerce and industry and Pakistan High Commission on Monday remained unanswered till press time.
Nisha Taneja, professor, ICRIER, said about 350 items were traded last year despite curbs, indicating the interdependency between both nations. This is a positive signal. Besides, the new regime in Pakistan may have a better relationship with India, which perhaps explains why there has been a substantial increase in trad, she added.
Experts said Pakistan was forced to import food items at competitive rates as it was facing high inflation.
According to the Pakistan Bureau of Statistics, inflation measured by the Sensitive Price Index jumped to a record 42.3% in August because of surging food prices. Pakistan’s foreign currency reserves have also dwindled and are currently good for less than two months of imports.
“The two countries are in talks, and it could be revolving around aid to Pakistan because of the floods. Easing trade tension could be an outcome to help Pakistan. However, opening trade with Pakistan is a long way. Some items are traded via the Dubai route, indirect trade. The cost of trade is more when you get involved in indirect trade. Instead of that, if we trade directly, it will help businesses," said Vijay Kalantri, chairman, MVIRDC World Trade Center, Mumbai.
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