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Is trade with Pakistan possible?
Nanditta Chibber
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August 06, 2005

For the first time in 50 years, on July 26, a consignment from India rolled across the Wagah border into Pakistan -- a truckload of garlic.

For now, the Pakistan government has cleared the duty-free import of onions, potatoes, tomatoes, garlic and livestock through the re-opened land route. India, on the other hand, is free to import lentils, cotton, sugar and dry fruits from Pakistan.

Even as trucks cross the Wagah check-post, business has been slow to pick up, the result of fear and uncertainty of trading with Pakistan.

According to Praveen Khandelwal, secretary general, Confederation of All India Traders, "Though the land route has been opened for trade, no clear-cut trade policy between the two countries has been spelt out." The result? "Even keen traders are still waiting and watching the scenario," he says.

The opening of the land route for business has initiated the possibility of trade in perishable commodities, earlier dependent on either the bi-weekly Samjhauta Express, or the detour through Dubai, Afghanistan or Iran -- quite a long detour from the 90 minute drive from Amritsar to Lahore.

In India, the most anticipated import from Pakistan is likely to be cotton -- both raw cotton and cotton fabric -- earlier imported through rail and sea routes. The opening of the road is welcomed by Indian traders as Pakistani cotton is cheaper than that imported from China.

Says Satwant Singh, president, Readymade Garments and Cloth Dealers Welfare Association, "Denim imported from Pakistan is almost 50 per cent cheaper than its wholesale rate in India."

Though officially imported cotton from Pakistan is cheap, "it becomes even cheaper when it enters India, since it passes through corrupt channels where taxes are evaded," says Singh, who estimates that 60 per cent of the trade in Pakistani cotton is illegal.

Certainly, once the land route becomes established, trade is expected to grow briskly. "Cotton and electricity are the only two items we require from Pakistan," says Arun Singhania, president, Delhi Hindustani Mercantile Association, "for which there should be 100 per cent open trade."

It's not just the wholesalers who are enthusiastic about the road route. Even Pakistani designers who are opening shop in India say their voiles and chikan embroidery are in great demand here.

Farnaz Ahamad, a Karachi-based designer who has an outlet of her concept store Image in New Delhi, says: "The Indian market is very responsive to Pakistani designs and materials. There is curiosity and demand for fabric from Pakistan."

Afghani dry fruit, something else that is imported from Pakistan, is also expected to get a boost. The current import of dry dates from Pakistan and other dry fruit from Afghanistan is approximately worth Rs 100 crore (Rs 1 billion) a year, and is growing at 5-6 per cent annually.

The only grievance, according to Shyam Sundar Bansal, president, Indo-Afghan Chamber of Commerce, is that "it's one-way trade from Afghanistan. We want it to be two-way, but I don't think that will happen."

According to the Federation of Indian Chambers of Commerce and Industries (FICCI), India-Pakistan bilateral trade in 2004-2005 (April - November) was worth US$ 380.79 million, having doubled over the two previous years.

With the economies of both nations growing rapidly, FICCI estimates that annual free trade between India and Pakistan could reach $6 billion within a year, should trade barriers be removed and illegal trade (estimated at $2 billion) be legalised.

"Pakistani onyx is in demand in India," says Sunil Malani, a Jodhpur-based importer/exporter of semi-precious stones, though the stone is available in India too, and is imported in large quantities from Turkey. A direct trade route from Pakistan is bound to increase the scope of business in onyxware.

Though India and Pakistan do not legally trade in rice, illegal trade in rice and salt is rampant.

"Both countries export their basmati variety to other countries but do not trade with each other," says Ram Bhagat Gupta, general secretary, Delhi Grain Merchants Association, who agrees that illegal trade in not only rice but also Pakistani rock salt (called Lahori namak) is popular in India and is priced cheaper than its Himalayan counterpart -- and is thus a preferred import item as it is tax free too.

According to an agent who sources rock salt from the Khera mountains near Lahore, it is a byproduct when procuring zinc (hence the low prices). Manjeet Singh, a Delhi-based rock salt lamp sculptor, used to initially source the raw product from the Himalayas, but now gets it from Pakistan where such lamps, supposed to have therapeutic value, are made.

According to one Pakistani official, sanitaryware, some categories of automotive components, shoes and cutlery are Pakistani products that could find a ready market in India, but "one cannot demand that a smaller economy open its doors without, in turn, opening its own doors much" with respect to India's formidable trade practice with Pakistan.

But the perception among the Indian trading community, according to Khandelwal is that "Pakistan has not defined India as a Most Favoured Nation state", and that "the Middle East as a more secure market is already available" without the inherent risks that trading with Pakistan might entail. The Pakistani spokesperson suggests that "even though MFN status is not defined, Indian traders do enjoy the same privileges and Indian exports to Pakistan have considerably risen in the past few years".

While entrepreneurs on both sides of the divide agree that bilateral trade between India and Pakistan would bring in economies of scale and open up the job market, boosting confidence between the two countries would do more for business relations than all the rhetoric that passes for policy at present.

Potential items which Pakistan could export to India
  • Cotton yarns
  • Fabrics
  • Rock salt
  • Fresh and dry fruits
  • Finished leather
  • Sugar and molasses
  • Fertilisers
  • Marble (including onyx)
  • Precious and semi-precious stones
  • Textile and clothing articles
  • Knotted carpets
  • Sports goods
  • Water coolers

Potential items which India could export to Pakistan

  • Iron and steel
  • Auto components and spares
  • Pharmaceuticals
  • Raw materials
  • Tea
  • Non-metallic mineral products
  • Plastic materials
  • Intermediaries for chemicals
  • Agro-based raw materials
  • IT-related software
  • Casting and forging
  • Bicycles
  • Vegetables and meat

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