Post MFN move: India to list Pak items for higher custom duties

New Delhi: In the wake of government’s decision to withdraw Most Favoured Nation (MFN) status to Pakistan, steps are being taken by the Union Commerce Ministry to prepare a list of Pakistani items which would face restrictions and high custom duties.
While the Modi government has sought to squeeze Pakistan’s already under stress economy, sources point out that more than the religious sentiment and respecting the sentiments of Sikhs – minorities in both India and Pakistan – the “opening of the Kartarpur Corridor” was seen by the Imran Khan regime as an opportunity to slowly reduce trade barriers.
Authorities in Pakistan were hopeful that the Kartarpur Corridor would “encourage the cross-border movement of people and goods”. This was a point, which was understood well by foreign policy engine room in India and traders in Indian side of Punjab state as well.
“A timely reduction in the barriers that restrict the movement of people across the Line of Control could open up new economic opportunities. This has been in Imran Khan regime’s mind,” a source said.
Prime Minister Narendra Modi has understood the gravity of Imran Khan regime’s economic stress and thus has been hitting out at it for not focusing on governance and depend on state sponsorship to terror.
“A country that came into existence after the partition of India, a country where terrorism is sponsored and promoted, it is a country which is on the brink of economic collapse and bankruptcy- that country has become synonymous with the word terrorism today,” Mr Modi said at Yavatmal in Maharashtra on Saturday.
From time to time, MEA spokesman Raveesh Kumar too has been mocking at Pakistan’s domestic matter and even has counseled Imran Khan on those lines rather than speak about ‘minorities’ in India.
It is worth mentioning that the World Bank has said that trade between Pakistan and India was valued at a little over $2 billion, but it could go as high as $37bn.
The PML-N under Nawaz Sharif had offered several proposals to take trade relations with India to the “next higher” levels.
Even the PPP dispensation took several steps to liberalise the trade regime with India on both unilateral and bilateral basis.
According to government sources, India mainly exports raw cotton, cotton yarn, chemicals, plastics, manmade yarn and dyes to Pakistan and imports petroleum products, bulk minerals, finished leather, fresh fruits and cement.
India’s tea exports to Pakistan grew substantially in 2017-18 to 15.83 million kilograms from 14.73 million kilograms in 2017 and products chiefly came from Assam and West Bengal, sources said.
Textiles and clothing in effect constitute the largest share of bilateral trade between the two neighbours and few years back, trade in textiles sector constituted about 48 per cent in total bilateral trade between two sides.
In the eastern India, apex India Tea Exporters Association has backed the government decision to ‘deal’ with Pakistan, including in trade aftermath the dastardly terrorist attack on February 14 at Pulwama.
Trade and commerce interest has become secondary as the trading community in textiles and tea join the nationwide anguish against Pakistan.
The decision of the Cabinet Committee on Security on withdrawal of the Most Favoured Nation status given to the western neighbour in 1996 is seen as an attempt to mount further economic pressure on Imran Khan regime by squeezing the economy.
Sources in the government say this will also help India ensure that Pakistan gets ‘isolated’ in the comity of nations and is forced to take actions against terror hubs. Simultaneously, international pressure is also building up.
However, analysis carried out on the basis of surveys conducted in India, Pakistan and Dubai in 2016 showed informal trade between India and Pakistan would be around USD 4.7 billion. Out of that, India’s exports to Pakistan through informal channels stood over USD 3.5 billion and imports from Pakistan USD 1.2 billion.
Sources have said the informal trade actually thrive as the route ensures avoid custom hassles and so called tensions and conflicts in relations between two nations.
The ease of routing goods through a third country Singapore, Dubai and Malaysia also deserve a closer look.
At official levels, Pakistan and India currently use Wagah border and Port Qasim, Karachi for trading.
In terms of technicalities, removal of MFN status means India can enhance customs duties on goods from Pakistan and harm its trading interest.
Under provisions of the Customs Act and the Foreign Trade (Development and Regulation) Act, the government of India now has option to ban some items and also impose port restrictions. “These would hit Pakistani business interests,” the source said.
In accordance with the MFN principle and its obligations under the WTO, India had accorded MFN status in 1996 but Pakistan had not done it. Ironically, the government decision to withdraw MFN status to Pakistan was taken on Friday even as in January this year the government had told Parliament during winter session in a written reply: “Presently, there is no proposal to review the Most Favoured Nation status to Pakistan”.
Sources said India-Pakistan trade had increased to USD 2.41 billion in 2017-18 as against USD 2.27 billion in the previous fiscal.
Import from Pakistan to India stood at $288.134 million in 2004-05 and reached $350m in 2016-17 in the wake of liberalisation of the trade regime. Indian exports to Pakistan were $547.458m in 2004-05 and shot up to $2.7 billion in 2016-17.
Pakistan’s economy on domestic front is faced with many limitations and none other than Pakistan’s Prime Minister Imran Khan has repeatedly spoken of improving trade with India.
At times, some statistics suggest even Bangladesh economy is doing better than Pakistan’s.
On Friday, Prime Minister Narendra Modi mocked at Pakistan’s state of economy and said while authorities in Islamabad are moving around the world with ‘begging bowl’ – it was not getting the help so easily.