Pak india trade relations

The partition causes one of the largest human migrations ever seen, and sparks riots and violence across the region. The Maharaja, faced with an internal revolt as well an external invasion, requests the assistance of the Indian armed forces, in return for acceding to India. He hands over control of his defence, communications and foreign affairs to the Indian government. Both sides agree that the instrument of accession signed by Maharaja Hari Singh be ratified by a referendum, to be held after hostilities have ceased.

Pak india trade relations

Nisha Taneja and Samridhi Bimal Published: January 14, With the foreign secretaries of the two countries slated to meet, all eyes are now set on when an official meeting between Indian and Pakistani commerce secretaries will be fixed, with a focus on fresh proposals to speed up the trade normalisation process.

India should, in turn, announce deeper market access to Pakistan by offering to reduce tariff duties to zero. The most substantial impact of the trade normalisation process would be on informal trade flows, which are often considered a defining characteristic of the India-Pakistan economic relationship.

The main export items from India, via informal channels, are jewellery, textiles, machinery and machine parts, electronic appliances, scraps, paper, chemicals, tyres, and betel leaves. The primary reason for informal trade is the high transaction costs of trading, as a result of which traders often resort to trading through third-country ports, mainly Dubai.

Pak india trade relations

Today, goods travel from Delhi to Lahore through Mumbai, Dubai and Karachi, making the journey 11 times longer and four times costlier. The move towards trade normalisation would certainly lead to a reduction in transaction costs and consequently shift informal trade flows to formal channels.

However, for this potential to be realised, India and Pakistan need to prepare themselves to facilitate the expansion of bilateral trade. If the two countries agree to grant transit rights to each other, India could be connected to Afghanistan and further to Central Asia through its western neighbour.

An increase in trade will be difficult without requisite financial mechanisms. Even though the central banks of India and Pakistan signed an agreement that allowed for the opening of branches by two Indian banks in Pakistan and two Pakistani banks in India inthis agreement has not still been implemented.

Without banking services, the provision of letters of credit and the facilitation of cross-border transactions of funds, it will be hard for firms to trade across the India-Pakistan border even when MFN is granted.

For several decades, limited people-to-people interactions because of barriers to communication have inhibited information flows that could help expand trade.

Creating multilevel channels of communication is important for bringing businessmen of both the countries together—which would help bridge information gaps, reduce misconceptions and generate a significant change in the business environment of the two countries.

Finally, there is a need to engage with the media.

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In both India and Pakistan, the media has a powerful influence on public sentiments. Negative reporting has so far dominated India-Pakistan relationship.

It would be much more helpful for reporters to create a positive environment that is conducive to holding talks on trade normalisation between the two countries. Golden moments in the history of India-Pakistan relationship are few and far between.

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The two countries should capitalise on every opportunity that comes their way. A successful meeting between the foreign secretaries could pave the way for a new era in India-Pakistan relations.

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Theoretical look at Pak-India trade relations - Pakistan -