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India and Pakistan have never shared decent trade relations because of political uncertainty. However, intermittently, there have been efforts aimed at improvement. For example, in 1996, India granted the Most Favoured Nation (MFN) status to Pakistan. But Pakistan did not do the same for India.

From 2006 till 2012, Pakistan carried a positive list, allowing 767 items to be imported from India to normalise the trade relations between the countries. It shifted its policy from the positive list to a negative list of 1209 items in March 2012. Additionally, Pakistan restricted road based trade by allowing only 137 items to be imported from India. According to international trade analysts, Pakistan has never had any serious intent of improving bilateral trade ties with India. The situation gets even more complicated when one takes into account the countless terrorist attacks organised by Pakistan backed terror outfits on Indian soil. The recent Pulwama terror attack in Jammu and Kashmir which closely follows the Uri attack is likely to worsen the trade relations between India and Pakistan.

A nominal scope for trade

Apart from the Chakan Da Bagh route in Poonch and the Salamabad route in Uri for trade between Jammu and Kashmir and Pakistan Occupied Kashmir (POK), India and Pakistan trade from two major routes, the Mumbai-Karachi sea route and the Attari-Wagah land route. Textiles used to hold the largest share of the two country’s bilateral trade till 2015-16. The scope of trade is limited as Pakistan allows only 138 items to be imported from India over the Attari-Wagah land route.

According to the Delhi-based economic policy think-tank, Indian Council for Research on International Economic Relations (ICRIER), the total trade stood at about $454 million during the 2016-2017 FY. On the other hand, India’s exports to Pakistan stood at about $1.8 billion during the same period. So in reality, bilateral trade between the two countries stood at around a nominal figure of $2 billion.

With an intention to ease the situation, Ajay Bisaria, Indian High Commissioner, Pakistan, addressed the Lahore Chamber of Commerce and Industry (LCCI) in March, 2018 and called for an abolition of ‘non-tariff trade barriers’ between India and

Pakistan. In the conference, he said, “There is no better way of improving bilateral relations than mutually beneficial economic ties.” He added, “At present, trade of over $5 billion is being done through a third country but after removal of non-tariff barriers, liberalisation of visa and normalisation of mutual relations, the two way trade could touch a high of $30 billion.” But in this politically unfavourable situation, it will remain a distant possibility.

Fall in trade

The leading products Pakistan exports to India are fresh fruits, spices, cement, petroleum products, minerals, leather, etc. In this short list, processed minerals, inorganic chemicals, raw cotton, cotton fabrics, glass and glassware account for 95% of the total imports. On the other hand, India mainly exports cotton, dyes, chemicals, vegetables and iron and steel to Pakistan; which also accounts to be nominal. But as the aftermath of Pulwama terror attack, around 450 shipments trucks were stuck at the Wagah Attari border, carrying around 95,000 bags of cement and thousands of tonnes of gypsum and granite for more than 10 days as security forces refused to allow trucks from Pakistan carrying shipments for India for internal security measures. That definitely left a noticeable threat to the Pakistani government.

Bilateral trade between India and Pakistan in FY 2017-18 stood at around $2 billion, amounting only 0.3% of India's overall merchandise trade. At that time period, India's exports to Pakistan stood at $1.9 billion which was only 0.63% of its total exports and imports from Pakistan amounted to around $488 million which was just 0.10% of India's total imports. It is quite visible that neither India; nor Pakistan will be affected much regarding trade after Pulwama terror attack as the situation is going to be detrimental. But, both India and Pakistan will face a marginal decline in their international trade.

Political situation

Just before the last Lok Sabha Election, on April 7, 2014 in its election manifesto, the Bharitya Janata Party (BJP) had promised to adopt a ‘zero tolerance’ policy on terrorism. But the nation has seen a 42% rise in terrorism related deaths in Jammu and Kashmir in the last three years of the present NDA government as compared to the last three years of the second UPA government. These data indicate that the Modi led government has been inefficient in dealing with terror activities.

IndiaSpend has given an analysis of data compiled by the South Asia Terrorism Portal (SATP) regarding this security issue. It informs that the number of security personnel killed in terrorist violence has increased by 72% from 111 in the last three years of UPA-II to 191 in the BJP led government’s first three years. The number of civilians killed due to terror activities in Jammu and Kashmir has increased by 37%. Most of the terrorism related deaths took place over the past one year after the security forces gunned down terrorist leader Burhan Wani on July 8, 2016.

Congress leader Om Prakash Mishra who is also a Professor of International Relations, Jadavpur University is unwilling to relate the Pulwama terrorist attack with the country’s political situation before the upcoming Lok Sabha Election in 2019. Mishra told BE, “Pakistan is actually strengthening India’s position as a terror victim state by backing terror outfits. India should consider trebling suitable actions. But one should not give this any political colour before the Lok Sabha Elections.”

No hope for a favourable future

In the recent past, the Mumbai film industry has banned most of the Pakistani artists working in India. The industry also reflected this decision by restricting India’s films in Pakistan. In the aftermath of the Pulwama attack, films like Total Dhamaal, Lukka Chuppi and Milan Talkies are also not going to be released in Pakistan, figuring a huge monetary loss for the Mumbai film industry.

However, the economic fallout of an all-out war would be disastrous for these two economies. On this note, Mishra added, “Rewards and benefits of war are uncertain and it is bound to damage both the adversaries. India must decide its course, thinking of all possible consequences.”

After the Pulwama attack, the Cabinet Committee on Security (CCS) led by Indian Prime Minister Narendra Modi withdrew the MFN status from Pakistan. A day after this, India has also raised customs duty (to 200%) on all goods imported from Pakistan. The Pulwama attack is bound to pull down Indo-Pak trade relations to a new low.