India's withdrawal of MFN status after Pulwama terror attack will affect Pakistan's exports worth $488 mn

Withdrawal of most favoured nation (MFN) status to Pakistan after the deadly Pulwama terrorist attack is expected to affect its exports to India to the tunes of $488.5 million, said media reports. Besides this, India can also hike customs duties on the goods that Pakistan imports. Trade between India and Pakistan is about $2 billion per year. Figures show that the trade balance is in favour of India as its exports to Pakistan is more than what it imports from that country. [caption id=“attachment_6088471” align=“alignleft” width=“380”]  Around 40 CRPF personnel were killed in the Pulwama terror attack. PTI[/caption] While a section of the experts opine that revoking MFN status to Pakistan will not have much impact on the trade between the two countries as the trade value is below $3 billion. However, another section is of the view that if Pakistan resorts to retaliatory measures, it may affect India more. Total Indo-Pakistan trade has increased marginally to $2.41 billion in 2017-18 as against $2.27 billion in 2016-17. India imported goods worth $488.5 million in 2017-18 and exported goods worth $1.92 billion in that fiscal, said a PTI report. India mainly exports raw cotton, cotton yarn, chemicals, plastics, man-made yarn and dyes to Pakistan while the latter’s imports include fresh fruits, cement, petroleum products, bulk minerals and ores and finished leather. According to the statistics of Directorate General of Foreign Trade under the Ministry of Commerce and Industry, the bilateral trade between the arch-rivals touched the peak of $2.7 billion in 2013-14. During this period, India exported goods worth $2.27 billion to Pakistan and the latter imported goods to the tune of $427 million. After the withdrawal of the MFN status, India can raise customs duties on several goods being imported from Pakistan. After the Cabinet Committee on Security (CCS) meeting, Finance Minister Arun Jaitley said that MFN status to Pakistan stands revoked. India granted the MFN status to Pakistan in 1996, but the latter had not yet reciprocated. The MFN status was accorded under World Trade Organisation’s (WTO) General Agreement on Tariffs and Trade (GATT). Both India and Pakistan are signatories to this and are members of the WTO. Under the MFN pact, a WTO member country is obliged to treat the other trading nation in a non-discriminatory manner, especially with regard to customs duty and other levies. In December last year, a World Bank report had said that the trade between India and Pakistan could reach up to $37 billion from the current $2 billion if the two neighbours removed artificial barriers like trust deficit and complicated and non-transparent non-tariff measures. The report titled ‘Glass Half Full: Promise of Regional Trade in South Asia’ stated that Pakistan’s decision of not granting Most Favoured Nation status or non-discriminatory market access to India was also a barrier to trade. Meanwhile, trade experts said that this decision would not have a major implication on bilateral trade between the countries as the value of trade is below $3 billion annually. Welcoming the government’s decision, Federation of Indian Export Organisations (FIEO) president Ganesh Kumar Gupta said that the move would impact Pakistani industries that are exporting to India. “The government should take a carefully crafted step as India’s exports are more than imports. If Pakistan will take retaliatory actions, then it would impact more to India,” international trade expert with Indian Institute of Foreign Trade (IIFT) Rakesh Mohan Joshi said. Professor Biswajit Dhar of Jawaharlal Nehru University (JNU) said that Pakistan mainly exports to India through Dubai and Singapore, “so we need to target that also”. — With PTI inputs