The main reason why Pakistan is delaying granting the much-awaited most-favoured nation (MFN) or non-discriminatory trading status to India is due to the Pakistani agricultural lobby which fears that subsidised products from India would hamper the livelihood of Pakistani farmer, according to Ishrat Husain, former governor of the State Bank of Pakistan.
“There has been some unexpected delay due to the concerns expressed by agricultural lobby in Pakistan. This is wrong. As agriculture production is cyclic in nature and the cycles in the two countries may not always coincide it will be advisable, in the interest of price stabilization and food security, to allow imports from each other’s countries when crop falls short of the normal demand,” said Husain, who is presently the dean and director of Karachi-based Institute of Business Administration.
He also said, the trade surplus that India enjoys with Pakistan should not be a cause of concern and should not act as a reason for them to not grant MFN status to India.
Bilateral trade between India and Pakistan stood at $1.94 billion in 2011-12 with Indian exports reaching $1.54 billion and imports from Pakistan at $401.19 million, according to ministry of commerce and industry.
“There is hardly any doubt that India Pakistan trade is a positive sum game in which both the countries will benefit. Despite all measures there is hardly any chance of dislocation or disruption to either India or Pakistan … Trade imbalance in favor of India should not be a source of worry but a reflection of the relative economic size,” Husain said here today while addressing a lecture on ‘Normalizing India-Pakistan Trade Relations’ organized by ICRIER.
Husain, who had steered the reforms in Pakistan’s banking sector, also highlighted that if bilateral trading relations become normal, Pakistan’s export to India will not exceed 1% of its total exports while Indian shipments to Pakistan will remain within the range of 6-7%.
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Husain said while both India and Pakistan have taken some unprecedented steps in creating an effective trading relationship, key to a successful business relationship lies in implementing the policies and that ongoing political tensions should not act as an impediment in normal business relationship between the two nuclear-armed neighbours.
“Tense security situations such as the recent firings across the Line of Control would cause temporary disruptions but these should not be taken as the pretext for hardening of the attitudes on both sides,” he added.
Husain also underscored the need to establish banking channels between both countries for a smoother transaction of business. It was Husain who had signed the historical memorandum of understanding with YV Reddy, the then governor of Reserve Bank of India (RBI), for opening bank branches in each other’s countries.
“The agreement on the opening of the bank branches of Indian banks in Pakistan and Pakistani banks in India has not yet been implemented. Pakistani banks are still awaiting the approval of RBI. In absence of the opening and confirmation of the letters of credit the financial risks of doing business will remain high and deter new comers and SMEs from entering the trade,” he said.
According to a latest data released by the Directorate General of Commercial Intelligence and Statistics, Ministry of Commerce & Industry, exports from Pakistan to India grew faster compared to India’s exports to Pakistan. Exports from Pakistan to India grew by 66% to $460 million during the period April-December 2012 against $277 million in the corresponding period last fiscal. This was also higher than $401 million, which was Pakistan’s total export to India in the entire fiscal 2011-2012. On the contrary, the rate of growth of exports from India to Pakistan during April-December 2012 was only 16%, the data indicated.