No discussion yet on revoking MFN status to Pakistan : Nirmala Sitharaman

India had extended the MFN status to Pakistan in 1996, but the neighbouring nation has not yet extended the same to New Delhi

The government has so far not discussed the issue of withdrawal of the Most Favoured Nation (MFN) status to Pakistan, Commerce and Industry Minister Nirmala Sitharaman said on Friday. Although India had extended the MFN status to Pakistan as a "goodwill gesture" way back in 1996, the neighbouring nation has not yet extended the same to New Delhi.

Last month, 18 Indian army soldiers were killed in Uri, Jammu and Kashmir allegedly by terrorists supported by the neighboring country. Subsequently, after demands went up within the government to revoke the MFN status, a meeting had been called by Prime Minister Narendra Modi to decide on it. After being postponed once, the meeting never happened.

While economic offensive can take many forms, revoking Pakistan's MFN status may harm India's position in multilateral trade forums, commerce ministry officials had earlier told Business Standard on conditions of anonymity.

The MFN status is governed by the World Trade Organization's (WTO) General Agreement on Tariffs and Trade (GATT). Countries signatory to the agreement commit against discriminating each other and rest of the WTO member countries. This implies that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods/services from all its trading partners.

Since being established, the MFN clause has been upheld by the WTO, it has worked as a bulwark against dubious, partial trade practices by countries and promoted free trade under a framework of mutual openness.

India is also mulling the option of dragging Pakistan to the dispute settlement body of the WTO because of this. However, Pakistan has the choice to cite 'security exceptions' in Article XXI of the GATT, under which a member-country may not grant the MFN to another member on grounds of security as an excuse for withholding MFN status to India, a trade expert said.

However, PHD Chamber of Commerce and Industry, with sizeable representatives from Punjab, said it is willing to sacrifice trade with Pakistan for the country. Bilateral trade between the two nations stood at $ 2.61 billion or just 0.41 per cent of India's overall merchandise trade in financial year 2015-16.

While exports to the neighbouring country worked out to $ 2.17 billion, or 0.83 per cent, of the total Indian outward shipments, imports from Pakistan were $ 441 million, or 0.12 per cent, of the total inward shipments.

Major export items include cotton, organic chemicals and plastics, among other while mineral fuels, edible nuts and plastering materials account for top imports. While India does not restrict imports from Pakistan, Indian exports across 1029 tariff lines — covering textile, auto and agro products — are restricted entry into the country.