Indo-Pak trade can cross $6 bn: ICRIER

Trade between India and Pakistan can increase to a phenomenal level of $6.6 billion if barriers are removed and the neighbouring country implements the South Asia Free Trade Area (SAFTA) agreement, according to Indian Council for Research on International Economic Relations (ICRIER).

India's exports increased by 157 per cent to $428.1 million and imports by 143 per cent to $82.1 million in the first quarter of 2006-07 as against the corresponding period last year, according to official figures.

"Trade between the two nations is very small as compared to trade between India and its other large partners in South Asia," ICRIER said in a report on 'India-Pakistan trade'.

On the other hand, informal trade through a third country is estimated to be in the range of $2 billion, the report said.

"With several regions integrating further through the free trade agreements (FTAs), it is imperative for the South Asian countries to enhance the pace of their liberalisation," it added.

In a larger context, South Asia is the least integrated region compared to other regions, namely East Asia, Europe and Central Asia, Latin America, Middle East, North Africa and Sub-Sahara Africa.

Regional liberalisation within Asia indicates that SAFTA would ultimately lead to integration with a larger community within the continent through BIMSTEC and ASEAN, the paper said.

However, success of SAFTA in turn would depend on trade relations between India and Pakistan.

The 'positive list' approach followed by Pakistan to allow Indian imports is a key factor constraining growth in trade. The approach in its present form inhibits trade, lacks transparency and leads to high transaction costs, the paper said.