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Improving Indo-Pak relations could be a positive turn for industry

Improving relations with India is a breath of fresh air after the past few years had been marred by hostilities between the countries. This could lead to increased trade and further trickle-down effects on the entire economy.

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Pakistan and India have made some strides towards a positive relationship, with the comments from Pakistan’s PM and Army Chief followed by the Indian PM’s message on Pakistan Day and his wish for PM Khan after the latter contracted coronavirus.

That combined with the Permanent Commission’s (PCIW) successful meeting in New Delhi, and rumors of the Pakistan-India bilateral cricket tournament suggest things are getting better on Track II level as well.

Read More: India-Pakistan antagonism: a changing direction of wind?

Pakistan-India relationship had never stabilized, but the recent trouble began after the “surgical strikes” in 2016 when a lot of controversies spread on the legitimacy of strikes. Since then every now and then both countries are involved in Line-of-Control violations in Sialkot, Kashmir, and other borders between the two nations.

In 2019 February, after Pulwama Attack was put on Pakistan, the Indian Airforce crossed the international border into Pakistani airspace, however, it resulted in PAF downing Indian MIG-21 along with the pilot. In August of the same year, India and Pakistan ended the trade relations leading to further disconnection between neighbors. That is until recently.

Easing of tensions was initially highlighted from the negotiated cease-fire agreement on the border, followed by the courteous public messages delivered to PM Khan from his Indian counterpart.

Due to the trade ban, total trade with India nosedived to US$403mn in FY20 from US$2.2bn in FY18 — standing at its lowest point since FY03.

According to AKD analysis, the trade resumption will prove beneficial for the Cement, Chemicals, Pharma, and Textiles. The primary beneficiaries include Maple Leaf Cement(MLCF), DG Khan Cement (DGKC), and LOTTE chemicals (LOTCHEM).

According to the report the Cement exports were at the forefront of the companies adversely affected by the worsening relations between Pakistan and India, as the latter imposed an increased custom duty on the import of cement from Pakistan.

According to data, the cement exports Year-on-Year fell by 46 percent for MLCF and 39 percent for DGKC in the fiscal year 2020.

If the export opens, with increased capacity, cement exports could potentially surpass FY18’ levels particularly with India’s government supporting the construction sector coupled with increased capacities of local manufacturers.

Moreover, PTA(used in manufacturing polyester) manufacturers like LOTCHEM, who have been importing Para-Xylene from the Middle East can finally reduce their freight cost, and the chemical industry can go back to getting it from India. This led to a 1.8 percent fall in PX exports of India.

Other than that, it would help Pakistan as the country is supposed to appear before FATF plenary in June 2021 and will help improve countries’ image in other countries as a progressive rational approach. It could lead to Pakistan getting support funds from abroad/ Moreover, Pakistan can import the COVID vaccine and food from India to help with the pandemic and inflation, respectively.

Read More: Pakistan and India to work together to resolve the IWT related issues

Whatever way we see, politically, economically, and socially; good relations with the neighboring country will bring benefits to Pakistan and can potentially reach a positive turn in the resolution of the Kashmir issue.

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