Pakistan’s Foreign Minister Ishaq Dar has hinted at a potential reassessment of trade ties with India, indicating a departure from the status quo since August 2019. This move comes amid growing calls from Pakistan’s business community to resume trade activities with India, citing concerns over increased costs associated with indirect imports via Dubai or Singapore.
FM Ishaq Dar emphasized the need for thorough examination and stakeholder consultations before making any definitive decisions regarding trade resumption, highlighting the complexities involved.
Backdrop of Suspended Trade
Bilateral trade between India and Pakistan came to a halt in August 2019 when Pakistan downgraded diplomatic relations with New Delhi following India’s revocation of Article 370, which granted special status to Jammu and Kashmir.
This move exacerbated existing tensions between the two nations, leading to a suspension of trade activities. Despite efforts to resume trade, including brief allowances for specific imports such as cotton and sugar in 2021, sustained trade relations remained elusive.
The suspension of trade was not solely a response to the Kashmir issue but also stemmed from broader economic and geopolitical factors. India’s imposition of a 200% tariff on Pakistani imports earlier in 2019, following the Pulwama terrorist attack, further strained trade relations. Both countries maintained significant trade surpluses, with India exporting more goods to Pakistan than it imported, albeit the trade volume being relatively small compared to India’s overall trade.
Exploring Economic Realities
The interruption in trade had significant implications for both countries’ economies. Pakistan faced challenges in meeting its food and energy needs, exacerbated by high inflation and political instability.
Importing goods from distant countries incurred additional costs, depleting Pakistan’s foreign exchange reserves. Meanwhile, Indian traders, particularly in Punjab, expressed hopes for trade resumption to access Central Asian markets more efficiently through the Integrated Check Post at Attari.
Recent diplomatic exchanges between the leaders of India and Pakistan, including congratulatory messages between Prime Minister Narendra Modi and Pakistan’s Prime Minister Shehbaz Sharif, sparked speculation about a possible thaw in relations.
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However, underlying issues such as Kashmir, cross-border terrorism, and religious hyper-nationalism in India pose significant challenges to sustainable normalization of ties. The prospect of trade resumption remains contingent upon mutual efforts and addressing longstanding grievances.
While Pakistan’s contemplation of trade resumption with India signifies a potential shift in diplomatic stance, numerous hurdles must be overcome to realize sustainable economic cooperation.
Addressing geopolitical tensions, revisiting trade policies, and fostering mutual trust are essential steps towards unlocking the economic potential of the region. Whether this signals a genuine thaw in relations or merely a fleeting opportunity remains to be seen, highlighting the complex dynamics at play in India-Pakistan relations.