Bilateral Trade Relations between India and Pakistan: Recent Experience and Future Prospects

Abstract

India and Pakistan are two most populous and largest economies of the South Asian region, however, official bilateral trade accounts for only less than one per cent of India's global trade but despite of it, their rapprochement has the potential to change the geopolitical dynamics of India. In this context, present study also examined bilateral trade relationship in terms of share in global trade, bilateral trade flow, trade intensities, trade reciprocities, revealed comparative advantages, possibility of intra industry trade along with overall potential of trade between the two for the period 1996 to 2014. The various indices like export intensity index, import intensity index, trade reciprocity index, revealed comparative advantage index, intra industry index, etc. have been used to analyse the trade relationship. The study highlights that the overall bilateral trade relation are seems to be week and multi-pronged strategy encompassing of reduction in existing high rates of tariff and non-tariff barriers as well as in trade costs of at least on specific products of the interest of both countries, reduction in infrastructural and financial bottlenecks, opening up of more trade routes through sea; rail as well as road, expansion of investment and technology transfer in the production and marketing of those products which enjoy high revealed comparative advantage, dilution of multiple rules and regulations, trade diversification and promotion through trade facilitation measures like make in India, digital India and skill India programs, granting MFN status to India as soon as possible to reduce cost and loss of revenue through informal trade, solution to transit rights etc. is urgently required to improve the existing trade relations.