Daily Times

The trade barriers due to the Indo-Pak conflict have had adverse impacts on Pakistan’s economy, aggravating the economic setback in an already crisis-stricken state. Pakistan needs to make smart moves to alleviate the tensions with India while maintaining its stance on the Kashmir issue. To foster economic growth, Pakistan can bring in use the high potential of agricultural trade between the two states and sustain an atmosphere of peace.

The history of ties between India and Pakistan is fraught with frictions on many fronts since the partition of British India in 1947. The conflict over the Kashmir region and cross-border terrorism has played a great role in fueling almost all of the political heat, trade embargos, and military standoffs. However, history remains witness that neither Pakistan nor India can achieve their goals of territorial revision through military action, and limiting trade or imposing trade bans have never helped achieve the desired outcome or resolve any conflict. India and Pakistan have great potential for bilateral trade due to geographic proximity. However, the overall share of trade volume between the two states is considerably low. India accounted for nearly 70% volume of Pakistan’s trade for a few years after Pakistan’s independence, but frequent disruptions in political ties lead to the trade embargo between India and Pakistan following the 1965 war and continuing till 1974.

Since the revival of ties in the 1990s, the trade between India and Pakistan mainly comprised of agricultural products and the agricultural sector constitutes a huge part of the economies of Pakistan and India. This sector currently holds a 19.2% share in the GDP of Pakistan and 20.19% in that of India, engaging nearly 38.5% of Pakistan’s labor force according to Pakistan Economic Survey 2020-21, and 54.6% of India’s workforce employed in this sector according to India Economic Survey 2020-21. Cotton is one of the major agricultural goods imported by Pakistan as raw cotton and cotton yarn. Tea and beverages also hold a large share of Pakistan’s imports and India delivers nearly 1/10th of the total demand for tea in Pakistan. One-tenth of the total dried legumes are also imported from India. Furthermore, India is a major supplier of fresh vegetables in Pakistan, mainly onions and tomatoes. Pakistan also exports some agricultural goods to India but the growth rate of India’s exports to Pakistan is much higher than Pakistan’s exports to India. The agricultural sector of India has the potential to meet more than 80% demand for plants or parts of plants in Pakistan. Moreover, if Pakistan targets the Indian agricultural trade market for exports, it has many potential products to trade in exchange for economic benefits.

Unfortunately, the trade volume shrank severely in 2019 when Pakistan decided to halt trade and diplomatic ties with India in protest of India’s decision to revoke the special autonomous status of IOK. Pakistan soon started feeling the implications of suspending especially the medicinal plants and cotton supplies from India, and started importing cotton from US and Brazil and medicines from the Middle East at much higher prices than India, aggravating the economic setbacks especially during the outbreak of COVID-19 which itself was extremely detrimental to the country’s economy. According to ‘Trading Economics’, a company that uses United Nation’s COMTRADE database to provide insights on 20 million economic indicators from 196 states, India exported goods and services worth only US$502.86 million to Pakistan, and received imports worth US$240.47 thousand from Pakistan in 2021. The trade volume can be observed shrinking rapidly after 2019 with the trade balance leaning in favor of India. This ban on cotton and sugar supplies was lifted by mid-March 2021. However, the trade ties still haven’t recovered from the embargo aftershocks.

It is crucial that India and Pakistan accelerate their efforts to develop a mutually agreed solution to every controversial issue and construct a framework to achieve economic cooperation on mutually beneficial considerations. Both states should act wisely to exploit the potential of agricultural trade they have. Pakistan and India need to engage in complex dialogue and agree upon a peaceful process to resolve the issues between them or take policy measures to prevent those issues from affecting the trade ties between them.

The author is an Islamabad-based policy researcher and can be reached at sayraarun786@gmail.com.