Exploring Business Opportunities Between India And Pakistan

Introduction

India and Pakistan used to be one nation governed by the British Empire until 15th August 1947, when they were divided into two different countries. From the day of independence the seeds of conflict were sown and these countries have since always been in a state of cold war for almost 50 years.

Both the countries are strategically important as they connect the central Asian states to the warm waters of the Arabian Sea, the hub of world trade routes.

The trade between India and Pakistan have been always in business during war and peace, either legally or illegally.

History of India and Pakistan Trade

India was a close trade partner of Pakistan for almost 20 years after partition. Export and imports included rice, grains, jute, cotton, spices, dry fruits, coal, iron and finished consumer products. In most cases the Indian share was larger than that of Pakistan. But after 1960 Indian percentage declined due to the on going Kashmir conflict, which soured the trade relations to an extent where there was no legal trade between India and Pakistan during 1965-1974.

In the present scenario of trade restriction official trade between India and Pakistan is around US$ 343 million compared to the unofficial trade from third countries and smuggling is estimated around US$ 2 ÐŽV 8 billion. (Muthiah) Combined trade of both countries with rest of the world is around US$ 200 billion.

Even though the countries are close enough and are the members of South Asian Association of Regional Cooperation (SAARC), they do not have any trade ties, but both countries are having free trade ties with neighbouring Sri Lanka.

Looking at the period of 2000-2001 and 2001-2002 in Table ÐŽV1 and Table ÐŽV 2, Pakistan imports from India were mainly agriculture related, 53% in 2000-01 and 16% in 2001-02 and chemicals, 21% in 2000-01 and 38% in 2001-02. While Indian imports from Pakistan were primarily agriculture and food related 66% for both the periods.

If we look at the trade scenario between the countries, shown in Table-1 and Table-2, it is restricted mostly to food related products and chemicals. Both the countries were exporting very few raw industrial products. If we look at the Table-1 and Table-2 types of commodities imported by the India and Pakistan for the period of 2000-2002 are inconsistent. This shows that both countries, despite having had poor political and diplomatic relations, do turn to each other in times of need.

Table 1: Pakistan's Imports from India: 2000-02 (thousands of rupees)

2001-02 2000-01

Total Imports Rs 11,471,155 Rs 13,928,480

% %

Agriculture and Food

(Sugar) 16

(10) 53

(39)

Iron and manganese ore 9 6

Chemicals

(Pure Xylenes) 38

(17) 21

(1)

Medicinal inputs 4 2

Plastics 8 4

Tyres and Rubber 7 4

Note: Agriculture and food includes 'residue of soybeans oil-cake', and Chemicals includes dyes, paint and ink.

Source: Federal Bureau of Statistics, Annual Trade Statistics 2000-02, Government of Pakistan, Islamabad, 2003.

Table 2: Pakistan's Exports to India 2000-02 (in thousands of rupees)

2001-02 2000-01

Total Exports Rs 3,246,436 Rs 2,777,405

% %

Agriculture and Food

(Dates)

(Rice) 66

(42) 66

(35)

(23)

Asafoetida 5 -

Crude Petroleum - 8

Cotton staple - 10

Cotton yarn and related

(Cotton tents) 18

(12) 5

(-)

Source: Federal Bureau of Statistics, Annual Trade Statistics 2000-02, Government of Pakistan, Islamabad, 2003.

Peace as a catalyst for India and Pakistan trade

Even with so many conflicts around the world we see nations now opening the gates of trade in the economic interests of countries. In the present global situation, there are no real friends or enemies only the interests of a specific country come first.

Even China has opened its market to the west in order to improve its economy though the west is strongly against the political system in China.

Supporting the above scenario President of Pakistan, Gen. Pervez Musharraf expressed his disapproval on war and said that peace can only be attained by economic cooperation. He also accepted that itÐŽ¦s not wise enough to bear the cost of huge army budgets while the economy is on the low (Ashish, 2001)

PakistanÐŽ¦s budget has been in deficit since 1990ÐŽ¦s and there is little hope of improvement due to the geographical conflicts on eastern and western borders of the country. India rank 9th in the 2005 list of major spenders, which is more than the military spending of Pakistan which stands at 28th in the 2004 military spenders. India also rank 127 and Pakistan rank 135 out of 177 in United Nations Development Program's Human Development Index (HDI). This shows that huge military spendingÐŽ¦s falls hard on the pockets of the general public. There is no limit to achieve maximum security because India or Pakistan is in region with three nuclear powers India, China and Pakistan.

Even though the GDP growth of India is far better than that Pakistan but still it does not cover costly military purchases.

If there is peace, and trade relations between India and Pakistan improve, the impact of this change will drastically decrease the defence expenditures of both countries,