Traders paradise or political nightmare?

Published: March 6, 2012


After a delay of 15 years, Pakistan finally took the decision on the much-talked most-favoured nation (MFN) status to India this week.

Technically speaking, the MFN status will automatically be given to India by the end of this year. Pakistan has a negative trade list with India with 1,209 items (items that both countries cannot trade with each other) that will be phased out by December 31, 2012. After that, both countries can import or export anything to each other.

According to the Indian minister for commerce, Anand Sharma, now almost 90 percent items can be traded with Pakistan as opposed to 17 percent earlier. This is one of the most significant economic decisions of the present government, as it will give a boost to the national economy. Economic challenges caused by, say, the security situation or the energy crisis are not going to subside in a few months. With less than four percent GDP growth rate, Pakistan cannot provide enough economic opportunities to its growing population.

The opening up of an economic front on our eastern border will boost our economy. It will help us in cutting down the cost of production of various goods, and reduce smuggling, among other benefits. On the other hand, India – Asia’s third largest economy – is also slowing down. The steady economic growth of India has also received some setbacks in recent months.

After having enjoyed exceptional GDP growth rate (8- 9 percent), India’s growth rate, for the first time in the past few years, has dropped to just 6.1 percent. Pakistan has taken the MFN decision at a time when the Indian government is also perturbed by persistent high inflation and lowest levels of economic growth in last three years.

This means that growing economic relations between India and Pakistan are going to benefit both countries at a time when their economies precisely need a stimulus. This makes economic sense. South Asia is one of the least economically-integrated regions of the world, also because of the political tensions between the two biggest economies of the region: Pakistan and India.

The slowdown in the world economy demands an increase in regional trade. Regional trade will primarily benefit the people of this region who will get cheaper goods and a greater variety. The governments of India and Pakistan are trying to come closer on the economic front at a time when the west, especially Europe, is facing severe economic slowdown. This has affected Pakistan and India as their exports to western states are shrinking this year.

Therefore, the way forward for both is to focus on economic growth without dragging politics into every issue.

Read more by Farhan here.

Farhan Zaheer

Farhan Zaheer

A reporter on the business desk of The Express Tribune.

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.