Daily News Analysis

Trade relations between India-Pakistan

1st April, 2021 Economy

Context: Pakistan decided to lift its nearly two-year ban on imports of cotton and sugar from India.

India-Pakistan trade before ban

  • Given their tumultuous relationship, trade between the neighbours has always been linked to politics.
  • So, India’s exports to Pakistan fell around 16 per cent to $1.82 billion in 2016-17 from $2.17 billion in 2015-16 after relations deteriorated in the aftermath of the Uri terror attack and the Indian Army’s surgical strikes on militant launchpads in Pakistan-occupied Kashmir in 2016.

Major products traded

  • Over the years, India has had a trade surplus with Pakistan, with much less imports than exports.
  • Pakistan was among India’s top 50 trade partners in 2018-19, but was pushed out of the list in 2019-20.
  • It had been anticipated that a trade ban between the countries would affect Pakistan more, since it relied heavily on India for key raw materials for its textiles and pharmaceuticals industries.
  • In 2018-19, cotton and organic chemicals accounted for around half of Pakistan’s imports from India.
  • India’s major imports from Pakistan in 2018-19 were mineral fuels and oils, edible fruits and nuts , salt, sulphur, stone and plastering materials, ores, slag and ash and raw hides and leather.


Pakistan’s trade ban

  • Pakistan’s decision to suspend bilateral trade with India in August 2019 was a fallout of the constitutional changes in Jammu and Kashmir, which Pakistan said were “illegal”.
  • However, an underlying reason for suspending trade was the 200 per cent tariff imposed by New Delhi on Pakistani imports earlier that year after India revoked Pakistan’s Most Favoured Nation (MFN) status in the aftermath of the Pulwama terrorist attack.

Why the change

  • The Pakistani decision to lift the ban on cotton imports comes in the backdrop of a shortage in raw material for Pakistan’s textile sector, which has reportedly suffered due to low domestic yields of cotton.
  • Also, imports from countries like the US and Brazil are costlier and take longer to arrive.