Foreign Policy Watch: India-Pakistan

India-Pakistan Trade

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Cross LoC trade

Tensions between India and Pakistan in 2019 have reduced the already low volumes of trade between the two countries to near zero.

India-Pakistan trade, in the beginning

  • In 1948-49, about 56% of Pakistan’s exports were to India, and 32% of its imports came from India.
  • From 1948-65, India and Pakistan used a number of land routes for bilateral trade; there were eight customs stations in Pakistan’s Punjab province and three customs checkpoints in Sindh.
  • India remained Pakistan’s largest trading partner until 1955-56. Between 1947 and 1965, the countries signed 14 bilateral agreements on trade, covering avoidance of double taxation, air services, and banking, etc.
  • In 1965, nine branches of six Indian banks were operating in Pakistan.

Close to vanishing

  • Following the terrorist attack on the CRPF convoy in Pulwama in February, India withdrew Most Favoured Nation (MFN) status for Pakistan and raised customs duty on Pakistani imports to 200% .
  • In April, India suspended cross-LoC trade to stop the misuse of this route by Pakistan-based elements.
  • Pakistan on its part closed its airspace to India for a prolonged period.
  • The decisions by both countries, while targeted at hurting the neighbour, have severely impacted the livelihoods of individuals and families involved in cross-border trading activities.
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