Foreign Policy Watch: India-Pakistan

Pakistan’s Flip-Flop on Trade with India


From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : india pakistan relation

Pakistan’s Finance Minister has stated that the government may consider importing vegetables and other edible items from India following the destruction of standing crops due to the massive floods in the region.

Why in news?

  • This statement comes after three years when Islamabad downgraded trade ties with New Delhi over the abrogation of Article 370 in Kashmir in 2019.
  • The fundamentalist country sees ties with India as against the spirit of religion and betrayal to the so-called Kashmir cause.

A U-turn by Pakistan

  • Pakistan’s double U-turn on resuming trade with India highlights the internal differences within the country.
  • There are huge differences between business and political communities, and the emphasis on politics over economy and trade.
  • It also signifies Pakistan cabinet’s grandstanding, linking normalisation of ties with India to Jammu and Kashmir.

What is the news?

  • Pakistan has sought to import only three items from India, namely cotton, yarn and sugar.
  • It has no consensus on resuming bilateral trade completely.
  • This is based on Pakistan’s immediate economic needs and not designed as a political confidence-building measure to normalise relations with India.

What changed Pakistan’s mind?

(1) Decline of Textile sector

  • For the textile and sugar industries in Pakistan, importing from India is imperative, practical and is the most economic.
  • Yarn, cotton cloth, knitwear, bedwear and readymade garments form the core of Pakistan’s textile basket in the export sector.
  • By February 2020, there was a steep decline in the textile sector due to disruptions in supply and domestic production.
  • This is definitely due to dumping of cheap Chinese goods.
  • When compared to the last fiscal year (2019-20), there has been a 30% decline (2020-21) in cotton production.

Do you know?

Pakistan is the fifth-largest exporter of cotton globally, and the cotton-related products (raw and value-added) earn close to half of the country’s foreign exchange.

(2) Crisis in the sugar industry

  • When compared to cotton, the sugar industry’s problem stem from different issues — the availability for local consumption and the steep price increase.
  • The sugar industry has prioritised exports over local distribution.
  • Increased government subsidy and a few related administrative decisions resulted in the sugar industry attempting to make a considerable profit by exporting it.
  • As a result, importing sugar from India would be cheaper for the consumer market in Pakistan.

In a nutshell

  • Clearly, the crises in cotton and sugar industries played a role in the ECC’s decision to import cotton, yarn and sugar from India.
  • It would not only be cheaper but also help Pakistan’s exports.
  • This is also imperative for Pakistan to earn foreign exchange.

Why all these have made headlines these days?

  • Pakistan is closer to bankruptcy like any other Chinese vassal state.
  • The second takeaway from the two U-turns — is the supremacy of politics over trade and economy, even if the latter is beneficial to the importing country.
  • For the cabinet, the interests of its own business community and its export potential have become secondary.
  • However, Pakistan need not be singled out; this is a curse in South Asia, where politics play supreme over trade and economy.
  • The meagre percentage of intra-South Asian Association for Regional Cooperation (SAARC) trade and the success (or the failure) of SAARC engaging in bilateral or regional trade would underline the above.
  • Trade is unlikely to triumph over politics in South Asia; especially in India-Pakistan relations.

The Kashmir link

  • The third takeaway is the emphasis on Jammu and Kashmir by Pakistan to make any meaningful start in bilateral relations.
  • This goes against what it has been telling the rest of the world that India should begin dialogue with Pakistan.
  • Recently, both Pakistan’s PM and the Chief of Army Staff, Qamar Javed Bajwa, were on record stating the need to build peace in the region.
  • Bajwa even talked about “burying the past” and moving forward.
  • There were also reports that Pakistan agreeing to re-establish the ceasefire along the Line of Control (LoC) was a part of this new strategy.


  • The latest statement by Pakistan’s cabinet that unless India revokes the 2019 decision in Jammu and Kashmir, there would be no forward movement.
  • This position also hints at Pakistan’s precondition to engage with India.
  • Pakistan has been saying that the onus is on India to normalise the process.
  • Perhaps, it is New Delhi’s turn to tell Islamabad that it is willing, but without any preconditions, and start with trade.
  • It may even allow New Delhi to inform Pakistan’s stakeholders about who is willing to trade and who is reluctant.



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