Unofficial flow continues to dominate Indo-Pak trade, says chamber

Bilateral official trade between the two countries has not been growing at the desired pace. During the first six months of fiscal 2006-07 (April to October), the official trade level between India an Pakistan was $995.61 million. It can be expected that official bilateral trade would register a growth rate of not less than 50 per cent this year.

“’Unofficial trade” is commonly defined as the flow of goods between two countries through unauthorised channels. This also includes smuggling and third country exports. Third country exports is defined as the routing of goods through other countries.

Goods such as plastic items, synthetic fabrics, melamine dinner sets, textiles and clothing, woolen goods, food items like wheat, sugar, edible oil and vanaspati flow into India through unauthorised channels. The Indian made goods that Pakistan imports through third country channels include textiles, machinery, tannery equipment, machine tools, equipment and spares, cotton fabrics, tyres, chemicals and viscose fibres. Sources said that the list of Indian made goods smuggled into Pakistan include cosmetics, alcoholic beverages, stainless steel utensils, ayurvedic medicines, video tapes, cassettes, confectioneries and cashew nuts.

The main reason for this high level of unofficial bilateral trade is the existence of Pakistan’s list of 1,075 tradable items. Only these listed items can be imported into Pakistan from India. Pakistan recently added 302 items to the existing trade list of 773 items for import from India. The other reasons for the high proportion of unofficial trade are the absence of good road links, highly irregular railway connectivity, expensive shipping links and rigid visa conditions.

In order to address the situation, the government is considering a proposal to upgrade the Amritsar-Wagh road to a four lanes. The Union government recently approved a revised protocol between India and Pakistan, which would permit the lifting of third country cargo by Indian and Pakistani flag vessels from each other’s ports. This would also allow the lifting of cargo between the two countries through third country vessels.

Though the governments of the two countries are doing a lot to improve the situation, there is a need for a liberalised visa regime and an environment conducive to free trade and investment. Under a free trade environment, no country can impose restrictions through trade lists and heavy-duty structures.