Back to square one
The Lethpora attack had an immediate fallout and it was visible once the Cabinet Committee on Security met in New Delhi. The announcement was yet to be made but it was evident that the Indo-Pak relationship has been ripped apart and the relation has touched an all time low.
India not only revoked the most-favoured nation (MFN) status to Pakistan in the aftermath of Pulwama attack but it is also considering punitive actions like significant hike in customs duties, port restrictions and ban on goods imported from the neighbouring country.
Withdrawal of the MFN status would significantly hit Pakistan’s exports to India, which stood at USD 488.5 million (around Rs 3,482.3 crore) in 2017-18. The Indian government can take punitive actions under the Customs Act and the Foreign Trade (Development and Regulation) Act.
Under these laws, the government can restrict trade of certain goods, significantly increase customs duties and impose port-related restrictions on Pakistani goods. The main items which Pakistan exports to India include fresh fruits, cement, petroleum products, bulk minerals and ores and finished leather.
India granted the MFN status to Pakistan way back in 1996. The MFN status was accorded under World Trade Organisation’s (WTO) General Agreement on Tariffs and Trade (GATT). Both India and Pakistan are signatories to this, and are members of the WTO.
Under the MFN pact, a WTO member country is obliged to treat the other trading nation in a non-discriminatory manner, especially with regard to customs duty and other levies. Withdrawal of the status would mean that India could impose heavy customs duties and discriminate Pakistani goods vis-a-vis similar items of other trading partners.
In 2012, Pakistan had committed to giving the MFN status to India but retracted later due to domestic opposition. Instead of MFN, Pakistan said it was working on granting Non-Discriminatory Market Access (NDMA) status to India but that also was not announced.
Total India-Pakistan trade has increased marginally to USD 2.41 billion in 2017-18 as against USD 2.27 billion in 2016-17. India imported goods worth USD 488.5 million in 2017-18 and exported goods worth USD 1.92 billion in that fiscal.
India also tried to corner Pakistan diplomatically by summoning the Pakistan High Commissioner to issue a very strong demarche over the Pulwama attack. The Indian High Commissioner to Pakistan Ajay Bisaria has also been called to Delhi for consultations in the wake of the horrific attack.
Though Pakistani authorities have sounded positive and said that they will not make any emotional decision following India’s announcement of withdrawal of MFN status to the country and respond to it after due deliberation, but things do not seem to be so easy.
The past experiences and the way the relations between the two neighbors is trending it is believed that the decision might have long-term consequences as it will further dim the chances of normalisation of political relations and tapping the potential of bilateral trade.
The World Bank in a recent report had estimated that Indo-Pak bilateral trade could reach to USD37 billion if trade barrier are removed. But all these seem to be a farfetched dream as of now.
KV Network
