Trade Relation between India and Pakistan.
India and Pakistan have been trying, though not very successfully, since the Shimla Agreement, 1972, to create political harmony. Several attempts later, the political and security issues have only become worse.
It is imperative to explore the bilateral trade relations between India and Pakistan, so as to seek a way towards a deeper engagement, as these two countries have the potential to change the geopolitical dynamics of Asia.We shall first explore the history of bilateral trade relations between the two nations.
History of Trade between India and Pakistan
Bilateral trade between India and Pakistan could be of mutual gain to both as they were not separate once. Mumbai and Karachi, their major business centres are near each other, which serves another advantage. But these advantages are marred by disadvantages such as, non-tariff barreiers, poor trade facilitation measures like customs and porcedural barriers, difficult visa regime, poor infrastucture resulting in costly transportation, and many more.
At the time of independence, almost3/5th of Pakistan’s total exports were directed towards the Indian market, and 1/3rd of its imports came from India (Sangani and Schaffer 2003). But discord in political relations obstructed bilateral trade. After India’s devaluation of its currency in 1949, Pakistan refused to devalue its currency and later imposed import restrictions, thus making the situation worse. Due to political and other tensions and conflicts, bilateral trade declined sharply. Trade between India and Pakistan almost ceased from the mid-1960s to mid-1970s due to the 1965 India–Pakistan war and the 1971 East-Pakistan war, which led to the creation of Bangladesh. More recently, bilateral relations between the two countries became tense after the...