INDO-PAK TRADE

RELATIONS
GROUP - 8

OBJECTIVES
To state the comparative advantages the two nations hold
To study the trade patterns between India and Pakistan over
the last 15 years.
We have also studied the relation between the trade figures
and the GDP of the two countries through regression analysis.
To forecast the trade figures between the India and Pakistan.
To study the similarity advantage the two nations enjoy.

INTRODUCTION

International trade has become mandatory in a way, no

country can afford to be self-sufficient
Till 1990, Indian economy was a closed one and tariffs were
really high, averaging around 200 percent
But post 1991, flood gates opened and Multinational firms
started entering India in hoards
The licence raj and the vast amount of trade barriers were
done away with, transforming India into a land of opportunities

MFN STORY
Both Pakistan and India joined WTO upon its formation in 1995.
India complied with the GATT and granted MFN to Pakistan soon after joining
the WTO. However, this facility has not been reciprocated by Pakistan.
India complied with the GATT and granted MFN to Pakistan soon after joining
the WTO. However, this facility has not been reciprocated by Pakistan.
10 It was only as recently as 2011 that Pakistan decided to accord MFN
status to India. In 2012, it was decided that the two countries will enjoy
mutual MFN treatment from January 2013. It is expected that the current
government will soon fulfill this promise as it faces a lot of pressure from the
business community of Pakistan and international donor agencies.
Non-Tariff Barriers imposed from the Indian side. These NTBs are complex
and range from quality assurance, physical inspection by customs officials,
to visa issuances.

POLICY DEVELOPMENTS SINCE 2004

Feb 2012
2009
2006
Positive
list
expande
2004
d to
Positive List 1075
comprising 757items
items allowed
to be traded

Positive
increased
to 1934
items

Positive
list
abolished

March
2012
-ve list
1209
items,
137
items via
land

LITERATURE REVIEW
1.

India Pakistan Trade Relation by Javid Ahmad Khan, 2012

2.

Prospects and Challenges for Increasing India-Pakistan Trade by

Ishrat Husain, 2011

3.

Normalizing India Pakistan Trade by Nisha Taneja, Mishita Mehra,

Prithvijit Mukherjee, Samridhi Bimal and Isha Dayal, 2013

4.

Pakistan-India Trade: What Needs To Be Done? What Does It Matter?

Edited by Michael Kugelman Robert M. Hathaway, 2013

5.

India-Pakistan Trade: A Roadmap for Enhancing Economic

Relations by Mohsin S. Khan, 2009

RESEARCH METHODOLOGY

Secondary data collected from the Ministry of Commerce and Trade, Government of India
website and a website- http://statisticstimes.com/.
The data is collected for the period of 15 years starting from the financial year 2000-01 to
2014-15.
Total Export and Import figures between the two countries
Export and Import figures of top 20 commodities.
All the data used for this study is taken in Indian Rupees only.
The Import/Export data available at the source is monthly cumulative data added till March of
every financial year.
Monthly data from the cumulative data series is calculated by subtracting previous months
data from the cumulative number.
Month-on-Month growth percentage is calculated from 2001-02 onwards with respect to the
same month of the previous year.
Year-on-Year growth rate is also calculated from 2001-02 onwards. Percentage figures of the
trade between two countries is also calculated in terms of Indias total foreign trade.

DATA FINDINGS
India's Exports to Pakistan
16000
14000
12000
10000
In Rs Crore

8000
6000
4000
2000
0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year

Growth of Exports
120.00
100.13

100.00

77.56

80.00

60.00

50.81
45.27

Percentage

40.00

32.15

30.34

28.17

24.05

20.00

0.00

-20.00

23.14

14.22

2001

2002

2003

2004

2005

2006

2007

2008

-16.55

-19.31

-40.00
Year

2009

2010

2011

-19.52

2012

2013

2014

-17.93

India's Imports from Pakistan

3500

3000

2500

2000
In Rs. Crore
1500

1000

500

2000

2001

2002

2003

2004

2005

2006

2007
Year

2008

2009

2010

2011

2012

2013

2014

Growth of Imports
100.00
80.00
60.00
40.00
Percentage
20.00
0.00

2001

2002

2003

2004

2005

2006

2007

-20.00
-40.00
Year

2008

2009

2010

2011

2012

2013

2014

Trade Surplus from Trade with Pakistan

12000

10000

8000

In Rs. Crore

6000

4000

2000

2000

2001

2002

2003

2004

2005

2006

2007

Year

2008

2009

2010

2011

2012

2013

2014

Trend of India's Exports to Pakistan as %age of Total Exports

1.4

1.2

0.8
Percentage
0.6

0.4

0.2

2000

2001

2002

2003

2004

2005

2006

2007
Year

2008

2009

2010

2011

2012

2013

2014

Trend of India's Imports from Pakistan as %age of Total Imports

0.18

0.16

0.14

0.12

0.1
Percentage
0.08

0.06

0.04

0.02

2000

2001

2002

2003

2004

2005

2006

2007

Year

2008

2009

2010

2011

2012

2013

2014

ANALYSIS

QUANTITATIVE

Trend analysis using the Excel function to forecast Import and

Export data for the next 6 years.
trend analysis using the Excel function to forecast Import and
Export data for the next 6 years.
The result of the second study forms the basis of the first study

REGRESSION ANALYSIS: RELATION

BETWEEN GDP & GROWTH RATE AND
EXPORTS
Calendar Year

PPP GDP Per Capita

(Rs.)
India

Pak

2000

2001

132671.18

174354.64

2001

2002

139847.83

178170.14

2002

2003

145315.89

182873.86

2003

2004

157553.57

190569.54

2004

2005

171897.96

206384.69

2005

2006

191019.27

227724.32

2006

2007

212082.72

243838.27

2007

2008

235728.55

259509.51

2008

2009

246266.28

266849.38

2009

2010

265492.50

264197.90

2010

2011

292218.03

268655.86

2011

2012

313752.73

278343.72

2012

2013

331181.57

288283.84

2013

2014

354640.33

297278.93

2014

2015

380594.89

307856.51

GDP Growth
(Nominal)

India

Pak

3.98

3.91

4.94

1.97

3.91

3.11

7.94

4.73

7.85

7.48

9.29

8.96

9.26

5.82

9.8

5.54

3.89

4.99

8.48

0.36

10.26

2.58

6.64

3.62

5.08

3.84

6.9

3.7

7.17

4.14

Trade

Exports
(Cr.)

Imports
(Cr.)

851.19

292.5

686.79

308.83

997.73

217.05

1318.52

264.9

2341.18

426.74

3051.47

794.98

6106.88

1462.73

7827.37

1158.72

6532.07

1668.39

7461.03

1304.62

9255.11

1513.95

7448.34

1739.54

11233.15

2943.7

13832.53

2606.57

11352.78

3040.67

Relation of Exports with the Per capita GDPs of India and Pakistan

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.963926

R Square

0.929152

Adjusted R Square

0.916271

Standard Error

1219.702

14

Observations

ANOVA

Regression

df

SS

MS

2.15E+08

1.07E+08

Residual

11

16364410

1487674

Total

13

2.31E+08

Coefficients
-11740.8
0.025006
0.048506

Standard Error
3748.337
0.016268
0.030117

Significance F

72.13153

4.75E-07

Intercept
GDP India
GDP Pak

t Stat
-3.13227
1.537084
1.610577

P-value
0.009539
0.152524
0.13557

Lower 95%
-19990.8
-0.0108
-0.01778

Upper 95%
-3490.77
0.060812
0.114793

Lower 95.0%
-19990.8
-0.0108
-0.01778

Upper 95.0%
-3490.77
0.060812
0.114793

Relation of Exports with the GDP growth rate of India and Pakistan

SUMMARY OUTPUT

Regression Statistics
Multiple R

0.30821

R Square

0.094993

Adjusted R
Square

-0.06955

Standard Error

4359.307

14

Observations

ANOVA

Regression

df

SS

MS

21941599.9

10970799.9

Residual

11

209039157

19003559.7

Total

13

230980757

Coefficients
5581.108
437.5304
-543.401

Standard Error
4469.88694
589.324525
572.200833

F
0.5773024

Significance F

0.5775441

Intercept
India
Pak

t Stat
1.24860168
0.7424269
-0.94966848

P-value
0.2377312
0.4733849
0.3626794

Lower 95%
-4257.0465
-859.56415
-1802.8066

Upper 95%
15419.263
1734.6249
716.00445

Lower 95.0%
-4257.0465
-859.56415
-1802.8066

Upper 95.0%
15419.26
1734.625
716.0044

REGRESSION ANALYSIS: RELATION BETWEEN

GDP & GROWTH RATE AND IMPORTS
Calendar Year

PPP GDP Per Capita

(Rs.)
India

Pak

2000

2001

132671.18

174354.64

2001

2002

139847.83

178170.14

2002

2003

145315.89

182873.86

2003

2004

157553.57

190569.54

2004

2005

171897.96

206384.69

2005

2006

191019.27

227724.32

2006

2007

212082.72

243838.27

2007

2008

235728.55

259509.51

2008

2009

246266.28

266849.38

2009

2010

265492.50

264197.90

2010

2011

292218.03

268655.86

2011

2012

313752.73

278343.72

2012

2013

331181.57

288283.84

2013

2014

354640.33

297278.93

2014

2015

380594.89

307856.51

GDP Growth
India

Pak

3.98

3.91

4.94

1.97

3.91

3.11

7.94

4.73

7.85

7.48

9.29

8.96

9.26

5.82

9.8

5.54

3.89

4.99

8.48

0.36

10.26

2.58

6.64

3.62

5.08

3.84

6.9

3.7

7.17

4.14

Trade
Exports
(Cr.)

Imports
(Cr.)

851.19

292.5

686.79

308.83

997.73

217.05

1318.52

264.9

2341.18

426.74

3051.47

794.98

6106.88

1462.73

7827.37

1158.72

6532.07

1668.39

7461.03

1304.62

9255.11

1513.95

7448.34

1739.54

11233.15

2943.7

13832.53

2606.57

11352.78

3040.67

Relation of Imports with the Per capita GDPs of India and Pakistan

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.953247

R Square

0.908679

Adjusted R Square

0.892075

Standard Error

315.5305

14

Observations

ANOVA

Regression

df

SS

MS

10897199

5448600

Residual

11

1095155

99559.52

Total

13

11992354

Coefficients
-1999.57
0.008855
0.004914

Standard Error
969.675
0.004209
0.007791

Significance F

54.72706

1.92E-06

Intercept
GDP India
GDP Pak

t Stat
-2.0621
2.104133
0.630695

P-value
0.063634
0.059175
0.541122

Lower 95%
-4133.81
-0.00041
-0.01223

Upper 95%
134.6698
0.018118
0.022062

Lower 95.0%
-4133.81
-0.00041
-0.01223

Upper 95.0%
134.6698
0.018118
0.022062

Relation of Imports with the GDP growth rate of India and Pakistan

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.154027

R Square

0.023724

Adjusted R
Square

-0.15378

Standard Error

1031.673

14

Observations

ANOVA

Regression

df

SS

MS

F
0.133655

284512.2073

142256.104

Residual

11

11707841.75

1064349.25

Total

13

11992353.96

Significance F

0.876291

Intercept
India
Pak

Coefficients
1713.901
-5.34463
-65.7663

Standard Error
1057.842809
139.4694584
135.4169679

t Stat
1.62018473
-0.0383212
-0.4856577

P-value
0.133481
0.970118
0.636739

Lower 95%
-614.396
-312.315
-363.817

Upper 95%
4042.19709
301.625575
232.28444

Lower 95.0%
-614.39556
-312.31484
-363.81703

Upper 95.0%
4042.197
301.6256
232.2844

FORECASTED GDP AND GROWTH FIGURES

PPP GDP Per Capita (Rs.)
GDP Growth

Calendar Year
India

2015

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

2021

407266.28

438468.94

475048.21

515609.51

559036.34

606289.58

Pak
India

Pak

7.46

4.3

7.47

4.7

7.55

4.82

7.65

7.7

7.75

317608.14

331018.42

347383.60

365633.58

384367.75

404110.98

http://statisticstimes.com

FORECASTED EXPORT AND IMPORT

FIGURES FOR SIX YEARS (2015-2020)
FORECASTED TRADE DATA

Year

Basis: GDP of India

Exports(Cr. Imports(Cr.
)
)

Basis: GDP of Pakistan

Exports(Cr. Imports(Cr.
)
)

Basis: GDP Growth- India

Exports(Cr. Imports(Cr.
)
)

Basis: GDP GrowthPakistan

Exports(Cr. Imports(Cr.
)
)

201
6

14507.86

3212.86

12817.96

2805.54

6231.68

1328.42

6026.25

1317.26

201
7

16072.73

3562.51

14028.95

3070.84

6236.56

1328.70

5870.00

1293.30

201
8

17907.24

3972.42

15506.78

3394.58

6275.63

1330.94

5823.12

1286.11

201
9

19941.46

4426.95

17154.81

3755.62

6324.46

1333.74

5752.80

1275.33

202
0

22119.39

4913.59

18846.57

4126.23

6348.87

1335.14

5752.80

1275.33

202
1

24489.23

5443.11

20629.44

4516.81

6373.29

1336.55

5752.80

1275.33

http://statisticstimes.com

QUALITATIVE
Country

India

Pakistan

Major Export Items

Major Import Items

Pearls,
Jewellery,
Clothing,
Machinery,
Vehicles,
Metal
Products,
Tea,
Mate,
Iron
Ore, Cotton Products, Petroleum,
Precious
Stones,
Handicrafts,
Pharmaceuticals,
Leather
&
Products, Software.

Crude
Petroleum
Products,
Machinery, Pearls, Precious and
Semi-Precious Stones, Iron &
Steel, Chemical Products, Edible
Oils, Vehicles, Fertilizers.

Raw Cotton, Rice, Cotton Cloth,

Cotton Yarn, Synthetic Textiles,
Garments, Hosiery, Carpets &
Rugs, Leather, Leather Products
including Leather Garments &
Footwear,
Ceramic,
Fish
&
Fish Products.

Petroleum & its Products, NonElectrical Equipments, Transport

Equipments,
Iron
&
Steel
Products,
Edible
Oils,
Electrical
Goods,
Chemicals,
Fertilizers, Tea.

TOP 20 COMMODITIES EXPORTED FROM

INDIA TO PAK (2009 - 2014)

TOP 20 COMMODITIES IMPORTED BY INDIA

FROM PAK (2009 - 2014)

INDUSTRY WISE IMPACT ANALYSIS

Textiles and Clothing
Contributes less than one fifth to Indias exports but almost twothirds in Pakistan
Pakistan enjoys a strong comparative advantage in yarn, fabrics
and other value-added textile. India, therefore, has included these
items in its sensitive list to protect its industry.
Currently, trade in textiles and clothing between India and Pakistan
is almost non-existent.

 Iron and Steel

Unlike Pakistan, India has a well-established steel industry, and is a
net exporter of steel and steel products
abundant raw materials, highly skilled technical manpower,
and competitive labor
Pakistans iron- and steel-product imports from India account for
just a small fraction of its total imports. About 46 items are
identified as potential imports that are cheaper to import from
India on the basis of lowerunit value of Indian exports,
compared to the import unit value of Pakistans imports from the
rest of the world

 Chemicals and Pharmaceuticals

Pakistans highly dependent on imported chemicals to cater to
the needs of its agriculture and industrial sectors
Compared to Pakistan, the Indian chemical industry is well
established and has shown impressive growth over the years,
contributing about 6.7 percent to the Indian GDP
Out of the total imported chemicals and pharmaceutical
products from India, 166 items had a lower unit value
compared to the unit value of the same items imported from
elsewhere

 Automobiles
The automobile industry in Pakistan operates under franchise and
technical- cooperation agreements with leading world manufacturers
But the size of the industry and parts suppliers has remained much below
its potential because of inconsistent policies and abrupt swings in allowing
imports of fully built cars.
India has a strong engineering base, and has successfully created a sizable
capacity for production of vehicles.
Indian auto companies are highly cost-competitive due to appropriate
levels of mechanization and low-cost automation, and have achieved a
high level of productivity by embracing Japanese concepts and best
practices.

 Information Technology
India is the largest centre for business Process and IT offshore
services
IT industry in Pakistan is in its infancy, it is growing at a fast
pace, even as it struggles to catch up with the regional and
global industry
Pakistan has lagged behind other regional countries in using IT
as a catalyst for economic revival
Joint Ventures between India and Pakistan can promote IT

 Agriculture
Indian producers get subsidies on fertilizers, electricity and diesel.
More than 50 percent of agricultural incomes in Pakistan originate
from the livestock sector, which is under no threat from Indian
producers.
Past experience shows that trade between the two countries in
vegetables, lentils etc. acts as a price stabilizing force
Attractive Pakistan Punjab and the Indian Punjab (the HaryanaDelhi belt)
Imports will also force Pakistani farmers, if they are uncompetitive,
to strive to become more efficient by adopting better production,
storage and preservation techniques and reduce post-harvest
losses.

TRADE BARRIERS

REASONS FOR ANY STEEP INCREASE/FALL

IN TRADE IF ANY

RECOMMENDATIONS

Pakistan ought to concede MFN status to India, while India

ought to decrease its taxes on horticulture products, materials,
Pakistan ought to concede MFN status to India, while India
ought to decrease its taxes on horticulture products, materials,
Rationalize and simplify the technical barriers to trade
Trade facilitation through expeditious border crossings

 Coordination of border agencies

Opening of new border crossings
Quick customs clearance
Improvement of electronic data interchange, telecommunication,
and transport links
Creation of new shipping protocols
Easing of visa restrictions for businessmen. In addition, increase
railway, air, and road connections between the two countries.

REFERENCES
Khan, J.A., (Nov. - Dec. 2012), 'India Pakistan Trade Relation',IOSR
Journal of Business and Management (IOSR-JBM) ISSN: 2278487X.Volume 5, Issue, PP 01-10
Husain, I. (September 2013), 'Prospects and Challenges for Increasing
India-Pakistan Trade',Atlantic Council,ISBN: 978-1-61977-002-7
Taneja, N., Mehra, M., Mukherjee, P., Bimal, S., and Dayal, I., (September
2013), 'Normalizing India Pakistan Trade',INDIAN COUNCIL FOR
RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS, Working Paper
No. 267
Kugelman, M., Hathaway,R.M., (Jun 17 2013), 'Pakistan-India Trade:
What Needs To Be Done? What Does It Matter?',Asia Program Woodrow
Wilson International Center for Scholars, ISBN: 978-1-938027-13-0
Khan, M.S., (July 2009),'India-Pakistan Trade: A Roadmap for Enhancing
Economic Relations', Peterson Institute for International
Economics,Number PB09-15

REFERENCES

http://www.manzilpakistan.org/wp-content/uploads/2014/03/PAK-INDIA-TRADE-WORKING-PAPER-1final-version-320.pdf

http://www.dawn.com/news/1206757

http://icrier.org/pdf/working_paper_267.pdf

http://thediplomat.com/2015/02/india-pakistan-the-curious-case-of-the-mfn-status/

http://www.ciaonet.org/attachments/25701/uploads

http://www.iosrjournals.org/iosr-jbm/papers/Vol5-issue3/A0530110.pdf

http://indiapakistantrade.org/ResearchPaper.html

http://www.indiapakistantrade.org/pdf/India-Pakistan-Summary.pdf

https://www.wilsoncenter.org/sites/default/files/ASIA_121219_Pakistn%20India%20Trade%20rpt
FINAL.pdf

http://saarcstat.org/db/trade_stat/saarc_exports_by_month

http://saarcstat.org/db/statistics/merchandise_trade/growth_of_trade_and_penetration

https://www.rbi.org.in/

http://www.iie.com/publications/interstitial.cfm?ResearchID=1256

http://www.intranet.iie.com/publications/pb/pb09-15.pdf

http://lums.edu.pk/updata/publications/pdf/87.pdf