May 9, 2006	Tuesday	Rabi-us-Sani 10, 1427

WASHINGTON, May 8: The unofficial trade between India and Pakistan increased by 37 per cent during 2005-06, although the official trade also has shown a slower but steady rise, says a report published in the US media on Sunday.

The report — based on a survey conducted by the Associated Chambers of Commerce and Industry of India -– notes that the two neighbours traded goods worth $965 million through unofficial channels during this period. The official trade, at $700 million, was considerably lower.

The report attributes the rise in unofficial trade to easier flow of goods and services through a developed network of informal traders who pay no taxes or duties and have lower transaction costs as compared to the formal channels.

The high transaction costs -– caused by procedural delays and administrative bottlenecks -– have forced much of the trade, including commodities that are legally tradable, to flow through informal channels, the report says.

In 2003-04, the two-way trade between India and Pakistan was estimated at $340.50 million of which India’s exports to Pakistan were estimated at $287.70 million as against India’s imports from Pakistan at $57.80 million. In 2004-05, however, India’s exports to Pakistan stood at $506.47 million as against its imports that were pegged at $95.53 million.

The study also suggests a strategy to enhance economic cooperation between India and Pakistan in commodities such as energy, tea, sugar, fresh fruits, vegetables, basmati rice, cotton, textile and machinery, pharmaceuticals and chemicals. There’s also scope for enhancing the services sector such as tourism and information technology.

According to the study, Pakistan imported more than 150 million tons of tea from the world market, whereas from India it imported only around 2.5 per cent of the total. There is a huge potential for Indian tea exporters to take advantage in Pakistan, more so because recently key exporter to Pakistan, Kenya has fallen short of its supply of tea due to drought, the report adds.

India can also increase sugar exports to Pakistan, which is currently facing a shortage of sugar due to low cane production in 2005 and is planning to place imports of 50,000 tons of white sugar from India. Traders believe that supplies from India would be viable if adequate arrangements are made for land trade to move sugar.

The report notes Pakistan has an advantage in producing various fruits and vegetables, particularly mango, guava and citrus while India has advantage in different agriculture products, such as wheat. Therefore, if trade is opened, both the countries will be enriched from each other’s experience and increase its volume of exports. Noting that the two nations are major exporters of basmati rice and key importers of edible oil, it urges them to ‘join hands’ to get better deals in the international market.

In the services sector, the report suggests increasing ‘health tourism’, which can allow rich Pakistani citizens to seek good medical facilities in India at a fraction of what they pay in Europe and North America.