KARACHI, July 10: The State Bank of Pakistan has called for more liberalisation of trade with India which it believes will be more beneficial for Pakistan, as the country could save hundreds of millions of dollars by importing from India instead of elsewhere.
The SBP in its research book, “Implications of liberalizing trade and investment with India”, suggested joint ventures to benefit from the Indian experience in different sectors.
The report says the situation is disappointing because intra-regional trade remained stagnant at less than two per cent of the total trade in the last 25 years. Of the total value of Pakistan’s exports in FY04, 32 per cent represent those items which are also imported by India from the rest of the world, constituting one-third of the total Indian imports.
About 1,181 items worth $3.9 billion are common between Pakistan’s exports and India’s imports during FY04, covering 45 per cent of the total items exported by Pakistan, says the report.
About 70.3 per cent of the common items exported from Pakistan have unit values less or equal to Indian imports’ unit values. “There is a large scope for export of these items simply by producing the quality required in India. The potential of trade (exports plus imports) between the two countries estimated by the SBP amounts to $5.2 billion,” said the report.
In FY04, there were 2,646 common items of Pakistan’s imports worth over $7 billion, while under these items India also had exports worth over $15 billion. The SBP analysis revealed that for 48.7 per cent of the items in FY04, the unit values for Pakistan’s imports were more than the unit values of India’s exports.
Even after excluding the items which are currently permissible for imports from India, about 45 per cent of them still remain in the common list which could be imported from India at a lesser cost than the current cost of import from the rest of the world.
“Allowing import of such items from India (i.e. expanding the current list of positive items) will give Pakistan an average saving estimated between $400 million and $900 million,” said the report.
The report observed that Pakistan had adopted a conscious strategy to gradually open trade with India. On the other hand, India does not impose equivalent formal restrictions on exports to or imports from Pakistan, though it also has sensitive list of items which are not allowed.
The SBP research identified potential sectors for mutual cooperation between India and Pakistan as agricultural products, tires, auto spare parts, minerals, chemicals, pharmaceuticals, leather, textiles, telecommunications, gas pipeline and electricity generation using coal and wind energy in Sindh, Pakistan.
The report said India was the major source of raw material (iron ore) for the iron and steel industry and accounted for 69.2 per cent of the total imports of iron ore in FY04.
Unlike Pakistan, India has a well-established steel industry and is a net exporter of steel and steel products. In FY04, Pakistan imported $662 million worth of iron and steel products (326 items) of which India supplied only 25 items worth $7.1 million. About 46 items are identified as potential imports that are cheaper to import from India on the basis of lower unit value of Indian exports, compared to the import unit value of Pakistan’s imports from the rest of the world.
During FY03 and FY04, Pakistan imported 4.3 per cent and 6.8 per cent of its total imports of chemicals and pharmaceutical products, respectively, from India. Out of total imports of $2.9 billion (1105 items) in FY04, India supplied 353 items worth $196.8 million. The report suggested that Pakistan could benefit from chemicals and pharmaceuticals industries of India.
