A ban by any other name
The government is indeed showing considerable restraint by not opting for a knee-jerk reaction to India’s provocation
In the aftermath of last week’s suicide bombing on a bus carrying Indian security forces in occupied Kashmir, India has moved to escalate tensions with Pakistan. It has all but banned imports from its western neighbour. Having withdrawn the MFN status from Pakistan, India has raised import duty by 200 per cent.
Pakistan mostly exports fresh fruits, tomatoes, cement, petroleum products, minerals, finished leather, inorganic chemicals, raw cotton, spices, wool, rubber products, surgical instruments, plastic dyes and sports goods. In fiscal year 2017-18, these exports earned Pakistan a revenue of $488.5 million. India, on the other hand, exported raw cotton, cotton yarn, chemicals, plastics, manmade yarn and dyes to Pakistan worth $1.92 billion.
Pakistan has options against India available under Safta and the WTO. But despite the trade imbalance and escalation of the economic war, Islamabad has decided not to overreact to New Delhi’s moves and to take action with great care. The government is indeed showing considerable restraint by not opting for a knee-jerk reaction to India’s provocation. However, the loss of precious foreign exchange at a time when the country is already struggling with its liabilities will intensify the economic challenge the government is faced with.
People most affected by this move will be the growers and exporters in Pakistan and consumers in India who will either have to fork out extra cash owing to the enhanced duty or will be forced to look for alternatives. However, with jingoism at its peak in India, it is unlikely that the Indian side will be deriving much benefit by making import of Pakistani goods prohibitively expensive. Pakistan, on the other hand, has to try and find some way to either get things back to normal or find some other way to make up for the loss of revenue. A tit-for-tat approach would obviously hurt India more but it would come at the cost of further damaging the frayed ties.
Published in The Express Tribune, February 19th, 2019.
Pakistan mostly exports fresh fruits, tomatoes, cement, petroleum products, minerals, finished leather, inorganic chemicals, raw cotton, spices, wool, rubber products, surgical instruments, plastic dyes and sports goods. In fiscal year 2017-18, these exports earned Pakistan a revenue of $488.5 million. India, on the other hand, exported raw cotton, cotton yarn, chemicals, plastics, manmade yarn and dyes to Pakistan worth $1.92 billion.
Pakistan has options against India available under Safta and the WTO. But despite the trade imbalance and escalation of the economic war, Islamabad has decided not to overreact to New Delhi’s moves and to take action with great care. The government is indeed showing considerable restraint by not opting for a knee-jerk reaction to India’s provocation. However, the loss of precious foreign exchange at a time when the country is already struggling with its liabilities will intensify the economic challenge the government is faced with.
People most affected by this move will be the growers and exporters in Pakistan and consumers in India who will either have to fork out extra cash owing to the enhanced duty or will be forced to look for alternatives. However, with jingoism at its peak in India, it is unlikely that the Indian side will be deriving much benefit by making import of Pakistani goods prohibitively expensive. Pakistan, on the other hand, has to try and find some way to either get things back to normal or find some other way to make up for the loss of revenue. A tit-for-tat approach would obviously hurt India more but it would come at the cost of further damaging the frayed ties.
Published in The Express Tribune, February 19th, 2019.