Pakistan-India Trade:

Additional Trade Challenges: Transport, Transit, and Non-Tariff Barriers
math of politically sensitive events. Indeed, the heightened talks initiated
in April 2011 leading to the MFN breakthrough were possible because
the seeds for change had already been laid in the last few years, therefore
making it possible to take bigger and bolder measures.
India and Pakistan are now in the thick of transitioning to normal
trade relations. This paper makes an attempt to assess the ground covered
so far, the challenges that remain, and the trade opportunities that are
likely to open up as the two countries normalize trade ties. On the basis
of this analysis, the paper also lays out a roadmap for future measures.
Trade Trends
Bilateral trade between India and Pakistan increased more than 10 times
between 2000 and 2010. Total trade between the two countries was $2.5
billion in 2010, of which India’s exports to Pakistan were $2.2 billion
and imports were $0.3 billion. Despite the positive list maintained by
Pakistan, India has always had a trade surplus with Pakistan. India’s trade
balance as a proportion of its total trade with Pakistan increased from 40
to 80 percent between 2000 and 2010.
India’s top 10 exports to Pakistan at the six-digit classification of
items accounted for 67 percent of India’s total exports to Pakistan in
2010. The top commodities exported from India to Pakistan that year
included sugar, cotton, fabric, and organic chemicals. Sugar alone accounted
for 24 percent of exports. Dates are the most important item
being imported from Pakistan, accounting for 18 percent of total imports
in 2010. India’s top 10 imports from Pakistan at the six-digit level accounted
for 63 percent of its total imports from Pakistan in 2010. Other
items in the top 10 imports included cement, woven fabrics of cotton,
petroleum oil, organic chemicals, and plastic (see Table 1).
Trade PossiBiliTies
The still-restrictive trade regime and the presence of large informal trade
flows indicate that there is a huge untapped trade potential between India
and Pakistan. There are items that the two countries can import from each
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