Pakistan-India Trade:

Nisha Taneja
through the Attari/Wagah border, infrastructure that remains inadequate,
and the poor quality of rolling stock are some of the problems that traders
have faced for a long time, and continue to face now. A scarcity of
wagons, and difficulties in allotting them, have encouraged agents to seek
huge rents from traders in exchange for the allotment of wagons. Such a
non-transparent trading environment restricts the free flow of information,
and creates uncertainty for traders. It has also been found that traders
in Kolkata, located in eastern India, find it difficult to trade through the
Attari/Wagah land border, because information on how to trade by the
rail route is not accessible to them. Therefore, these consignments are sent
by sea to Colombo and then to Karachi (Taneja 2007). Another major
problem is that current agreements permit only certain types of wagons to
move between India and Pakistan. This limits the transportation of containerized
wagons, and consequently the movement of those commodities
that require containerization. As a result, containerized cargo destined for
Pakistan moves via a circuitous route through the port in Mumbai, instead
of through the much shorter direct route through Attari/Wagah.
The agenda for improving rail transport should include the implementation
of mechanisms that allow for the containerization of rail
cargo, an improvement in rolling stock and wagon availability, and
greater automation that will improve transparency and reduce information
asymmetries related to trade.
Sea Transport
Until recently, India and Pakistan followed a very restrictive maritime
protocol. The protocol allowed only Indian and Pakistani vessels to
carry cargo between the two countries, and did not permit Indian and
Pakistani vessels to send cargo destined to a third country from the ports
of either country (in essence, India could not send cargo to a third country
from Pakistan, and vice versa). This arrangement restricted competition
from foreign vessels, and therefore resulted in high sea freight rates
being charged by Indian and Pakistani vessels for cargo being shipped
between the two countries. However, there was no restriction on the
movement of transhipped cargo. Hence, several trading firms in India
and Pakistan transhipped their goods through Colombo. However, the
protocol was amended in 2005, and as a result sea trade between the
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