Pakistan-India Trade:

Nisha Taneja
the costs they incurred prior to the opening of the road route and liberalization
of the sea route.
The key land route Delhi-Amritsar-Attari (road-cum-rail) was
compared with the more indirect Delhi-Mumbai-Karachi route (landcum-sea).
The latter was used because the Delhi-Attari route was
not always accessible due to various impediments associated with rail
transportation. Additionally, the most important sea route connecting
Mumbai and Karachi was compared with the more indirect Mumbai-
Dubai-Karachi route. The latter route has for several years been used to
transport items not on the positive list.
The transaction cost elements for which data was obtained included
the cost of transportation and other transaction costs (such as bribes to
various authorities, notably those with customs and railways). Based on
the data collected, a comparison was undertaken of total transaction
costs—in terms of absolute costs, and in terms of efficiency measured by
costs incurred per container per kilometer.
The survey results indicated that absolute transaction costs per container
on the indirect route were much higher than those accrued on the
direct routes. Thus, on the Mumbai-Dubai-Karachi route, transaction costs
were 1.3 to 1.7 times greater than those between Mumbai and Karachi. The
discrepancy was found to be even more glaring with the Delhi-Mumbai-
Karachi route. Here, transaction costs were 2.7 times greater than those on
the direct route between Delhi and Attari (see Table 4).
In terms of efficiency (transaction costs incurred per container per
kilometer between direct and indirect routes), the study found that
the indirect Delhi-Mumbai-Karachi route is 1.9 times more efficient
than the direct Delhi-Attari road-cum-rail route, and that the indirect
Mumbai-Dubai-Karachi route is 2.6 times more efficient than the direct
Mumbai-Karachi route.
A useful insight from the above analysis is that to overcome barriers
posed by the trade and transport regimes, traders developed alternative
routes where liberal markets in trade and transport allowed for
greater efficiency. There is not much incentive, then, for traders to use
the direct inefficient routes for trade between India and Pakistan. This
also explains the persistence of trade through indirect routes for almost
six decades. The switch to direct routes can happen only if there are
substantial improvements in efficiency. Since 2005, a number of trade-
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