INDO-PAK Trade Relations (dfdfs1)

INDO-PAK TRADE RELATIONS

GROUP - 8

OBJECTIVES

• To state the comparative advantages the two nations hold

• To study the trade patterns between India and Pakistan over the last 15 years.

• We have also studied the relation between the trade figures and the GDP of the two countries through regression analysis.

• To forecast the trade figures between the India and Pakistan.

• To study the similarity advantage the two nations enjoy.

INTRODUCTION

• International trade has become mandatory in a way, no country can afford to be self-sufficient

• Till 1990, Indian economy was a closed one and tariffs were really high, averaging around 200 %

• Post 1991, flood gates opened and MNCs started entering India in hoards

• Licence raj and vast amount of trade barriers were scrapped off, transforming India into a land of opportunities

MFN STORY…

• Both Pakistan and India joined WTO upon its formation in 1995.

• India complied with the GATT and granted MFN to Pakistan soon after joining the WTO. However, this facility has not been reciprocated by Pakistan.

• It was only as recently as 2011 that Pakistan decided to accord MFN status to India.

• In 2012, it was decided that the two countries will enjoy mutual MFN treatment from January 2013.

POLICY DEVELOPMENTS SINCE 2004

2004• Positive List

comprising 757 items allowed to be traded

2006• Positive list

expanded to 1075 items

2009• Positive

increased to 1934 items

Feb 2012• Positive list

abolished

March 2012• -ve list 1209

items, 137 items via land

LITERATURE REVIEW

1. India Pakistan Trade Relation by Javid Ahmad Khan, 2012

2. Prospects and Challenges for Increasing India-Pakistan Trade by Ishrat Husain, 2011

3. Normalizing India Pakistan Trade by Nisha Taneja, Mishita Mehra, Prithvijit Mukherjee, Samridhi Bimal and Isha Dayal, 2013

4. Pakistan-India Trade: What Needs To Be Done? What Does It Matter? Edited by Michael Kugelman Robert M. Hathaway, 2013

5. India-Pakistan Trade: A Roadmap for Enhancing Economic Relations by Mohsin S. Khan, 2009

RESEARCH METHODOLOGY

• Secondary data • Ministry of Commerce and Trade, GOI website and “statisticstimes.com”

• EX-IM data available at the source

• Monthly cumulative data added till March of every financial year

• MoM growth %age

• calculated from 2001-02 onwards wrt same month of the previous year

• YoY growth rate

• calculated from 2001-02 onwards

• %age figures of the trade between two countries • calculated in terms of India’s total foreign trade

• All the data used for this study is taken in INR

RESULTSEXPORTS TO PAKISTAN

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20140

2000

4000

6000

8000

10000

12000

14000

16000

India's Exports to Pakistan

Year

In R

s Cr

ore

2001 20022003 20042005 20062007 2008200920102011 2012 2013 2014

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00

100.00

120.00

-19.31

45.27

32.15

77.56

30.34

100.13

28.17

-16.55

14.22

24.05

-19.52

50.81

23.14

-17.93

Growth of Exports

Year

Perc

enta

ge

RESULTSIMPORTS FROM PAKISTAN

2000200120022003200420052006200720082009201020112012201320140

500

1000

1500

2000

2500

3000

3500

India's Imports from Pakistan

Year

In R

s. C

rore

2001 20022003 20042005 20062007 2008200920102011 2012 2013 2014

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00

100.00

Growth of Imports

Year

Perc

enta

ge

RESULTSTRADE SURPLUS FROM TRADE WITH PAKISTAN

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

2000

4000

6000

8000

10000

12000

Trade Surplus from Trade with Pakistan

Year

In R

s. C

rore

RESULTSTREND OF INDIA’S EXPORT & IMPORT

200020012002200320042005 20062007 20082009201020112012201320140

0.2

0.4

0.6

0.8

1

1.2

1.4

Trend of India's Exports to Pakistan as %age of Total

Exports

Year

Perc

enta

ge

2000 2001 200220032004200520062007 200820092010 20112012 201320140

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

Trend of India's Imports from Pakistan as %age of Total

Imports

Year

Perc

enta

ge

ANALYSISQUANTITATIVE

• Trend analysis using the Excel function to forecast Import and Export data for the next 6 years.

• Trend analysis using the Excel function to forecast Import and Export data for the next 6 years.

• The result of the second study forms the basis of the first study

REGRESSION ANALYSISRELATION BETWEEN GDP & GROWTH RATE AND EXPORTS

Calendar YearPPP GDP Per Capita (Rs.) GDP Growth (Nominal) Trade

India Pak India Pak Exports (Cr.) Imports (Cr.)

2000 2001 132671.18 174354.64 3.98 3.91 851.19 292.5

2001 2002 139847.83 178170.14 4.94 1.97 686.79 308.83

2002 2003 145315.89 182873.86 3.91 3.11 997.73 217.05

2003 2004 157553.57 190569.54 7.94 4.73 1318.52 264.9

2004 2005 171897.96 206384.69 7.85 7.48 2341.18 426.74

2005 2006 191019.27 227724.32 9.29 8.96 3051.47 794.98

2006 2007 212082.72 243838.27 9.26 5.82 6106.88 1462.73

2007 2008 235728.55 259509.51 9.8 5.54 7827.37 1158.72

2008 2009 246266.28 266849.38 3.89 4.99 6532.07 1668.39

2009 2010 265492.50 264197.90 8.48 0.36 7461.03 1304.62

2010 2011 292218.03 268655.86 10.26 2.58 9255.11 1513.95

2011 2012 313752.73 278343.72 6.64 3.62 7448.34 1739.54

2012 2013 331181.57 288283.84 5.08 3.84 11233.15 2943.7

2013 2014 354640.33 297278.93 6.9 3.7 13832.53 2606.57

2014 2015 380594.89 307856.51 7.17 4.14 11352.78 3040.67

REGRESSION ANALYSISRELATION BETWEEN GDP & GROWTH RATE AND EXPORTS

Relation of Exports with the Per capita GDPs of India and PakistanSUMMARY OUTPUT

Regression Statistics

Multiple R 0.963926

R Square 0.929152

Adjusted R Square 0.916271

Standard Error 1219.702

Observations 14

ANOVA

df SS MS F Significance F

Regression 2 2.15E+08 1.07E+08 72.13153 4.75E-07

Residual 11 16364410 1487674

Total 13 2.31E+08

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept -11740.8 3748.337 -3.13227 0.009539 -19990.8 -3490.77 -19990.8 -3490.77

GDP India 0.025006 0.016268 1.537084 0.152524 -0.0108 0.060812 -0.0108 0.060812

GDP Pak 0.048506 0.030117 1.610577 0.13557 -0.01778 0.114793 -0.01778 0.114793

REGRESSION ANALYSISRELATION BETWEEN GDP & GROWTH RATE AND EXPORTS

Relation of Exports with the GDP growth rate of India and PakistanSUMMARY OUTPUT

Regression Statistics

Multiple R 0.30821 R Square 0.094993

Adjusted R Square -0.06955

Standard Error 4359.307 Observations 14

ANOVA

df SS MS F Significance F

Regression 2 21941599.9 10970799.9 0.5773024 0.5775441

Residual 11 209039157 19003559.7

Total 13 230980757

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept 5581.108 4469.88694 1.24860168 0.2377312 -4257.0465 15419.263 -4257.0465 15419.26

India 437.5304 589.324525 0.7424269 0.4733849 -859.56415 1734.6249 -859.56415 1734.625

Pak -543.401 572.200833 -0.94966848 0.3626794 -1802.8066 716.00445 -1802.8066 716.0044

REGRESSION ANALYSISRELATION BETWEEN GDP & GROWTH RATE AND IMPORTS

Calendar YearPPP GDP Per Capita (Rs.) GDP Growth Trade

India Pak India Pak Exports (Cr.) Imports (Cr.)

2000 2001 132671.18 174354.64 3.98 3.91 851.19 292.5

2001 2002 139847.83 178170.14 4.94 1.97 686.79 308.83

2002 2003 145315.89 182873.86 3.91 3.11 997.73 217.05

2003 2004 157553.57 190569.54 7.94 4.73 1318.52 264.9

2004 2005 171897.96 206384.69 7.85 7.48 2341.18 426.74

2005 2006 191019.27 227724.32 9.29 8.96 3051.47 794.98

2006 2007 212082.72 243838.27 9.26 5.82 6106.88 1462.73

2007 2008 235728.55 259509.51 9.8 5.54 7827.37 1158.72

2008 2009 246266.28 266849.38 3.89 4.99 6532.07 1668.39

2009 2010 265492.50 264197.90 8.48 0.36 7461.03 1304.62

2010 2011 292218.03 268655.86 10.26 2.58 9255.11 1513.95

2011 2012 313752.73 278343.72 6.64 3.62 7448.34 1739.54

2012 2013 331181.57 288283.84 5.08 3.84 11233.15 2943.7

2013 2014 354640.33 297278.93 6.9 3.7 13832.53 2606.57

2014 2015 380594.89 307856.51 7.17 4.14 11352.78 3040.67

REGRESSION ANALYSISRELATION BETWEEN GDP & GROWTH RATE AND IMPORTS

Relation of Imports with the Per capita GDPs of India and PakistanSUMMARY OUTPUT

Regression Statistics

Multiple R 0.953247

R Square 0.908679

Adjusted R Square 0.892075

Standard Error 315.5305

Observations 14

ANOVA

df SS MS F Significance F

Regression 2 10897199 5448600 54.72706 1.92E-06

Residual 11 1095155 99559.52

Total 13 11992354

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept -1999.57 969.675 -2.0621 0.063634 -4133.81 134.6698 -4133.81 134.6698

GDP India 0.008855 0.004209 2.104133 0.059175 -0.00041 0.018118 -0.00041 0.018118

GDP Pak 0.004914 0.007791 0.630695 0.541122 -0.01223 0.022062 -0.01223 0.022062

REGRESSION ANALYSISRELATION BETWEEN GDP & GROWTH RATE AND IMPORTS

Relation of Imports with the GDP growth rate of India and PakistanSUMMARY OUTPUT

Regression Statistics

Multiple R 0.154027

R Square 0.023724

Adjusted R Square -0.15378

Standard Error 1031.673 Observations 14

ANOVA

df SS MS F Significance F

Regression 2 284512.2073 142256.104 0.133655 0.876291

Residual 11 11707841.75 1064349.25

Total 13 11992353.96 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept 1713.901 1057.842809 1.62018473 0.133481 -614.396 4042.19709 -614.39556 4042.197

India -5.34463 139.4694584 -0.0383212 0.970118 -312.315 301.625575 -312.31484 301.6256

Pak -65.7663 135.4169679 -0.4856577 0.636739 -363.817 232.28444 -363.81703 232.2844

FORECASTED GDP AND GROWTH FIGURES

Calendar YearPPP GDP Per Capita (Rs.) GDP Growth

India Pak India Pak

2015 2016 407266.28 317608.14 7.46 4.3

2016 2017 438468.94 331018.42 7.47 4.7

2017 2018 475048.21 347383.60 7.55 4.82

2018 2019 515609.51 365633.58 7.65 5

2019 2020 559036.34 384367.75 7.7 5

2020 2021 606289.58 404110.98 7.75 5

http://statisticstimes.com

FORECASTED EXPORT AND IMPORT FIGURES FOR SIX YEARS (2015-2020)

FORECASTED TRADE DATA

Basis: GDP of India Basis: GDP of Pakistan Basis: GDP Growth- India Basis: GDP Growth- Pakistan

Year Exports(Cr.) Imports(Cr.) Exports(Cr.) Imports(Cr.) Exports(Cr.) Imports(Cr.) Exports(Cr.) Imports(Cr.)

2016 14507.86 3212.86 12817.96 2805.54 6231.68 1328.42 6026.25 1317.26

2017 16072.73 3562.51 14028.95 3070.84 6236.56 1328.70 5870.00 1293.30

2018 17907.24 3972.42 15506.78 3394.58 6275.63 1330.94 5823.12 1286.11

2019 19941.46 4426.95 17154.81 3755.62 6324.46 1333.74 5752.80 1275.33

2020 22119.39 4913.59 18846.57 4126.23 6348.87 1335.14 5752.80 1275.33

2021 24489.23 5443.11 20629.44 4516.81 6373.29 1336.55 5752.80 1275.33

http://statisticstimes.com

ANALYSISQUALITATIVE

Country Major Export Items Major Import Items

India

Pearls, Jewellery, Clothing, Machinery, Vehicles, Metal Products, Tea, Mate, IronOre, Cotton Products, Petroleum, Precious Stones, Handicrafts, Pharmaceuticals, Leather & Products, Software.

Crude Petroleum Products, Machinery, Pearls, Precious and Semi-Precious Stones, Iron & Steel, Chemical Products, Edible Oils, Vehicles, Fertilizers.

Pakistan

Raw Cotton, Rice, Cotton Cloth, Cotton Yarn, Synthetic Textiles, Garments, Hosiery, Carpets & Rugs, Leather, Leather Products including Leather Garments & Footwear, Ceramic, Fish &Fish Products.

Petroleum & its Products, Non-Electrical Equipment’s, Transport Equipment’s, Iron &Steel Products, Edible Oils, Electrical Goods, Chemicals, Fertilizers, Tea.

TOP 20 COMMODITIES EXPORTED FROM INDIA TO PAK (2009 - 2014)

TOP 20 COMMODITIES IMPORTED BY INDIA FROM PAK (2009 - 2014)

INDUSTRY WISE IMPACT ANALYSIS Textiles and Clothing

• Contributes less than one fifth to India’s exports but almost two-thirds in Pakistan

• Pakistan enjoys a strong comparative advantage in yarn, fabrics and other value-added textile. India, therefore, has included these items in its sensitive list to protect its industry.

• Currently, trade in textiles and clothing between India and Pakistan is almost non-existent.

Iron and Steel

• India

• well-established steel industry

• Net exporter of steel and steel products

• abundant raw materials, highly skilled technical manpower, and competitive labor

• Pakistan

• 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

INDUSTRY WISE IMPACT ANALYSIS Chemicals and Pharmaceuticals

• Pakistan’s highly dependent on imported chemicals to cater to the needs of its agriculture and industrial sectors

• Indian chemical industry is well established and has shown impressive growth over the years, contributing about 6.7 percent to the Indian GDP

• Out of the total imported chemicals and pharmaceutical products from India, 166 items had a lower unit value compared to the unit value of the same items imported from elsewhere

Automobiles• Pakistan operates under franchise and technical- cooperation agreements

• India has a strong engineering base, and has successfully created a sizable capacity for production of vehicles.

• Indian auto companies are highly cost-competitive due to appropriate levels of mechanization and low-cost automation

• High level of productivity by embracing Japanese concepts and best practices.

Information Technology• India is the largest centre for business Process and IT offshore services

• IT industry in Pakistan is in its infancy, it is growing at a fast pace, even as it struggles to catch up with the regional and global industry

• Pakistan has lagged behind other regional countries in using IT as a catalyst for economic revival

• Joint Ventures between India and Pakistan can promote IT

Agriculture• Indian producers get subsidies on fertilizers, electricity and diesel.

• More than 50 percent of agricultural incomes in Pakistan originate from the livestock sector, which is under no threat from Indian producers.

• Past shows that trade between the two countries in vegetables, lentils etc. acts as a price stabilizing force

• Attractive Pakistan Punjab and the Indian Punjab (the Haryana-Delhi belt)

• Imports will force Pakistani farmers, if they are uncompetitive, to strive to become more efficient

INDUSTRY WISE IMPACT ANALYSIS

TRADE BARRIERS

• Non Transparent and cumbersome Administrative Procedures and Government Policies and Regulations

• Market Structure• Institutional Factors• Max. duty is generally 25% but with many exceptions (e.g. Agri.

Products)• Lack of Adequate Banking Relations:• Visa Restrictions• Trade Logistics• Communication Problems

RECOMMENDATIONS

• Pakistan ought to concede MFN status to India, while India ought to decrease its taxes on horticulture products, materials,

• Pakistan ought to concede MFN status to India, while India ought to decrease its taxes on horticulture products, materials,

• Rationalize and simplify the technical barriers to trade

• Trade facilitation through expeditious border crossings

• Coordination of border agencies

• Opening of new border crossings

• Quick customs clearance

• Improvement of electronic data interchange, telecommunication, and transport links

• Creation of new shipping protocols

• Easing of visa restrictions for businessmen. In addition, increase railway, air, and road connections between the two countries.

REFERENCES

• Khan, J.A., (Nov. - Dec. 2012), 'India Pakistan Trade Relation', IOSR Journal of Business and Management (IOSR-JBM) ISSN: 2278-487X.Volume 5, Issue, PP 01-10

• Husain, I. (September 2013), ' Prospects and Challenges for Increasing India-Pakistan Trade', Atlantic Council, ISBN: 978-1-61977-002-7

• Taneja, N., Mehra, M., Mukherjee, P., Bimal, S., and Dayal, I., (September 2013), 'Normalizing India Pakistan Trade', INDIAN COUNCIL FOR RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS, Working Paper No. 267

• Kugelman, M., Hathaway,R.M., (Jun 17 2013), 'Pakistan-India Trade: What Needs To Be Done? What Does It Matter?', Asia Program Woodrow Wilson International Center for Scholars, ISBN: 978-1-938027-13-0

• Khan, M.S., (July 2009),'India-Pakistan Trade: A Roadmap for Enhancing Economic Relations', Peterson Institute for International Economics, Number PB09-15

• http://www.manzilpakistan.org/wp-content/uploads/2014/03/PAK-INDIA-TRADE-WORKING-PAPER-1-final-version-320.pdf

• http://www.dawn.com/news/1206757

• http://icrier.org/pdf/working_paper_267.pdf

• http://thediplomat.com/2015/02/india-pakistan-the-curious-case-of-the-mfn-status/

• http://www.ciaonet.org/attachments/25701/uploads

• http://www.iosrjournals.org/iosr-jbm/papers/Vol5-issue3/A0530110.pdf

• http://indiapakistantrade.org/ResearchPaper.html

• http://www.indiapakistantrade.org/pdf/India-Pakistan-Summary.pdf

• https://www.wilsoncenter.org/sites/default/files/ASIA_121219_Pakistn%20India%20Trade%20rptFINAL.pdf

• http://saarcstat.org/db/trade_stat/saarc_exports_by_month

• http://saarcstat.org/db/statistics/merchandise_trade/growth_of_trade_and_penetration

• https://www.rbi.org.in/

• http://www.iie.com/publications/interstitial.cfm?ResearchID=1256

• http://www.intranet.iie.com/publications/pb/pb09-15.pdf

• http://lums.edu.pk/updata/publications/pdf/87.pdf

THANK YOU