A foundry equipment manufacturer in India procured an order of
Rs 7crores for supplies to a new foundry in Pakistan in 2004.
The equipment was routed through Dubai with all signs of India
removed from the machinery. The Pakistani importer had to pay at
least 17 percent more than what he would have paid if he could
have imported the equipment directly from India.
In any case the cost of similar equipment from other countries would
have been higher by at least 35 percent, so the Pakistani
businessman soundly bought the equipment from India. When he
will need to buy spare parts, he would follow the same circuitous
route. Similar experiences obtain in many such situations, where
goods worth hundred of crores from India and Pakistan are bought
through either a circuitous route or clandestine channels.
However, times seem to be changing and the greater social impacts
seem to have made everyone alive to the fact that every action does
have its rather, grave, economic implications which cannot but be
taken into account. Regional and bilateral trade, more often than
not, have been the first casualty in cross-border conflicts. Its a
double whammy and therefore, costs tend to be multiplicative rather
than additive in their emergence and effect.
A simple back of the envelope calculation of such costs indicates
... success came from its decentralization of power, low prices and equipment cost, and the speed rotation of stocks. The company have a ... . For example, Carrefour introduced its own brands as a low-cost alternative but still focus on its quality. Carrefour knows that ...
that costs of conflict in addition to the costs of lost trading
opportunities more often than not constitute a not so significant
proportion of GDP. Had it not been for these costs the impact on
social development could have pushed most countries engaged in
cross-border conflict a few notches up the HDI. Conflict deterrence,
therefore, seems appropriate and a Rupee saved, is therefore a Rupee
earned. In times of fiscal stringency with ever widening costs of
running a country, such cost cutting efforts are most welcome.
More significant are the costs to the consumer and the producer –
the most significant segments of the social dynamo. A look at Indo-
Pak trade is rather instructive about the need to make economics
central to all our efforts.
Admittedly, Indo-Pakistan trade is competitive rather than
complimentary, and according to some trade pundits, there is little
scope for expansion. However, a large informal, illegal, border, call
it what-you-like trade indicates the contrary.
Though official bilateral trade figures are pegged at slightly less
than $400mn, illegal trade is $1.5-2bn. Informal trade, through third
country like the foundry equipment purchase, is another $1bn. Some
talk of a range of $2-8bn! Official trade figures apart, informal and
illegal trade are mere guesstimates. Nevertheless, they indicate the
huge potential for trade.
The size of market demand, therefore, cannot be dismissed as piffle.
Business on either side hunts for market access, market penetration,
market share in all regions except in countries with contiguous
borders. Does it make sense or is it force of circumstance? Obviously
the latter. Going by the unofficial figures, who wouldnt want to
trade with there neighbours.
In all this number crunching, the plight of the consumer and the
producer, be it in India or Pakistan is rather unenviable. The
Pakistani consumer pays higher costs virtually for every commodity
coming from India, primarily because of a round-about the
consignment takes to reach from India to Pakistan. Also, something
... negative lists of India, Pakistan and Sri Lanka are substantially larger than those in the respective bilateral trade agreements. Echoing this ... the Indian market. In view of the NTBs that severely limit the opportunities of bilateral trade between these countries, the study ... of natural gas reserves which can potentially provide low-cost energy for a downstream industrial structure. With amicable and ...
available in the neighbourhood, is not permitted becomes more costly
at the point-of-purchase, being sourced from a costlier supplier. India
should consider a preferential tariff and reduced non-tariff barriers
formula for Pakistan.
A Bilateral Investment Treaty can readily neutralise the supply
side constraints in Pakistan and the fear of being swallowed by the
giant Indian economy. At the end of the day despite huge trade
deficits countries have not stopped trading with China. Even Nepal,
Bangladesh and Sri Lanka have FTAs with India. If its only politics
pulling Indo-Pak back, then the new norm needs to be reiterated,
which is, economics will drive politics for all future and practical
India should not be looked as a competitor alone, for sure India will
win the numbers game in the short run due to its huge market size,
however, Indian market should be eyed as the hub of investments
and transfer of technology not alone for Pakistan but for the whole
At present, Pakistan, which has one of highest per capita
consumption of tea, imports 150mn kgs mainly from Kenya, even
though Pakistanis prefer Indian tea. India didnt buy from Pakistan
directly. If it did, as is experienced today, the Chana (chickpea) in
our dal in Delhi would be much cheaper being sourced through
Wagah than from Maharashtra!!. Zinetac, a patent medicine for
acidity, sells in India at Rs 7.20 for 10 tablets; it retails in Pakistan
for between Rs 80 and Rs 150.
For decades, Pakistan imports iron ore, rice and sugar from Australia,
Indonesia and Brazil respectively. If we take just another example
of Suzuki motor cars, Pakistanis pay more than twice as much than
what an Indian would do in India. The spare parts of the car are
believed to cost nearly seven times as high. Instead, it could have
been imported these from India, and enjoyed lower transport costs.
Do we see an opportunity here?
Significantly, in times of crisis we knock on our neighbours door. In
... the worlds nations. Countries like N. Korea, India, Pakistan, Israel (suspected have possessing undeclared weapons), and ... in South Asia was intensified by the Indian-Pakistani military conflict in Kashmir and almost brought the ... Eastern European markets to be opened to Western imports. However, the Cold War was a ... the Soviet Union; the Cold War. It cost both countries billions of dollars, created a ...
1990, India helped Pakistan tide over a potato and onion crisis, and
during a sugar shortage in 1997, it imported 50,000 tons of Indian
sugar. Recently, too, Pakistan sourced meat, tomatoes, onions, garlic
and potatoes from India, duty free, to rein in prices and meet domestic
Similarly, in 2003 India sourced enormous consignments of grains
from Pakistan due to an emergency. Where else could both have
acquired food supplies on an emergency basis but from its neighbour?
It is expected that if importers decide to pass through the price
differentials domestic prices would drop by 15-20%.
On the other hand, Pakistani industries and engineering sector can
benefit from the import of machinery and basic and intermediary
raw materials to reduce the costs of capital goods and machinery as
well as the finished goods. Pakistani textile industry can be the
single biggest beneficiary because Pakistan leads India in coarse
counts 20s and below and India leads Pakistan in fine counts 40s
In addition, India needs to source woven fabric from Pakistan; one
of the heaviest and more recent investments made by Pakistan
textiles sector is in the woven sector, what could be a better market?
Allowing the import of capital goods and machinery from each other
will offer substantial savings in freight costs and time due to the
Economics has assumed a pivotal role in the foreign policy exercise
among nations since the end of the Second World War. History
bears testimony to the fact that even countries of the war-ravaged
Europe displayed a vision by deciding to set aside their mutual
political and security problems for widening their bilateral and multilateral
Lets learn from the humble housewife, who seems to have more
economic wisdom than the political masters of our countries. Buy
from the cheapest source, in commercial language called forum
shopping shopping from the most cost effective forum/source. After
... that, despite the Kargil war, Pakistan was importing more goods from India than India was importing from Pakistan through a formal trade route. ... major apprehensions of Pakistan is that in case of liberal trade policy with India, the Pakistani manufacturing sector will become ... and health. The additional pressure on Pakistan is coming from the debt servicing sector. With decline of one paisa (the ...
all we just happen to be neighbours. What if our politics makes a