Pulwama attack: Withdrawing MFN status to Pak won't hurt Islamabad too much

In the wake of the Pulwama suicide bombing in the Kashmir valley that has killed 40 Central Reserve Police Force (CRPF) personnel, India decided to withdraw Most Favoured Nation (MFN) status to Pakistan. India had granted MFN status to Pakistan in 1996, a year after the formation of the World Trade Organisation (WTO). According to Article 1 of the General Agreement on Tariffs & Trade (GAAT), which was the predecessor of the WTO, no nation would discriminate against any other with respect to trade. This meant that any favour, immunity or privilege extended by one country to another would be extended to all other members of the WTO.

India’s move to withdraw MFN status would have little impact if New Delhi’s intention was to hurt Pakistan’s economy for providing safe havens to terror outfits like the Jaish E Mohammad (JeM), who claimed responsibility for the Pulwama attack.

India’s bilateral trade with Pakistan stands at about $2.4 billion – constituting just 0.3 per cent of its global trade of $769 billion. India’s trade with Pakistan as a component of its overall trade has hovered at these levels for years now. While India has an unfavourable trade balance with the rest of the world, it maintained surplus of almost $1.4 billion with Pakistan on exports of $1.9 billion in 2017-18.

Ever since India granted the MFN status to Pakistan in 1996, there has been a negligible rise in Pakistan’s exports to India. In 1996-97, Pakistan’s exports to India were just $36 million. By 2017-18, its exports to India stood at $489 million. This was just 1.5 per cent of Pakistan’s exports during the year. Almost half of all Pakistani exports to India comprised fruits, nuts, salt and cement.

Meanwhile, compared to its exports to India, Pakistan sold Afghanistan three times more goods (in value) and China five times more.

India’s exports have traditionally been greater than its imports from its western neighbour. In 1996-97, India exported about $157 million of goods to Pakistan, primarily sugar. By 2017-18, India’s exports to Pakistan had touched $1.9 billion -- half of it consisting of cotton, organic chemicals and plastics. Read Complete Article