India Uncut

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Saturday, February 19, 2005

The politics of economics

There is, says TN Ninan in an excellent piece in Business Standard, one thing more important for India-Pakistan relations than the bus service between Srinagar and Muzzafarabad: "starting a lorry and train service to carry goods between Amritsar and Lahore."

A free-trade agreement between the two countries will be a win-win situation, as trade always is. It will, in fact, hold more benefits for Pakistan than for India. Ninan examines India's free-trade agreements with other coutries in the region and writes:
What is interesting is that India has accepted non-reciprocity as a principle in its trade deals with Nepal, Bhutan, and Sri Lanka, and will almost certainly do so with Bangladesh.

In other words, while Pakistan sees India as some kind of regional bully, the fact is that India has given more in trade negotiations than it has taken.

It is not that no trade takes place between India and Pakistan. Since official trade is discouraged, rampant smuggling is said to equal official trade (governments on both sides lose customs revenue as a result).

And there is much larger trade (estimates go up to $2 billion) through third countries like Dubai. This is an expensive way to get goods across.

The loser is the consumer in both countries, and no one can be the gainer in this game.

But Ninan sees hope in the South Asian free trade area that Saarc members have agreed to create starting 2006. If that helps free trade between Pakistan and India, he writes, "economics will have found a way around politics".
amit varma, 10:48 PM| write to me | permalink | homepage

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