Tuesday, December 15, 2015

Prospects for India-Pakistan trade

The India-Pakistan trade is estimated to be of the order of $2 billion per year; experts think that if trade were conducted under WTO rules, it could easily expand to $40 billion per year.   However, Pakistan has been hesitating; part of the reason is fear of being overwhelmed by India.

In my opinion, the window for opening up trade while Pakistan still has some competitive advantages over India is rapidly passing.

In 2010, Pakistan ranked 85th in the World Bank's Ease of Doing Business Index; India ranked 133rd.
In 2015, Pakistan ranked 138th, India ranked 130th -- and the report cut-off date for data was even while GOI was in the process of simplifying regulations, for e.g., start up of a business.

The best time to open up for trade for two economies is, IMO, while the smaller/weaker one still has some competitive advantages. That window has passed, I think; in particular, the current Government of India is very keen on climbing up these competitive rankings, and so Pakistan will find it hard to keep up.

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