Improved Indo-Pak ties may help double trade from $3 billion

MUMBAI: Prime Minister Narendra Modi's cor dial meeting with his Pakistani counterpart Nawaz Sharif on his first day in office has ignited hope among industrialists across the border that trade between the two neighbours could double from $3 billion a year over the next two-three years.

The meeting on Tuesday may well signal the beginning of improvement in strained relations between the two countries and trade could be a beneficiary and an agent for change, a cross-section of Pakistani business leaders told ET, adding that this could also help curb the menace of smuggling.

“Trade relations between India and Pakistan will be the backbone of improving trade in the SAARC region. When the two countries trade more with each other, there will be a strong will and compulsion to improve relations,“ said Zakaria Us man, president of the Federation of Pakistan Chambers of Commerce and Industry.

Bilateral trade between India and Pakistan is a fraction of the estimated potential of $40 billion a year, although the two countries also trade indirectly, via mainly Dubai, to the tune of $6-7 billion annually. Estimates put smuggling between the two countries at as high as $3 billion a year. “Our stars have aligned as both countries have strong demo cratic leaders who are prag cratic leaders who are prag matic and business-orient ed. There are natural synergies between the two countries and removing barriers and opening trade channel could help trade grow to $10 billion in a few years,“ said Amin Hashwa ni, executive director of the Hashwani Group.

Many Pakistani business leaders had backed Modi in the run-up to the recent general elections. During a visit to Pakistan in November, this correspondent had met several industrialists and traders who said that they hoped Modi would win with a strong majority so that he and Sharif could work towards peace. In their meeting on Tuesday, Modi and Sharif discussed development and economic revival as a common agenda, perking up sentiment among the business community in both countries.

“Modi has a reputation of being anti-Muslim. But he also has a reputation of being pro-business. If his government takes some steps to address the concerns and facilitate trade, it will go a long way,“ said Muhammad Yasin Siddik, chairman of All Pakistan Textile Mills Association. He added,“Custom clearances take time and we face several non-tariff challenges. This should be addressed immediately.“ Indian firms, too, see benefits in improved trade ties. “Pakistan has fuel, but does not have power plants. We have power plants sitting idle. If we open rail and roads for trade, and import fuel from there, we could run our plant and even export to them part of our generation,“ said Shailendra Roy, director and head of power business of Indian engineering giant L&T.

India-Pakistan trade thrived for nearly two decades after Independence, until the war of 1965. Trade happens primarily across Pakistan's west and India's east Punjab through the Wagah border, but traders hope the two countries could open other corridors like the Munabao-Khokhrapar connecting Sindh and Rajasthan. While India may benefit from cheaper goods from Pakistan, the latter hopes to gain technical know-how and value-added engineering and IT services.