Trade Tripped

Jun 16 2014, 02:28 IST
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SummaryIndia needs to correct trade distortions with SAFTA nations to become a regional leader

While regional cooperation and leadership might be on the new government’s mind, given how PM Narendra Modi invited SAARC government heads to his swearing-in, it has to first deal with the state of trade with India’s neighbours if such goals are to be attained. According to a World Bank blog, for India, trading with the other SAFTA (South Asia Free Trade Agreement) nations is far more expensive than with Europe or the US. Given the costs, the volume of trade also remains low and therefore, of little leverage.

While experts have long held that India developing stronger economic ties with Pakistan could help overall bilateral relations, the World Bank and UNESCAP data analysed in the blog post point out that the costs of trade between the two countries is twice that of the cost of trade between the US and China. The rigid bureaucratic walls put up for trade between the two countries is discouraging. For example, only 137 items of export can cross the border at Wagah-Attari, while the rest have to take the more expensive sea or air routes. In the SAFTA region, the number of documents required for clearing both exports and imports are the highest when compared to regional treaties under

NAFTA, Mercsour, and the ASEAN. Not only do SAFTA countries, including India, have very restrictive land transport policies for cross-border trade—transloading, or reloading of goods from the exporting country’s trucks on to importing country ones at the border, and discordant border permit protocols are all too common—none have moved on transit agreements that could remedy these either. Given how landlocked parts of the subcontinent—India’s north-east, Afghanistan and north-western Pakistan—would benefit greatly from cross-border trade, India needs to correct this distortion.

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