Surgical strike by India: PM Narendra Modi-called meet to review Pakistan MFN status postponed

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New Delhi | Updated: September 30, 2016 7:27:48 AM

Since India’s exports to Pakistan outweigh its imports from the neighbour, some analysts say a withdrawal of MFN status is not necessary.

India, in 1996, unilaterally granted Pakistan the MFN status, which means giving equal treatment to all trading partners under the World Trade Organization (WTO) framework without any discrimination. (Reuters)India, in 1996, unilaterally granted Pakistan the MFN status, which means giving equal treatment to all trading partners under the World Trade Organization (WTO) framework without any discrimination. (Reuters)

A meeting by Prime Minister Narendra Modi — originally scheduled for Thursday— to review the most favoured nation (MFN) status granted to Pakistan has been deferred to next week, according to senior government officials.

While no reason has been officially announced, it is assumed that the government had to postpone it due to the PMO’s pre-occupation with other important issues, including the announcement of the surgical strikes by the Indian miliatry on Wednesday against terrorists operating from Pakistani soil, and an all-party meeting on Thursday. The meeting next week will be attended by senior officials of the ministries of external affairs and commerce, among others.

India, in 1996, unilaterally granted Pakistan the MFN status, which means giving equal treatment to all trading partners under the World Trade Organization (WTO) framework without any discrimination. Pakistan, on the other hand, continued to trade with India with a positive list of items and later, in 2012, replaced it with a negative list of 1,209 items. This means barring the products in the negative list, India can ship out other items to Pakistan.

While a final decision will be taken by the Prime Minister’s Office, for its part, the commerce ministry feels instead of withdrawing the MFN status to Pakistan, the government should rather consider dragging the neighbour to the WTO’s dispute settlement mechanism for its stubborn refusal to grant the same non-discriminatory trade treatment to India. Also, a withdrawal of the MFN status may boost informal trade between the two nations through Dubai and also encourage smuggling of goods, analysts said. Moreover, Pakistan may be tempted to use India’s withdrawal of MFN an excuse to enlarge its negative list of tradable items with India. While overall Indian trade will be barely affected, such a step will hurt people in the border areas of both the sides, who are dependent on imported goods to certain extent, said a senior government official. India’s merchandise exports to Pakistan touched $2.17 billion in the last fiscal, constituting 0.8% of the country’s total exports. Similarly, India’s imports from Pakistan stood at $441 million, making up for 0.1% of the former’s overall purchases from overseas.

Since India’s exports to Pakistan outweigh its imports from the neighbour, some analysts say a withdrawal of MFN status is not necessary.

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