The Hindu : India's trade with neighbours rises by 21 per cent

Online edition of India's National Newspaper
Sunday, Jan 04, 2004

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India's trade with neighbours rises by 21 per cent

By Sushma Ramachandran

New Delhi Jan. 3. India's trade with countries of the South Asian Association for Regional Cooperation (SAARC) has risen by 19 per cent in dollar terms during 2002-3 and 21 per cent in rupee terms, according to an analysis by a leading chamber.

The PHD Chamber of Commerce and Industry found that Bangladesh is India's largest trading partner in SAARC accounting for 42 per cent of official exports to the entire region during 2002-3. As far as Pakistan is concerned, bilateral trade rose by 22 per cent during the year but exports from this country have risen more rapidly than imports. Exports have gone up by 45 per cent but imports declined by 30 per cent.

The PHDCCI president, Ravi Wig, says "it is a good turning point for India to consolidate trade with SAARC countries and take it to a higher orbit of growth". He felt, however, that care has to be taken to encourage other SAARC countries to increase exports to India since some countries are keen to enhance their market access to the expanding Indian market.

He said that unless concrete measures are taken to enhance imports from other SAARC countries, the response from other members to take the SAARC concept to its logical conclusion would be less than enthusiastic. He said the Chamber is holding parleys with SAARC experts to find ways and means to enhance imports from these countries. The role model being taken is that of bilateral trade with Sri Lanka where many Indian enterprises have set up joint ventures owing to the investment-friendly policies of that country. As a result, exports from that country, which were minuscule just a few years ago are now estimated at Rs. 4.4 billion.

Highlighting the skewed pattern of trade within the SAARC countries, the Chamber notes that though Bangladesh is India's largest trading partner in the region, imports from that country comprise barely 11 per cent of imports from the entire region. Interestingly, Nepal alone accounts for over 56 per cent of the imports from SAARC countries during 2002-3 though exports to Nepal are only 11 per cent of the total exports to the region.

India's trade with Pakistan has grown by 22 per cent in rupee terms in 2002-3 but the bulk of the growth is through exports with imports actually declining. Mr. Wig expressed the hope that with the signing of the South Asian Free Trade Agreement (SAFTA) and Pakistan according MFN (most favoured nation) treatment to India, the trade between the two countries will grow exponentially. This may lead to trade through the non-official route and through third countries being carried out directly. This would have three main results for Pakistan, he felt. Firstly, tax evasion through the illegal route will be plugged, thereby raising revenue collections. Secondly, Pakistan traders can increasingly trade Indian goods with neighbours such as Afghanistan, Iran and the CIS countries. Thirdly, the unit cost of imported goods from India will be lower than the switch trade, taking place through third countries.

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