Asian Research Thesis Index

Abstract

With the trade normalization process between India and Pakistan gathering momentum since November 2011, new
vistas for enhancing bilateral trade have been opened between the two countries. This study has analyzed the trade
potential between India and Pakistan, and examined how this prospective is disregarded owing to several socio-
political reasons. The trade prospects between India and Pakistan is estimated to lie between US$10.9 billion and
US$19.8 billion.
The study has assessed the products which are of vital importance for a massive growth in trade but unfortunately
these products or items fall in the negative or sensitive lists and non-tariff barriers. In the services sector, trade
possibilities have been identified in Information Technology (IT), Business Process Outsourcing (BPO), health and
entertainment services. This trade potential remains unrealized largely due to impediment in transport and transit
facilities, restrictive visa regime, continuation of large informal trade flows, and presence of non-tariff barriers to
trade between India and Pakistan. Since the Foreign Direct Investment (FDI) regime between the two countries is
liberalized, the study has identified sectors which hold potential for investments, and are likely to deepen the trade
linkages between India and Pakistan. Moreover, the research also highlighted traders' motivation for doing business
in both markets as well as challenges and obstacles in expanding bilateral trade.
Findings of the current study reveal very crucial aspects of the bilateral trade between Pakistan and India. The first
and foremost is the significance of the trade relations within the region than expanding relations with the remote
partners. Interest of both the countries in expansion strategy of services sectors and the existence of favourable
demand to enhance bilateral trade may create huge potential for expansion of trade relations. The study also reveals
that political disputes and the non-tariff barriers have been the major problems for businessmen of both countries
in doing business in each other's countries. Analyzing the geo-economic conditions of both the countries, the study
urged for a strong trade relation between Pakistan and India.

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