Pakistan-India Trade:

Pakistan’s Trade with India:
Thinking Strategically
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IJAZ NABI
On February 29, 2012, Pakistan granted India Most Favored
Nation (MFN) status, paving the way for a normal, World Trade
Organization (WTO)-consistent trade relationship between the
two largest economies of South Asia. (India granted MFN to Pakistan in
1996.) It would be a mistake, however, to take for granted sustained trade
growth following this announcement. Pakistan-India relations are complex
and many factors can intervene to disrupt the smooth flow of trade
and other economic transactions. This essay 1 argues that Pakistan, but also
India, has to take a strategic, regional approach in managing its trade and
economic relationship with India to prevent future disruptions in trade
and thus maximize the benefits of this important announcement.
BaCKGround
Before 1947, the regions constituting Pakistan and India had been part
of a large, well-integrated economy, and for centuries people, money,
and goods had moved unimpeded between the regions. This routine
exchange was given a new vigor in the century leading up to 1947, when
canal irrigation, transport networks, and a newly established legal framework
unleashed market forces on an unprecedented scale.
Following partition (and independence from colonial rule) in
1947, despite the violence and transfer of populations, deep economic
ijaz nabi is a visiting professor of economics (and former dean) of the School
of Humanities, Social Sciences, and Law at Lahore University of Management
Sciences (LUMS).