Pakistan-India Trade:

Additional Trade Challenges: Transport, Transit, and Non-Tariff Barriers
other instead of from elsewhere in the world. In order to identify these
items and assess the magnitude of trade possibilities (referred to as trade
potential) between the two countries, in late 2011 the author calculated an
estimate of potential bilateral trade. Products having trade potential were
identified as those with (a) adequate demand in the receiving country and
(b) adequate supply capabilities in the source country. The exercise was
conducted by posing Pakistan as a supplier to assess its possibilities to India,
and then by posing India as the supplier country.
The results of the exercise show the existence of an estimated bilateral
trade potential of $25.2 billion in 2010, which is 10 times larger than
the current $2.5 billion trade (Taneja and Kalita 2011).
India has an untapped export potential of $21.1 billion, of which
$7.2 billion can be accounted for by petroleum products alone. Exports
of petroleum products by India to Pakistan can increase manifold with
Pakistan’s granting of MFN status to India. Compared to Bangladesh,
Sri Lanka, and Nepal, India’s exports to Pakistan in this sector are quite
low. In 2010, India’s petroleum oil and products exports to Nepal were
the highest at $627.8 million, followed by Sri Lanka at $598 million, and
Bangladesh at $110.1 million.
The 10 largest items having export potential from India to Pakistan
accounted for 45.5 percent of total export potential. Cotton and organic
chemicals like para-xylene, which are already major export commodities
to Pakistan, are shown to have additional potential for exports of $459.8
million and $230 million, respectively. Other items in the top 10 products
having export potential include light petroleum oils & preparations,
motor vehicles, telephones, and tea (see Table 2).
Pakistan’s export potential to India in 2010 was $4.1 billion, of
which $1 billion was petroleum products. The value of the 10 largest
items with export potential from Pakistan to India was $2 billion, which
accounted for 49 percent of total export potential. Dates have an additional
export potential of $52.3 million. The top 10 products having
export potential include petroleum oils, cotton, jewelry, and electric
generating sets (see Table 2).
It is to be noted that India and Pakistan have an export potential in petroleum
oils. However, at a disaggregated level, Pakistan’s major petroleum
oil export is base oil, while India’s comparative advantage within petroleum
oil lies in high speed diesel, aviation turbine fuel, fuel oil, and lubricating oil.
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