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For India Inc, Pakistan is a sour kinnow

As Pakistan awaits an IMF bailout to avert the ongoing currency crisis, will PM designate Imran Khan prefer a call from India?

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A 5-hour drive from Islamabad to Lahore in the winter of 2012 had shown me some glimpses of a fractured economy. As you leave Islamabad and hit the motorway (M2), the dull, barren and rocky countryside makes the drive soulless but for a few stretches of sprawling yellow carpets of mustard and rapeseed fields, and lush green rice plantations, fringed by a dash of orange of the abundantly harvested Pakistani citrus fruit, kinnow. The country that has built an excellent network of highways cuts a pitiful face with an endless array of smoke-spitting cars and trucks, well past their expiry, on the road.

In 2012, when Anand Sharma, the then minister for commerce and industry, led a trade and media delegation to Pakistan, there was a lot of hope in the air. The country across the Wagah border looked pretty similar to India's post-Emergency Maruti-Premier Padmini era. Pakistan, with its economy teetering on the verge of collapse, ran at least three decades behind India.

In contrast, Indian roads looked prettier with a wide choice of cars. Sanjay Gandhi-sponsored Maruti Motors, which died a natural death during the Emergency and resurrected later with the help of Japanese auto giant Suzuki, had already rewritten India's auto sector history.

Pakistan government also forged an alliance with Suzuki sometime in 1982 to set up Pak Suzuki Motor Company, but it continued to sell outdated models junked from other markets. Pak Suzuki ruled the market with more than half the share, with Honda and Toyota bringing in a semblance of competition, though the troika faced constant allegations of an auto cartel.

For India Inc, Pakistan market was almost like a low-hanging juicy kinnow, but too sour. Tatas and Mahindras were keen to enter, and so were Munjals, Bajajs and Ruias. Rajan Bharti Mittal of Bharti Enterprises, a part of the delegation in 2012, then told me that building infrastructure in Pakistan for mobile roaming was not a big issue. Pakistan is less than one-sixth of India, but the sixth largest country by population, and a potential market with 20 crore people. Most importantly, Pakistan's customers were not averse to Indian products, but the political cacophony spiritedly drowned meek voices of India Inc.

In the process, India lost out a big, ready-to-serve market. For instance, the passenger car sales in Pakistan grew at 13% CAGR since 2013-14, primarily on the back of low motorisation rate. Of course, increasing consumerism, rising incomes and low interest rates also helped the cause. Its Auto Policy 2016-21, announced in March 2016, which offered tax incentives, drew several foreign players like Renault, Nissan, Kia, Volkswagen and Hyundai. Interestingly, many Chinese carmakers are also gearing up to satisfy Pakistan's insatiable appetite for sporty cars.

The recent free-fall of the Pakistani rupee against the US dollar – four devaluations since December, sliding nearly 18% before a recent pullback – has given life to Chinese companies with the latter willing to use the RMB (yuan) as currency in Pakistan. The two countries have increased the rupee-yuan swap, doubling it to 20 billion yuan for the next three years and started using the local currencies for bilateral trade, reducing dependence on the US dollar and, with it, volatility in exchange rate parity.

While India and Pakistan celebrate their 72nd Independence Day in a couple of days, we should rethink the bilateral thaw. As Pakistan awaits a bailout by International Monetary Fund to avert the ongoing currency crisis, will PM-designate Imran Khan prefer a call from India?

The writer is editor, DNA Money.He tweets @AntoJoseph

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