This comes a day after a terror attack killed about 40 Central Reserve Police Force (CRPF) personnel in J&K.
India will write to World Trade Organisation (WTO) informing it about withdrawing the Most-Favoured Nation (MFN) status to Pakistan. It is also considering to raise import tariffs and may even look at closing the trade via land route.
This comes a day after a terror attack killed about 40 Central Reserve Police Force (CRPF) personnel in J&K.
"Firstly, Commerce Ministry will write to the WTO informing it about the decision to withdraw the MFN status to Pakistan by invoking article 21 of WTO which relates to security exception," a Commerce ministry official said.
With withdrawal of the status, the government can increase the import tariffs. It can also put a temporary ban on the trade pending decision of the WTO, sources said.
Meanwhile, "various options including hiking import tariffs on the most traded items such as cement and cotton are being considered by the government. The govt may also look at closing the land borders for trade. This would mean stopping the exports from India," sources said.
MFN status meant that there would not be any discriminatory tariffs on any product imported from Pakistan and that the imports from that country will be treated at par with the same products being imported from other countries.
The MFN status was granted to Pakistan by India way back in 1996 under the WTO's General Agreement on Tariffs and Trade (GATT). Pakistan, however, didn't reciprocate. The trade between the two countries was pegged at about $ 2.41 billion last fiscal.
India imported goods worth $488.5 million in 2017-18 whereas it exported Rs $1.92 billion worth of items during the same period.
India mainly exports cotton, dyes, chemicals, vegetables, iron and steel while it imports fruits, cement, petroleum products, minerals and ores, leather and spices.
The decision is likely to affect mainly trade happening through land route from Wagha and Attari border. As many as 139 items are allowed be be traded through land route.
"This is likely to push up the cost of doing business for both the countries. Trade may still happen. It may, however, take place through illegal route (porous borders) or through third country, (Dubai)" said Arpita Mukherjee, trade expert at Delhi-based think-tank Icrier. The impact of such decisions are seen over a period of time, she added.
India has a positive trade balance with Pakistan, while with the rest of the world it has a negative trade balance. Experts said that though the trade volume is not very high, there is a potential to increase it.
What It Means
Removal of MFN status means India can now enhance customs duties to any level on goods coming from Pakistan. It can also put a temporary ban on trade.
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