Indo-Pak illegal trade down 50%

The amount of illegal trade between India and Pakistan has decreased 50 per cent on account of resumption of good relations and the re-establishment of maritime and railway linkages, according to a study by Associated Chambers of Commerce and Industry of India (Assocham).

This had been aided by the execution of the South Asian Free Trade Agreement (Safta), with the two-way trade surging by $400 million in February 2006, the study added.

Ever since trade through the sea route between Mumbai and Karachi was restored and railways and road linkages established, the traffic of goods through illegal channels from India to the UAE, Iran, Afghanistan and Pakistan came down substantially.

Safta, too, has brought about significant changes on the Customs tariff and other trade-related barriers between the two countries, reducing transaction costs substantially, according to the study called "India-Pakistan : Rerouting Informal Trade to Formal Channels". Therefore, illegal trade, which was estimated to be to the tune of $2 billion by the end of 2004-05, had come down to $1 billion by February 2006, the study said.

Items of informal trade had largely been clothes, textile machinery, tyres, cosmetics and jewellery, drugs and pharmaceuticals.

The trade between India and Pakistan by the end of 2004-05 has been estimated at $ 602 million, which as per Assocham's estimates, exceeded $1,000 million towards the end of February 2006. India's exports to Pakistan were estimated at $506.47 million against its imports of $ 95.53 million in 2004-05.

If confidence building measures like regular exchanges between the political and bureaucratic levels of the two countries were continued, the volume of illegal trade would be wiped out and would be turned into official trade, taking the total volume trade to about $10 billion by 2010.

Illegal trade had flourished due to a developed network of informal traders across borders, lower transaction costs and lesser procedural delays and administrative bottlenecks that increased the transaction costs.