Indo–Pak trade may fall 60% to $900 mn in 2009-10, says FICCI

09 Mar '09

4 min read

Pakistan trade is likely to suffer a major setback in the coming months with total trade, presently at a little over US$ 2 billion, likely to see a 60 per cent decline in the year 2009-10 with the overall figure nose-diving to US$ 900 million. This is revealed in a quick survey conducted by FICCI amongst exporters and importers doing business with Pakistan.

Companies that participated in the survey reported that there is great unwillingness on the part of Indian exporters to travel to Pakistan to conclude even the firmed up deals. The tumultuous situation in Pakistan has created a 'fear psychosis' amongst Indian exporters and importers who say that cross border travel has been a major casualty following the recent developments in the neighboring country.

Since conclusion of business deals require multiple two-way visits and no prospects of direct visits being foreseen in the near future, generating fresh business will become an onerous task according to many companies.

'Wait and Watch' is the preferred strategy for many as developments in Pakistan have become quite dramatic and unprecedented, according to the survey.

While in the current situation bilateral trade is going down, some of the Indian exporters and importers may take advantage of third country channels. Notable amongst these channels are Dubai and Singapore. According to survey participants, businesses in Pakistan have a good degree of comfort level in doing trade through these channels and therefore Indian companies may leverage these alternatives to maintain some economic linkages with their counterparts in Pakistan.

In fact, some of the companies have already increased their stock of inventories at Dubai and Singapore to service the Pakistani market.

According to the survey participants the key sectors that would see a significant dip in cross border trade with Pakistan include textile and apparel, textile machinery, cotton, agricultural products particularly cereals, steel and chemicals.

It is interesting to note that in the case of textile machinery, companies have reported that as export of equipment is normally followed by trips by support staff for installation and maintenance, trade volume would see a dip in the ensuing months. Already, many Indian companies from this sector have taken a guarded approach by placing employee security as their prime concern over other matters.

In case of textiles, particularly cotton yarn, trade is easing between the two countries. In fact, Indian importers have already initiated talks with producers and manufacturers from countries like Egypt and Italy as these are considered as good replacements for import sources from Pakistan.

Some representatives also opined that following the recent terror attack on Sri Lankan cricket team, trade between Pakistan and other nations from the SAARC region would also take a hit. It is also likely that companies from Sri Lanka may start sourcing more quantity from Indian companies instead of Pakistani companies.

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