January 26, 1954
Indo-Pakistan Trade
(Contributed)
T
R A D E relations between I n d i a the export surcharge on coal was
and Pakistan have been largely removed. Consequently the agreegoverned during 1953 by the trade ment left out raw jute, in the list
agreements (a) of August 5, 1952 of imports and of coal, cotton textiles
and (6) of M a r c h 19, 1953. The and jute goods in the list of exports.
trade between the two countries has In M a r c h 1953, however, a threetherefore to be viewed in the light year agreement (discussed later) was
concluded arranging for imports of
of these agreements.
raw
j u t e from Pakistan and exports
T h e Agreement of February 1951
marked the end of the trade dead- of coal from India.
T w o separate schedules showing
lock between I n d i a and Pakistan
w h i c h had followed the non-devalua- imports from and exports to Pakition of the Pakistan rupee in Sep- stan were appended to the agreetember 1949 and permitted the ment of August 5, 1952, but trade
movement of goods between the two in items not referred to in the schecountries to be resumed. This agree- dules was not prohibited. To ensure
ment covered specified quantities of freer trade in these unspecified items,
raw jute, food grains, hides and import and export licences appliskins, etc, amongst imports into I n d i a cable to soft currency area countries
and of coal, iron and steel, cotton were made applicable to these untextiles and certain other miscellane- listed commodities by both the counous commodities amongst exports to tries.
Pakistan. The agreement which was
There were about twenty-six items
v a l i d upto June 30, 1952 was ex- in the Schedule ' A ' representing
tended upto August 7, 1952. The exports from I n d i a to Pakistan such
flow of trade under this Agreement, as pig iron, manufactures of iron
though it d i d not reach to the desir- and steel, wood and timber, mustard
ed level, was fairly satisfactory.
o i l , b i d i leaves, tobacco, bidies,
On the termination of the agree- spices, myrobalans and extracts,
ment, the Government of I n d i a de- textile machinery etc. Imports into
cided to enter i n t o a short-term I n d i a from Pakistan covered hides
Agreement covering exports to Paki- and skins, fish, poultry and eggs,
stan of certain categories of iron and printed books, spices, etc (see Table
steel, railway materials, etc, against I).
Complete information as regards
imports of hides and skins, fish,
spices and minor commodities. Raw the actual shipments effected during
jute was not included in the list as the period of agreement as against
Pakistan had levied a discriminatory the agreed quantities of commodities
licensing fee and export duty on raw is not available. However, such i n jute exported to I n d i a from July formation as could be had from the
1952. The special licensing fee for Accounts relating to Foreign (Sea,
exports of raw jute to I n d i a was Land and A i r ) Trade and NavigaRs (P) 2-8 per maund, and the ex- tion of India is presented in stateport duty on kutcha bale was Rs (P) ment ' A ' attached. This statement
3-12 per md as against Rs 3 per md does not, however, cover all the
commodities as covered by the Agreein the case of pacca bales.
, As this levy was a violation of the ment. T h e following table compares
G A T T , the I n d i a n delegate present- the position of total Indo-Pakistan
ed a complaint to the Seventh Ses- trade during the period of the Agreesion of the Contracting Parties to ment and the corresponding period
the G A T T w h o asked both parties of the previous year.
to the dispute to hold preliminary
discussions. As the supply position
of raw jute was satisfactory in view
of a larger crop, I n d i a d i d not want
to import raw jute from Pakistan,
Unless the discriminatory surcharge
was removed. Pakistan, on her side,
was making efforts to import coal
tion which India was levying a higher
export surcharge) from countries
er than I n d i a , and was not anxito import coal from India u n t i l
141
From the table it would be
obvious that the fall in the total
trade between the two countries was
occasioned by a fall both in imports
from and exports to Pakistan. W h i l e
imports into I n d i a declined by 50
per cent, Pakistan's imports from
I n d i a declined to the extent of 78
per cent over the corresponding
period of 1951-52. T h e decline
would have been still greater had it
not been for import of raw jute f r o m
July 19531 The balance of trade
for India, therefore, swung from a
surplus of Rs 5.9 crores in 1951-52
to a deficit of Rs 13.8 crores in 195253The restrictive import policy adopted by Pakistan during 1952-53,
w i t h a view to correcting her balance
of payments was mainly responsible
for this sharp fall in her imports
from India. The general restrictive
character of the import policy pursued by Pakistan during 1952-53
appears, however, to have been
directed particularly against India.
For, while imports from I n d i a duri n g the period of the agreement
declined by about 80 per cent over
the corresponding period of the pre-i
vious year, total imports into Pakistan from all sources during July to
June 1953 showed a decline of only
50 per cent over July to June 1952)
Among the principal commodities
included in the agreement but w h i c h
did not reach the agreed level of
imports into Pakistan, p i g iron
bidi leaves, tobacco, bidies and
spices figured prominently (Sett
Statement A . ) This was largely due
to restrictive measures taken by Paki
stan.
The Pak import O G L X I I I was
replaced b y O G L X I V i n August
1952 imposing drastic cuts in imports. Certain piecegoods and yarn|
jute manufactures, matches, spices,
etc (largely imported from I n d i a )
were important. T h e limited O G L
X I V was also subsequently cancelled
in November 1952 and thereafter
all impotrs into Pakistan were placed
under licence.
i
On August 22, 1952 an import
duty of 35 per cent ad valorem was
imposed on betel leaves by Pakistani
Indian bidies were made subject to
an import duty of 50 per cent from
M a r c h 1952 and bidi leaves were
also subsequently removed from
O G L . This imposed considerable
January 26, 1954
hardship on the beedi-industry in
Pakistan and some manufacturers
were forced to use cigarette wrapp i n g paper as a substitute for bcedi
leaves! In December 1952, however,
the East Bengal Forest Department
found a new substitute leaf " K u m b i " for rolling beedi tobacco.
Agreed exports to Pakistan of
Myrobolans which are used as a
tanning material were steady during
the period. But the removal of i m port duty of 30 per cent ad valorem
on synthetic tanning materials by the
Government of Pakistan in February
1953 affected imports of myrobalans
from India in the subsequent
months.
into Pakistan.
A g a i n , Pakistan
entered into long-term arrangement
w i t h countries like Japan and I t a l y
for imports of textiles, machinery
and other consumer goods against
exports of specified quantities of raw
jute and raw cotton to stabilise her
economy. M o r e recently, the Pakistan Government decided to import
textiles worth Rs 4 crores on their
own. Of this, only meagre orders
are expected to flow to India. Second-hand gunny bags and new
jute goods which were previously
exempt from import duty were also
made subject to import duties of 45
per cent and 30 per cent ad valorem
respectively in M a r c h 1953. These
were probably imposed to protect
Cotton and jute textiles which
were not included in the agreement
but constituted important items of
India's exports prior to the disruption of trade relations d i d not also
escape the import cuts. The import
duty on cotton textiles (other than
those from U K ) was raised from 30
to 60 per cent ad valorem in June
1952 (ie, prior to the Agreement),
but in view of the precarious foreign
exchange position, it was decided
in M a r c h 1953 not to grant any
licences for import of cotton textiles
149
her " i n f a n t " jute industry.
Following the discussions in the
Inter-Sessional Committee of the
G A T T ( i n February 1953) I n d i a
and Pakistan entered on M a r c h 19,
1953 into a three year trade agreement (July 1, 1953 to June 30 1956)
f o r exchange of coal for jute. Pakistan agreed to sell to I n d i a in each
jute year (July-June) 18 to 25 lakh
bales of jute. Pakistan also removed the discriminatory licensing fee
and the discrimination against I n d i a
involved in the differential export
duties on kutcha and pucca bales.
India, for her part, removed the
export surcharge on coal. The trade
in these commodities is set out below : —
THE ECONOMIC WEEKLY
January 26, 1954
We have considered so far the recorded trade between I n d i a and
'Pakistan. But there are grounds for
believing that considerable smuggling goes on across the long land
frontiers. This smuggling has been
intensified by the fact that Pakistan
now follows an over-all restrictive
import policy while Indian import
policy is fairly liberal; this causes
wide disparities in the prices of several imported goods between the two
countries. Besides, of several goods
of which I n d i a had a surplus, Pakistan has a deficit. It was officially
stated by Dr Punjabrao Deshmukh
in M a y 1953 that one of the factors
causing a scarcity of sugar in India
at that time was the smuggling of
sugar to Pakistan. (This w o u l d
have given the I n d i a n Government
considerable opportunity for an
" arbitrage " profit but the opportunity was missed.) M o r e recently,
cotton textiles are being probably
smuggled to Pakistan, the transaction
being financed by import and sale
of gold by Pakistani nationals in
India. There have been reports
(Pakistan Times, Dec 3, 1953) that
gold prices in India were lower than
those in Pakistan and yet gold from
Pakistan was being sold in I n d i a at
lower prices. This gives grounds for
the belief that the proceeds in
Indian rupees of such sales of gold
were probably used to finance the
smuggling from India of commodities which were in short supply in
Pakistan. The profits on the second
transaction probably cover the losses
on the sale of gold. ( T h e number
of persons crossing the border at
Wagah is reported to be about 200
per day.) Anyhow data on this
trade are not available.
From the above study of IndoPakistan trade, it appears that the
trade has been strangulated by various import control and tariff measures taken by the Government of
Pakistan. Over 1954, hangs a question-mark. W i l l 1954 see a .further
silting up of channels of legal trade
and throw wide open the flood gates
of smuggling. The future political
relations between the two countries
alone can give the answer.
Jute Research
In an effort to explore new markets and utilities for jnte, the Indian
Central Jute Committee organised a
technological research re-organisation
scheme and the expert committee
which was appointed has made its
recommendations to the Government of India. The implementation
of the scheme recommended is
expected to cost about Rs 2 lakhs
annually.
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