Informal trade between India and Pakistan (W - 141)

Informal trade between India and Pakistan (W - 141)

Publication details

  • Monday | 09 Jun, 2014
  • Abid Qaiyum Suleri, Vaqar Ahmed, Asif Javed, Muhammad Abdul Wahab
  • Working Papers
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By Vaqar Ahmed, Abid Q. Suleri, Muhammed Abdul Wahab, Asif Javed

Abstract

This paper aims to update the past estimates on the informal trade between India and Pakistan. We have, in this survey-based effort, only captured the informal merchandise flowing from India through various routes identified by Pakistani traders. The quantitative estimates provided by the wholesaler and retailer community have been validated through clearing agents and customs officials. The key sectors in which informal flow from India is taking place include fruits and vegetables, textile, automobile parts, jewellery, cosmetics, medicine, tobacco, herbal products, spices and herbs, paper and paper products, and crockery. The major routes from where these goods are channelled into Pakistan include Dubai, Kabul, Kandahar, Chaman and Bander Abbas. The minor routes include several places in the adjoining border region. Our estimates show that the value of informal flow from India to Pakistan is USD 1.79 billion annually. Despite such flows have narrowed the demand-supply gap in various product categories and created livelihoods for several people in the poor regions, it was also observed that this expansion in informal trade is hurting the manufacturing community. Pakistani producers end up competing with items that are not duty paid and found cheaper in the local market. There is also a loss of revenue to the government as these goods are not subject to usual customs procedures. In case of food, herbs, and pharmaceutical items, such merchandise is not checked for health and safety standards posing risk to human health. Given the large volumes of informal trade, it is in the interest of the government to move fast and adopt measures that lead to formalization of trade. The overall process of India-Pakistan trade normalization can certainly help achieve this endeavour.