Afaq Hussain & Nikita Singla
Attention to border economies, in the absence of India Pakistan trade, says a new book.
16 January 2020: Since February 2019, India-Pakistan relations have been sliding downhill. Escalating tensions between India and Pakistan led their governments to each retaliate through successive unilateral decisions that caused losses in both countries. As in the past, traders in both countries were affected, albeit much more severely this time around.
After the militant attack in the Pulwama district of Jammu and Kashmir in February 2019, the Indian government decided to withdraw the status of Most Favoured Nation (MFN) for trade granted to Pakistan since 1996. Subsequently, it increased customs duty on all goods imported from Pakistan to 200%. Following the airstrikes in the Balakot region (Khyber Pakhtunkhwa province) later in February, Pakistan and subsequently, India barred each other from their respective airspaces, with Pakistan extending the ban for nearly five months. In April that year, the Indian government suspended trade across the Line of Control (LoC) in Jammu and Kashmir region citing misuse of the trade route by Pakistan-based elements.
Four months later, it enacted the Jammu and Kashmir Reorganization Bill, reorganising the former Indian state of Jammu and Kashmir into two union territories—Jammu and Kashmir, and Ladakh. Pakistan, thereafter, reduced diplomatic and economic ties with India — expelling the Indian envoy, partially shutting its airspace, and suspending bilateral trade and postal services.
Trade between India and Pakistan has fluctuated but persevered over the years, surviving the jolts of the Kargil conflict in 1999, and terror attacks on India’s parliament in 2001 and city of Mumbai in 2008, among other incidents. In 2008, trade began across the Line of Control that was followed by the terror attacks in Mumbai only 35 days later. Yet, this trade survived the recurring political impasses to thrive for more than a decade, achieving a turnover of INR 7,500 crores with over one lakh trucks exchanged in 10 years.
Cross-LoC trade would have died in its infancy if not for the spirit of the people involved. It is much more than a mere commodity exchange. This cross-LoC barter was not set up to be an isolated economic activity, but to open a new chapter of building bridges and re-connecting communities. The sudden and indefinite suspension of Cross LoC trade on 18 April 2019 might eventually weaken the bridges gradually built through the exchange of goods and people to people contact. Trade community, mostly belonging to the border areas of Baramulla and Poonch, have suffered losses because of the suspension of trade.
The quantum of loss incurred by traders in both India and Pakistan varied by the nature of trade and trade route. In their new book, “Unilateral Decisions Bilateral Losses”, the authors Afaq Hussain and Nikita Singla of Bureau of Research on Industry and Economic Fundamentals (BRIEF), a New Delhi-based research and policy think tank, attempt to understand trade at a micro level in terms of the dependence of border economies on cross-border trade. The book details the socio-economic impact of trade suspension, assessed through field research in Jammu and Kashmir, and Punjab. As the trade communities, and the citizens at large, stand by the decisions of the government, the book makes a call to identify adequate measures that could be taken towards sustaining these border economies, in the absence of cross-border and cross-LoC trade.
Be it in Jammu and Kashmir or Punjab, the ripples of the India-Pakistan face-off have been felt by stakeholders across social and economic fronts on both sides of the border/LoC. According to the authors’ on-the-ground interactions with stakeholders in Jammu and Kashmir, about 600 merchants and 300 labourers that were all directly involved in the day-to-day trade operations across the LoC were most hit by the trade ban. After trade along the Uri-Muzaffarabad route was suspended on 8 March 2019, the book estimates that a profit of INR 15 crores that nearly 230 India-based cross-LoC traders could have cumulatively made in 31 weeks after suspension, could not be realized.
Similarly, in Amritsar, according to the book, more than 9,000 families were directly affected because of their breadwinners’ dependence on bilateral trade; and every month, two-thirds of nearly INR 30 crores that was being added to the local economy was lost.
While the bilateral trade between India and Pakistan was relatively small, and cross-LoC trade even smaller, for their suspension to have any significant impact on the two countries’ national economies, their local economies are suffering significantly. Any form of border trade creates its own economic ecosystem and emotional capital. Today, this ecosystem is looking to their respective governments for support. So, until trade resumes, what are the alternative sources of livelihood that can be generated to support the border economies?
Bureau of Research on Industry and Economic Fundamentals (BRIEF) is a New Delhi based research and policy think tank with a focus on international trade and regional cooperation in South Asia. Over the last few years, in order to strengthen the dialogue on economic engagement between India and Pakistan, it has initiated parallel programs focusing on multiple strands of economic cooperation between India and Pakistan including both mainstream bilateral trade and cross-Line of Control trade, and other Confidence Building Measures (CBMs) between the two countries. As a part of these programs, the main focus of BRIEF’s work is building research repository, creating positive constituencies, engaging and interacting with key stakeholders at multiple levels, and developing cross-border linkages – that help shape a positive narrative about India and Pakistan, nationally, bilaterally, as well as at a regional level in South Asia.
The authors of the book “Unilateral Decisions Bilateral Losses”, Afaq Hussain and Nikita Singla, are Director and Associate Director, respectively, at BRIEF.