The South Asia is the fastest growing region in the world but also one of the least integrated, as region’s trade with the rest of the world is growing rapidly while intra-regional trade is merely 5 per cent of its total trade.

Despite being natural trade and investment partners, the volume of trade between Pakistan and India, the two largest economies of the region, has been extremely low. Bilateral trade between India and Pakistan, a couple of years ago stood at an estimated US$1.83 billion. India accounts for nearly 1.2 per cent of Pakistan’s global exports, while Pakistan accounts for less than 0.9 percent of India’s global exports.

The SAARC Chamber of Commerce and Industry, an apex body of regional chambers, called for improved relations between Pakistan and India to augment trade and economic relations between the two neighbors.

There will be three-pronged impact of Pak-India free trade. Firstly, Pakistan’s balance of trade may improve by $250 million annually despite the larger trade deficit with India, since imports from there will replace more expensive imports from elsewhere.

Secondly, Pakistani customs revenues will increase due to increased imports from that country. Thirdly, one must look at the impact on local industrialisation and upgradation, which existing studies ignore.

Vice President SCCI Pakistan Chapter Iftikhar Ali Malik said that free movement of business community would not only help improve business environment but immensely benefit the entire South Asian region.

According to economists, the two most relevant dimensions of Pak-India trade are political and economic. Politically, the question is whether to trade with India until the Kashmir issue is resolved. This is a contentious question.

However, globally, economically successful countries are increasingly de-linking politics and economics. Thus, India-China, China-Taiwan and China-Japan have big disputes but are still trading extensively. Pakistan should also take the decision based primarily on economic factors.

He said that for instance, total trade between Brazil and Argentina amounted to $33 billion in 2010, almost 15 times more than the current Indo-Pak trade of little over US$2 billion.

He said that it is worth mentioning that Argentina and Brazil too have had similar turbulent past of war and fierce rivalry.

Iftikhar Ali Malik said that the private sector of either country has to play a key role in the prevailing scenario for viable and sustainable better trade relations between the two countries for welfare of the people of the region.

He said that studies by the Indian Council for Research on International Economic Relations show that discriminatorily stringent application by India of non-tariff barriers (e.g. regulatory and safety requirements) dampens Pakistani exports to that country. Political uncertainty and visa hassles also dampen mutual trade.

Eliminating these hurdles could increase bilateral trade to $6-10 billion annually, most of it representing increased Indian exports to Pakistan. India could then become Pakistan’s biggest trading partner. Increased imports from India will not necessarily devastate all Pakistani producers, since they will largely replace existing, more expensive, imports from elsewhere.