The Development of Most Favoured Nation (MFN) Status and Trade Progress between India-Pakistan

Abstract

India and Pakistan are the major political actors and largest economies of South Asia that share a common border and similar culture and history. Since their independence in 1947 both countries have antagonistic relations with complex multi-dimensional problems. However, apart from enduring rivalry both the neighbors have many other options to cooperate with each other and fight against poverty in the region. In the past, India granted Pakistan Most Favored Nation (MFN) status in 1996, but Pakistan acted otherwise and took economic relations in the light of underlying conflicts. This paper presents the impact of political decision on regional trade between India and Pakistan from the prospect of MFN. The study is based on pre and post MFN status, which shows substantial evidence that Indian decision of declaring Pakistan as MFN has shifted the dimension of trade in favour of India. The study is based on qualitative and descriptive analysis which shows consumerism in Pakistan and its trend of Indian exports to Pakistan. The broad objective of study is aimed at analyzing the possibility of trade between India and Pakistan under the world trade system. However, Pakistan‟s exports to India are indifferent to Indian economic situation and Pakistan‟s decision has insignificant impact on mutual trade. Thus, despite the volatile relationship, trade can play important role for economic growth of Pakistan and the country can exploit the bigger market of India. Further, reduction in political tensions would eventually benefit both countries like Brazil and Argentina where means can generate larger benefits and trade facilitation measures. For the very reason both India and Pakistan took some serious steps to break the deadlock for trade and mutual benefits. In this process trade routes have been opened, communications have been established. Mutual trade can benefit billions people living in both countries and instead of being caught up in the past both should look towards the brighter future.