Informal trade, or smuggling of goods, between India and Pakistan is estimated at over USD $5 billion, almost double the official two-way commerce between the two neighbours with history of chequered ties, an ASSOCHAM study has pointed out. The findings of the study were released Sunday.
Based on documents and reports by over 50 top think tanks and research organisations, including ICRIER, annual reports of the Indian Ministry of Home Affairs, Lahore Journal of Economics, Institute of South Asian Studies-National University of Singapore among others, the ASSOCHAM Paper on India – Pakistan Trade, bought out some interesting facts which include the non-formal trade or unaccounted transactions, which can bluntly be called smuggling.
According to the study, smugglers / traders mainly carry out the informal trade between Pakistan and India through the exchange of goods at the Indo-Pakistan borders as well as through the misuse of the personal baggage scheme through the ‘Green Channel’ facilities at international airports or railway stations.
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It said while the actual volume of informal trade is difficult to calculate, there are different informal channels of information which has been collated over a period of time by different research bodies and think tanks. The ASSOCHAM Paper has largely drawn upon a wide bank of these research documents.
Informal traders in both the countries have developed efficient mechanisms for information flow, risk sharing and risk mitigation. The three important contributory factors towards thriving informal trade are quick realization of payments, zero documentation and little procedural hassles leading to lower transaction costs.
The study says that there are more exports from India than imports through the smuggling route. Besides the Afghanistan route, other channels of such informal trade include India-Dubai-Pakistan, Wagah by rail or road and Srinagar-Muzaffarabad.
The composition of items going from India include jewellery, textiles, machinery and electronic appliances. On the import front, the items include textiles, dry fruits, spices and carpets.
Significantly the informal trade or smuggling is over and above the ‘Third country’ trade which is generally done through Dubai and is not illegal. The ‘Third country’ trade is also done through agents in Singapore, according to the study.
Through this route, exports from India include capital goods, textile machinery, dyes and chemicals, iron and ore, spices, tannery equipment, machine tools, cotton fabrics, tyres and chemicals and medicine. It is mostly exports.
“Trade between Pakistan and India via Dubai has the advantage (for the traders) that consignments are not scrutinized as much as those coming directly from either country,” said the ASSOCHAM study.
So, according to the study, the India-Pakistan official trade of USD 2.67 billion is far less than other channels.