Pakistan Eyes Trade Reboot, Awaits India’s Green Light - Business Guardian
Connect with us

International Affairs

Pakistan Eyes Trade Reboot, Awaits India’s Green Light

Published

on

Resuming business with its larger, fast-growing neighbor clearly makes sense, but Indian companies will require some convincing.

Last week, Pakistani Finance Minister Ishaq Dar surprised many by mentioning, almost casually, that the new government would “thoroughly examine trade matters with India.” This potential revival of trade relations signals a significant shift for Pakistan, which severed economic ties after Indian Prime Minister Narendra Modi unilaterally revoked Kashmir’s special constitutional status in 2019. Previously, Pakistani leaders had maintained that relations wouldn’t be restored until the decision was reversed.

In the realm of geopolitics, the recent statement by Pakistani Finance Minister Ishaq Dar regarding the potential resumption of trade ties with India might not be as surprising as it initially seems. Delving deeper, it’s evident that the Pakistan Muslim League-N, led by former Prime Minister Nawaz Sharif, comprises a unique coalition of semi-urban petty bourgeoisie and influential industrialists. This alliance has long recognized the mutual benefits, both economic and strategic, of fostering normalized trade relations with India.

The prospective gains from such normalization are indeed considerable, particularly for Pakistan, grappling with dire economic circumstances. According to estimates by the World Bank in 2018, Pakistan’s exports could surge by up to 80%, translating to approximately $25 billion, should trade with India be optimized. In the current scenario, where Pakistan’s economy teeters on the brink, relying on successive bailouts including a recent $3 billion tranche from the International Monetary Fund, the urgency to tap into potential revenue streams cannot be overstated. However, the asymmetry in the Indo-Pak economic equation is starkly apparent.

While Pakistan’s economy struggles, India’s remains robust and steadfastly guarded against opening its markets to potential competition from neighboring nations. With an economy over ten times the size of Pakistan’s and a significantly higher per capita income, India maintains a position of relative strength. The historical backdrop of Indo-Pak relations is fraught with tensions, often exacerbated by cross-border conflicts and political brinkmanship. India’s recent reelection of Prime Minister Narendra Modi following heightened military tensions in Kashmir underscores the complexities of bilateral ties.

Thus, any overtures towards restoring trade relations must be cautiously timed and delicately approached by Pakistani diplomats, especially considering the impending general elections in India. Moreover, Pakistan cannot afford to adopt a passive stance in this regard. While Modi has shown a willingness to engage with Pakistani leadership on certain occasions, there is no guarantee that his successor will share the same disposition. Therefore, cultivating advocacy for trade normalization within India’s private sector becomes imperative for Pakistan, aligning economic interests with strategic objectives. Indeed, for India, the calculus of trade extends beyond mere economic dividends. It represents a strategic tool to bolster stability within Pakistan, fostering an environment conducive to economic growth and deterring extremist elements.

Recognizing this symbiotic relationship, Indian policymakers must approach the prospect of resumed trade with pragmatism and foresight. In conclusion, the potential rekindling of trade relations between India and Pakistan presents a pathway towards stability and prosperity for both nations. By transcending historical animosities and prioritizing economic cooperation, Indo-Pak relations can evolve from a source of conflict to a catalyst for regional development. As Pakistan signals its readiness to recalibrate its approach, India must reciprocate with measured optimism, cognizant of the transformative potential inherent in revitalized bilateral ties.

The Daily Guardian is now on Telegram. Click here to join our channel (@thedailyguardian) and stay updated with the latest headlines.

For the latest news Download The Daily Guardian App.

International Affairs

UAE commits $15 mm to ‘Amalthea Fund’ for Gaza relief

Published

on

In accordance with President His Highness Sheikh Mohamed bin Zayed Al Nahyan’s instructions, the UAE has announced a USD 15 million allocation to support the “Amalthea Fund.” This initiative, endorsed by the Republic of Cyprus, aims to aid the maritime corridor initiative linking Cyprus and the Gaza Strip. The fund was established to facilitate and coordinate the flow of aid arriving in Gaza, and ensure that aid is delivered as effectively as possible.

The fund also aims to strengthen the capacity for the flow of humanitarian aid into Gaza, by providing flexible funding modalities for parties concerned with enhancing the humanitarian response to contribute to these endeavours. The Ministry of Foreign Affairs (MoFA) stressed in a statement that the UAE’s contribution to this fund stems from its commitment to address the worsening catastrophic humanitarian situation in the Gaza Strip through this multilateral cooperative approach, which achieved a historical precedent for helping the Palestinian people before the suspension of the maritime corridor between Cyprus and the Strip.

The Ministry underlined the importance of immediately mitigating the worsening catastrophic humanitarian situation in the Strip, and ensuring the immediate and widespread flow of aid, safely, unhindered, and sustainably delivered, through all available channels by land, air and sea.

The Ministry affirmed that within the historic commitment towards the brotherly Palestinian people, the UAE, under its wise leadership, continues to provide critical humanitarian aid and supplies to the Strip, and believes that the maritime corridor is part of a sustained effort to increase the urgent flow of aid and goods through all roads and mechanisms, while ensuring protection for relief workers.

Continue Reading

International Affairs

‘Birds of Goodness’ Airdrop delivers record aid to Northern Gaza

Published

on

The Joint Operations Command of the Ministry of Defence announced the successful completion of the 30th “Birds of Goodness” airdrop operation, delivering 125 tonnes of humanitarian aid and Eid clothing to northern Gaza.

The airdrop, which took place on April 10, 2024, was the largest to date and involved six aircraft: three C-17s from the UAE Air Force, two C295s and one C-130 from the Egyptian Air Force. The airdropped supplies encompassed essential food items alongside special Eid clothing parcels for families. These parcels contained clothes, toys, sweets, and various products for all family members.

The mission aimed to address the needs of the Palestinian people in Gaza during Eid Al Fitr, fostering hope and joy while alleviating their hardships. The operation targeted isolated areas in northern Gaza that are difficult to access by land. The total amount of aid delivered since the launch of “Birds of Goodness” has reached 1,857 tonnes of food and relief supplies.

This brings the total amount of aid sent by the UAE to northern Gaza to over 2,227 tonnes, including both land shipments through the Kerem Shalom crossing and airdrops via “Birds of Goodness.” The “Birds of Goodness” campaign is part of Operation “Chivalrous Knight 3” to support the Palestinian people in Gaza.

Continue Reading

Economic

China: Consumer prices up 2nd month, factory deflation persists

Published

on

China’s consumer prices showed a modest increase in March, but factory deflation persists, indicating a continuation of weak demand.

In March, China experienced a greater-than-expected cooling of consumer inflation, alongside persistent deflation in producer prices. This maintains pressure on policymakers to implement additional stimulus measures, given the ongoing weakness in demand. While deflationary pressures in the world’s second-largest economy seem to be gradually alleviating, concerns persist due to the prolonged property crisis, which continues to undermine both consumer and business confidence.

Consumer prices rose by a muted 0.1 per cent in March from a year earlier, National Bureau of Statistics (NBS) data showed on Thursday, versus a 0.7 per cent rise in February which was the first gain in six months and a 0.4 per cent rise in a Reuters poll. “Seasonal effects definitely played a role – food prices rose sharply during the Chinese New Year in February and subsequently came back down,” said Xu Tianchen, senior economist at the Economist Intelligence Unit. “More broadly, the over capacity issue is passing into prices in a way that will thwart the People’s Bank of China’s efforts to reflate the economy,” Xu added.

“Vehicle prices fell an annual 4.6 per cent, which could suggest manufacturers are introducing deeper price cuts in the distribution and sales process.” Factory-gate prices fell 2.8 per cent in March from a year earlier, with the producer price index (PPI) widening a 2.7 per cent slide from the previous month and extending a year-and-a-half long stretch of declines. On a month-on-month basis, the PPI fell 0.1 per cent. “Although consumer prices are no longer falling, rapid investment in manufacturing capacity is still weighing on factory-gate prices,” said Julian Evans-Pritchard, head of China economics at Capital Economics.

In recent months China has rolled out a raft of incentives to spur household spending including easier car loan rules, but consumers remain cautious about big-ticket purchases amid worries about the sputtering economy and the weak job market. Earlier this month, China’s central bank vowed to strengthen efforts to expand domestic demand and boost confidence. Core inflation, excluding volatile food and energy prices, in March was at 0.6 per cent from a year earlier, slower than 1.2 per cent in February.

The CPI fell 1.0 per cent month-on-month, cooling from a 1 per cent gain in February and worse than a 0.5 per cent drop forecast by economists. “Interestingly, CPI inflation surprised on the upside in the U.S. and downside in China,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “This indicates the monetary policy stances in these two countries may continue to diverge as well, hence the gap of interest rates in these two countries will likely persist,” he added.

Continue Reading

Business

India to grow 7 % in FY24, 7.2 % in FY25, driven by robust investment, services exports

Published

on

The 2024-25 growth estimate is, however, lower than 7.6 per cent projected for the 2022-23 fiscal. The ADB’s growth forecast for FY25 is in line with projections made by the RBI.

After a slew of upgrades in growth projection , the Asian Development Bank (ADB) on Thursday raised India’s gross domestic product (GDP) growth forecast for fiscal year (FY) 2024 from 6.7 per cent to 7 per cent and 7.2 per cent in FY2025, attributing the robust growth to public and private sector investment demand, gradual improvement in consumer demand and strong services sector.

The 2024-25 growth estimate is, however, lower than 7.6 per cent projected for the 2022-23 fiscal. The ADB’s growth forecast for FY25 is in line with projections made by the RBI. Strong investment drove GDP growth in the 2022-23 fiscal as consumption was muted, the ADB said and expects India to affirm its position as a major growth engine within Asia, driven by strong investment, recovering consumption, and gains in electronics and services exports.

While in the rest of developing Asia, faster growth will be driven by domestic demand and some improvement in semiconductor and services exports, including tourism. Stronger growth in South Asia and Southeast Asia will offset lower growth in other subregions. “Notwithstanding global headwinds, India remains the fastest growing major economy on the strength of its strong domestic demand and supportive policies,” said ADB Country Director for India Mio Oka. “The Government of India’s efforts to boost infrastructure development while undertaking fiscal consolidation and provide an enabling business environment will help in increased manufacturing competitiveness to augment exports and drive future growth,” said Oka.

With inflation moderating to 4.6 per cent in FY2024 and easing further to 4.5 per cent in FY2025, the ADB suggests monetary policy may become less restrictive, which will facilitate rapid offtake of bank credit. Demand for financial, real estate and professional services will grow while manufacturing will benefit from muted input cost pressures that will boost industry sentiment. Expectations of a normal monsoon will help boost growth of the agriculture sector. The report lauds the government’s focus on fiscal consolidation, with a targeted deficit of 5.1 per cent of GDP for FY2024 and 4.5 per cent for FY2025, which will enable the government to reduce its gross marketing borrowing by 0.9 per cent of GDP in FY2024 and create further room for private sector credit.

India’s current account deficit will widen moderately to 1.7 per cent of GDP on rising imports for meeting domestic demand. Foreign direct investment will be affected in the near term due to tight global financial conditions but will pick up in FY2025 with higher industry and infrastructure investment. Goods exports will also be affected by lower growth in advanced economies but pick up in FY2025 as global growth improves.

On the regional front, growth in developing Asia will remain healthy at 4.9 per cent in 2024 and 2025, despite a slowdown in China. In fact, while growth in the PRC will decline from 5.2 per cent in 2023 to 4.8 per cent this year and 4.5 per cent next year, it will accelerate in the rest of developing Asia—from 4.8 per cent in 2023 to 5.0 per cent this year and 5.3 per cent in 2025. The slowdown in the PRC will be driven by the weak property market and amplified by fading domestic consumption growth after last year’s reopening.

Continue Reading

Economic

African economies to grow 3.4 per cent in 2024, says World Bank

Published

on

The report said increased private consumption and declining inflation were supporting an economic rebound in Sub-Saharan Africa.

The latest Africa’s Pulse report by the World Bank indicates an economic rebound in Sub-Saharan Africa, driven by increased private consumption and decreasing inflation. However, the recovery remains fragile due to uncertain global economic conditions, mounting debt service obligations, frequent natural disasters, and escalating conflict and violence.

The report emphasizes the necessity for transformative policies to address entrenched inequality, ensuring sustained long-term growth and effective poverty reduction. While the region’s growth is expected to rebound from 2.6% in 2023 to 3.4% in 2024 and 3.8% in 2025, the recovery remains precarious. Despite a decline in inflation across most economies to 5.1% in 2024 from a median of 7.1%, it remains elevated compared to pre-COVID-19 levels.

Additionally, while growth of public debt is slowing, more than half of African governments grapple with external liquidity problems and face unsustainable debt burdens. Overall, the report underscores that despite the projected boost in growth, the pace of economic expansion in the region remained below the growth rate of the previous decade (2000-2014) and is insufficient to have a significant effect on poverty reduction. Moreover, due to multiple factors including structural inequality, economic growth reduces poverty in Sub-Saharan Africa less than in other regions.

“Per capita GDP growth of 1 percent is associated with a reduction in the extreme poverty rate of only about 1 percent in the region, compared to 2.5 percent on average in the rest of the world,” said Andrew Dabalen, World Bank Chief Economist for Africa. “In a context of constrained government budgets, faster poverty reduction will not be achieved through fiscal policy alone. It needs to be supported by policies that expand the productive capacity of the private sector to create more and better jobs for all segments of society.”

The World Bank’s Africa’s Pulse report called for several policy actions to foster stronger and more equitable growth. These include restoring macroeconomic stability, promoting inter-generational mobility, supporting market access, and ensuring that fiscal policies do not overburden the poor.

Continue Reading

Economic

Pakistan to adopt National Fiscal Policy amid bailout talks with IMF, says World Bank

Published

on

Amid the staggering economic crisis in Pakistan, the World Bank has asked Islamabad to adopt a national fiscal policy by aligning federal and provincial spending with constitutional mandates, merging various federal and provincial revenue agencies into a single general sales tax (GST) collection agency, and effectively taxing agriculture, capital gains, and real estate in the next fiscal year’s budget, Dawn reported on Monday. “Implement the new Fiscal Responsibility and Debt Limitation Acts (FDRLA) at the federal and provincial levels, including through the development and implementation of a national medium-term fiscal framework through the FY25 budget process,” the World Bank asked the government in its latest policy advice.

This is now expected to be made part of the next International Monetary Fund program that Pakistan Finance Minister Muhammad Aurangzeb will be discussing with the lender next week in Washington on the sidelines of the World Bank-IMF spring meetings, Dawn reported. The bank demanded tangible progress on GST harmonisation across the federation and its federating units, “including through the rollout of the GST portal,” and a move towards “rate harmonisation to facilitate tax compliance and the provision of input tax credits.”. On top of this, the World Bank also suggested “consolidation of all GST collection responsibilities with a single agency, which could then distribute revenues in accordance with constitutional provisions” to reduce administrative complexity.

At present, GST is collected by the Federal Board of Revenue, mostly on goods and some services, while similar revenue boards are operating in provinces to collect GST on some services. However, given the overlapping nature of certain services, the stakeholders have been facing GST collection adjustments among the provinces. More importantly, the World Bank wants decisive actions to mobilize revenues from underutilized sources, particularly those relating to the unfinished agenda of the 7th National Finance Commission (NFC) award of 2010: urban immovable property tax, agricultural income tax, and capital gain taxes. While conceding greater federal pool resources to the provinces, it was agreed to effectively bring these areas into the tax net to increase the tax-to-GDP ratio to 15 percent in five years, but the deal (NFC) was drafted in a weak manner.

Dawn reported that the NFC had “recommended that the federal and provincial governments streamline their tax collection systems to reduce leakages and increase their revenue through efforts to improve taxes and achieve a tax-to-GDP ratio of 15 percent by the terminal year 2014–15. Provinces would initiate steps to effectively tax the agriculture and real estate sectors.” However, this has remained a pipe dream over the following 15 years. As for urban immovable property tax, the World Bank has demanded the application of harmonised valuation tables (currently based on rental value) to be updated annually based on observed variables such as inflation, insurance valuation, and sales records, and also to equalize rates between owner-occupiers and rentals.

In this regard, the bank also wants authorities to harmonize and reduce exemptions such as area-based exemptions, owner-occupier exemptions, and non-resident exemptions and to unify federal deemed income tax and urban immovable property tax. For agricultural income tax, the World Bank has asked the government to make the definition of land area consistent, reconsider exemptions based on the size of land holdings, and set common minimum rates based on crop acreage or production estimates. At the same time, the government should also incorporate irrigation and/or construct buildings to differentiate per-hectare minimum rates. Dawn reported that regarding the capital gains tax, the bank has advised the government to unify the treatment of builders, property developers, real estate investment trusts (REITs), and others, simplify the types of taxes related to capital gains and transfers (capital gains tax (CGT), capital value tax (CVT), stamp duty, withholding tax, etc.), remove years-held based differential rates, and simplify the rate structure.

Overall, the World Bank has suggested broader revenue reforms to expand the tax base, improve progressivity, and ease compliance. To achieve this, it wants to close existing corporate and sales tax exemptions, including tax exemptions for real estate, the energy sector, COVID response, and some basic household goods, and instead compensate poor households for negative impacts through enhanced social protection.

To improve tax compliance, the bank has called for addressing constraints delaying the rollout of the track-and-trace system to all sectors and simplifying the tax structure by reforming the “personal income tax (PIT) system to reduce complexity by aligning schemes for salaried and non-salaried workers” and reforming PIT schedules to increase equity by eliminating privileged treatment of specific income sources and by harmonizing rate structures across taxable income sources.

The Planning Commission has already prepared a national planning framework for the upcoming National Economic Council, with the overall theme of ending provincial projects from the federal budget and improving resource deployment through federal and provincial “synergy” in the light of the “true spirit of the constitutional scheme,” including the 7th National Finance Commission Award and 18th constitutional amendment, Dawn reported.

An official said the planning framework would “offer an operational strategy for federal and provincial governments in the context of prevailing constitutional responsibilities and roles for the shared and common objective of development and growth.”. He said the concept of balanced development and regional equity was not only the responsibility of the federal government but equally that of the provinces through their respective development programs, and it was also the essence of the 7th NFC and 18th Amendment.

Continue Reading

Trending