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Stronger ties with neighbours

New Delhi, March 19: India is set to improve trade ties with its two biggest neighbours.

Pakistan has decided to grant the “most favoured nation” status under a different nomenclature by this weekend in return for lower duties on Pakistani garments, while a Bangladesh team is negotiating coastal shipping routes and a possible Indian loan to that country.

Top officials said they expected Pakistan to announce an MFN status for India using the neutral nomenclature ‘non-discriminatory market access’ (NDMA) by this weekend.

Pakistan has sought a reduction in duties on some 250 plus textile product lines, which officials say may be granted. India is expected to limit the number of goods in which trade is not allowed to 100 product lines, of which 75 would be farm produce and the remaining 25 would be products such as tobacco and alcoholic drinks.

All WTO signatories are duty bound to give other signatory nations equal treatment while levying import duty, under a clause that asks them to give each other MFN status.

However, despite signing the WTO agreement, Pakistan had for the last 16 years dithered on granting India an MFN status though India had granted Pakistan such a status in 1996. The move is expected to reduce high tariff walls against Indian goods which force trade with Pakistan to be conducted through third nations.

Bilateral trade between India and Pakistan now amounts to about $2.4 billion compared with India’s global trade of about $600 billion, with trade balance heavily tilted towards India.

Another $4 billion is traded through third world nations such as the UAE and Singapore. However, according to a report by the Woodrow Wilson International Center for Scholars, a normalised trade regime could rachet up India-Pakistan trade to $40 billion.

Pakistan may be able to increase its exports in textiles, cement, farm produce, chemicals and minerals, including lignite, to India once trade liberalisation kicks in, said analysts.

Bangladesh agenda

Bangladesh foreign secretary Shaidul Haque today met his counterparts in India’s commerce and water resources ministries to discuss coastal shipping scope and a possible soft loan.

Bangladesh denied any talks on the soft loan offer of $1 billion from India. But Indian officials said the offer, which is on top of a similar $1-billion soft loan negotiated during President Pranab Mukherjee’s tenure as finance minister, is in the works.

The loan would be used for infrastructure purposes, said officials. Indian loans are usually made on soft terms comparable to IMF loans but are tied to use of at least 75 per cent of the loan on purchase of Indian machinery.