[Answered]What do you understand by ‘trade corridor’? Examine whether Kartarpur corridor should be converted into a trade corridor between India and Pakistan.

Demand of the question

Introduction. What is trade corridor?

Body. Why Kartarpur corridor must lead to trade corridor? Various issues and challenges.

Conclusion. Way forward.

 Trade corridors are integrated networks of infrastructure including highways, railroads and ports, to link cities or countries,designed to stimulate economic developmentwithin a country or between countries.When implemented, trade corridors are often one of a package of different measuresincluding infrastructure development, visa and transport agreements, and standardisation.Given the situation between India and Pakistan, it is important that Kartarpur corridor must lead to economic ties and trade corridor must be established.

Why Kartarpur corridor must lead to trade corridor?

  1. The India-Pakistan face-off in the recent period has impacted trade on both sides. In the wake of the Pulwama attack, India withdrew the Most Favoured Nation (MFN) status to Pakistan. More recently, post the Jammu and Kashmir Reorganisation Bill, Pakistan cut off diplomatic and economic ties with India.
  2. In 2018-19, bilateral trade between India and Pakistan was valued at $2.5 billion. In this period, India’s exports to Pakistan accounted for $2.06 billion and imports from Pakistan were at $495 million. Both has declined.
  3. With Pakistan deciding to completely suspend bilateral trade, cotton exports from India to Pakistan get affected the most, eventually hurting India’sexports.
  4. Border economies owe their existence to cross-border economic opportunities. These economies are hurt most by India-Pakistan face-off. E.g Amritsar is land-locked, and traditionally has no significant industry. Since 2019, 5000 families have been directly affected in Amritsar because of dependence on bilateral trade.
  5. A larger look at trade activities between India and Pakistan reveals that import and export between India and Pakistan has been declining since 2014-15.
  6. The major reason for the nominal impact of the trade suspension on India’s businesses and economy is that a large part of the trade between the two countries takes place through the informal route, which means that the trade takes place through a third country. This hampers India’s profits.
  7. In the case of two countries, India-UAE-Pakistan is the primary channel for informal trading. In this process, trade is recorded between India and UAE and between Pakistan and UAE, but is not directly recorded between India and Pakistan.

Issues and challenges:

  1. In the past, attempts have been made by numerous governments to enhance both people to people linkages as well as economic ties, but terrorist activities from Pakistan and politics has acted as an impediment. E.g. The decision to go ahead with the Kartarpur Corridor raised hopes of closer trade linkages, but the Pulwama terror attack in 2019, ensuing tensions, and the suspension of trade and people-to-people ties by Pakistan after the revocation of Article 370 dashed all such hopes.
  2. There are apprehensions with regard to the corridor being a Pakistani intelligence conspiracy and would be used to increase Khalistani activities, which need to be removed.
  3. Both India and Pakistan reached a new low of trust and confidence which is difficult to be plugged.

Way forward:

  1. This initiative through both Punjabs could pave the way for “reconciliation” in South Asia.Business lobbies, as well as the state government of Punjab, could play a positive role in reviving economic ties. In the past too, state governments have played an important role.
  2. Further, the Punjabi diaspora could play an important role in getting both Punjabs closer. In the past, civil society groups and intellectuals in the diaspora have played a pro-active role in pitching for peace between East and West Punjab. Some members of the diaspora have already committed to investing in renovation of Sikh shrines.

Thus, the opening of the Kartarpur Corridor would hopefully play a role not just in fulfilling the desire of Sikh pilgrims to pay obeisance at the holy city of Kartarpur, but also pave the way for reduced tensions between New Delhi and Islamabad. Trade with Pakistan and access to markets in Afghanistan and Central Asia will provide the much needed booster to the state’s sagging economy.

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