India-Pakistan Economic Ties Under-shadowed by Geopolitics: An Analysis

Abstract

Despite the realization of its benefits, bilateral trade between India and Pakistan
experienced a significant downturn. Following the suspension of trade ties in 2009,
bilateral trade witnessed a staggering 90.4% decrease, with exports plunging from
$1.035 million to a mere $0.099 million, as the State Bank of Pakistan reported. Before
the suspension, the value of goods traded reached $2.56 billion in 2018-19, despite
tariff and non-tariff barriers, mainly imposed by India. A 2018 World Bank study
estimated the trade potential between the two countries to be around $37 billion,
highlighting vast untapped opportunities. Based on secondary data and a qualitative
approach through the lens of complex interdependence theory, this paper aims to
answer the question: “Why is bilateral trade between India and Pakistan at the lowest
ebb?” It further explores how bilateral trade can improve geopolitics and eventually
normalize relations between the two nations. Considering the significant costs of
economic non-cooperation for both countries and the entire South Asian region, it is
imperative to revive and strengthen bilateral trade relations. This promises economic
prosperity and holds the potential to build trust and reduce the chances of conflict,
ultimately leading to a more peaceful and stable South Asia.