A meeting convened by Prime Minister Narendra Modi to review the Most Favoured Nation (MFN) status to Pakistan on Thursday morning has been deferred to the next week, official sources said. There was no immediate clarity about the reasons for postponing the meeting.
The decision comes at a time India is weighing its options to respond to an attack by militants on an army base in Kashmir that killed 18 Indian soldiers.
New Delhi is weighing the option of withdrawing the MFN status to Pakistan as a non-military retributive measure for the September 18 attack on an Uri army base that left 18 jawans dead. India blames the Pakistan-sponsored militant outfit, Jaish-e-Muhammad, for carrying out the attack.
India accorded Pakistan the MFN status in 1996 as part of its commitment under the World Trade Organisation (WTO). It was to be reciprocated by Islamabad but the ruling establishment in the neighbouring country dithered over it.
The MFN status ensures equal treatment in terms of trading prices or tariffs and market access without discrimination in imports and exports. It does not suggest any special treatment. It simply means no discrimination when it comes to trade. If India revokes the MFN status to Pakistan, it would mean diminished imports from that country.
Experts say the revocation, if decided by India, will only have a symbolic impact as current levels of bilateral trade are very low. Bilateral trade between the two South Asian neighbours was just $2.6 billion in 2015-16 (of which $2.2 billion constituted India’s exports to Pakistan) — which represented a minuscule 0.4% of India’s overall goods trade worth $643.3 billion in the same year.
- What is MFN?
Most Favoured Nation (MFN) is a status granted by a trading partner to the other country giving an equal treatment in terms of trading prices or tariffs, market access without discrimination in imports and exports. MFN does not suggest any special treatment it simply means no discrimination when it comes to trade.
- Why is MFN important in the trade between India and Pakistan?
India accorded Pakistan this status way back in 1996. Since then it has been in talks with Pakistan to give an equal status to India. But till now, Pakistan has not accorded the status to India. India has given close to 200 MFNs (to all WTO members).
- What is the extent of current bilateral trade between India and Pakistan?
Bilateral trade between the two South Asian neighbours was just $2.6 billion in 2015-16 (of which $2.2 billion constituted India’s exports to Pakistan) — which represented a minuscule 0.4% of India’s overall goods trade worth $643.3 billion in the same year.
- Does MFN status impact the trade?
Yes, it does. If the status is granted by Pakistan to India, then close to 2004 items which India cannot export to Pakistan could have been exported, getting an easy market access. Some of these products are now routed via Dubai to Pakistan. Items such as machine tool, textiles, etc have good demand in Pakistan but go via Dubai instead of going directly from India.