Prime Minister Narendra Modi has called a meeting on Thursday to review the most-favoured nation status to Pakistan, as India weighs its options to respond to an attack by militants in Kashmir that killed 18 Indian soldiers, a source said on Tuesday.
India accorded Pakistan the MFN status in 1996 and expected it to reciprocate. Though Pakistan had agreed to grant Indian the MFN status during a secretary-level agreement in 2012, it has not kept its promise, missing several deadlines.
The decision of the meeting comes on the heels of another meet on Monday in which Prime Minister Modi discussed the Indus Waters Treaty India has with Pakistan. The meeting decided that India will explore all options to use as much water as it can within the boundaries of the World-Bank brokered treaty, considered one of the most liberal water-sharing pacts.
An industry body said on Sunday the MFN status has not made much of a difference, as trade between the two countries remains “abysmally” low.
Out of India’s total merchandise trade of $641 billion in 2015-16, Pakistan accounted for a meagre $2.67 billion. India’s exports to the neighbouring country worked out to $2.17 billion, or 0.83%, of the total Indian outward shipments while imports were less than $500 million, or 0.13%, of the total inward shipments.
“While India has granted Pakistan the MFN status, Islamabad had not responded... even with the MFN status, Pakistan’s exports to India remained less than half a billion dollar,” DS Rawat, secretary general of Assocham, said.
The MFN status is granted by a trading partner to another country for equal treatment in terms of trading prices or tariffs, and market access without discrimination in imports and exports. The status does not suggest any special treatment but says there will be no discrimination in trade.
If India revokes the MFN status to Pakistan, it would lead to diminished imports from the neighbour.
The Uri attack triggered India’s efforts to isolate Pakistan globally and squeeze it bilaterally. Foreign minister Sushma Swaraj said at the UNGA on Monday that India had attempted an unprecedented paradigm of friendship with Pakistan but all it got in return was “Pathankot, Uri and Bahadur Ali, a terrorist in our custody whose confession is living proof of Pakistan’s complicity in cross-border terror.”
The remark marked the latest exchange in a war of words between the two sides, which has heated up since the terror attack in Uri more than a week ago.