MFN Status Current Affairs - 2019

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Imports from Pakistan to India decline by 92% in March 2019

Imports from Pakistan to India have declined by 92% amounting to USD 2.84 Million in March 2019 after imposition of 200% customs duties on all products. The strong economic action against Pakistan was taken following Pulwama terror attack.

Key Highlights

  • Background: On February 2019, in aftermath of Pulwama terror attack for which Pakistan based JeM terror group claimed responsibility, India revoked the MFN (Most Favoured Nation) status given to Pakistan. This further led to strong economic action against Pakistan such as India raised customs duty to 200% on all goods imported from Pakistan.
  • During 2018-19 fiscal year for January-March period, the imports from Pakistan declined by 47%, about USD 53.65 Million.
  • India’s Export: In March 2019, India’s exports to Pakistan also dipped by about 32% amounting to over USD171 million. However, Indian exports grew by 7.4% (over USD 2 billion) during 2018-19.
  • Commodities Imported: India raised 200% custom duty on goods imported from neighbouring country, including cotton, fresh fruits, cement, petroleum products and mineral. But the main commodities imported during month of March 2019 from Pakistan includes knitted fabrics, wool, articles of apparel and clothing, preparation of vegetables spices, chemicals, man-made filaments, and plastics.
  • Exception: As per some experts, keeping in mind that importing goods at 200% customs duties would not be viable for anyone, thus government has allowed few domestic manufacturing exporters to avail Nil(0%) import duty benefit under Advance Authorisation Scheme to import products, especially raw materials from Pakistan.

About Most Favoured Nation Status

  • Under the MFN pact, a World Trade Organisation (WTO) member country is obliged to treat other trading nation (to whom it has granted MFN status) in a non-discriminatory manner, especially with regard to customs duty and other levies.
  • The MFN status was granted by India to Pakistan in 1996, but India was not granted the same from Pakistan.

India hikes customs duty to 200% on all goods imported from Pakistan

After the withdrawal of the Most Favored Nation tag to Pakistan, India has now increased the customs duties for imports from Pakistan to 200%. The increase in the customs duty would drastically increase the prices of Pakistani goods in India and make exports unfeasible.

Pakistan Exports to India

Pakistan’s exports to India include fresh fruits, cement, petroleum products, bulk minerals and ores, finished leather, processed minerals, inorganic chemicals, cotton raw, spices, wool, rubber product, alcoholic beverage, medical instruments, marine goods, plastic, dyes and sports goods.

The increase in the customs duty would adversely impact Pakistan’s exports to India, which stood at USD 488.5 million (around Rs 3,482.3 crore) in 2017-18 as it would drastically increase the price of goods in India.

The increase in the customs duty is in accordance with its domestic Foreign Trade (Development And Regulation) Act which allows the government to prohibit, restrict or regulate the import or export of goods and also conform to the global trade norms which do not require any country to furnish any information disclosure for which it considers contrary to its essential security interests and allow countries any action which they consider necessary for the protection of their essential security interests.