Pakistan Downgrades Diplomatic Ties with India; Reviewing Bilateral Arrangements

Pakistan on Wednesday announced it would expel India’s High Commissioner and suspending bilateral trade after New Delhi revoked Article 370 stripping Kashmir of its special status, and integrating Kashmir fully with the mainland.

Neighbours China and Pakistan, which both claim and occupied parts of Jammu & Kashmir, assigning a disputed status for the region have voiced fierce opposition to India’s removal of a constitutional provision that had allowed the country’s militancy-ridden state to impose the same laws applicable to rest of India.

Nuclear-armed neighbours, India and Pakistan have thrice waged war over Kashmir and in February engaged in an aerial clash. India, which has been battling Pakistan-backed insurgents there for 30 years, said the special status had hindered Kashmir’s development and it wanted to fully integrate the region with the rest of the country.

Moin-ul-Haq, Pakistan’s newly appointed High Commissioner to India, who has yet to take up his post will now not move to New Delhi, while Indian High Commissioner Ajay Bisaria will be returned to India, Islamabad said in a statement on Wednesday.

The decision came after Pakistan Prime Minister Imran Khan held a meeting of the National Security Committee in Islamabad on Wednesday

“It is very obvious that our High Commissioner wouldn’t be in Delhi, and obviously the man who is here will also leave,” Pakistani Foreign Minister Shah Mahmood Qureshi said in a telephone interview with Pakistani TV channel ARY News.

By releasing a press statement after the committee’s meeting, it announced it will:

• Downgrade diplomatic relations with India.
• Suspend bilateral trade with India.
• Review bilateral arrangements.
• Take the matter to the United Nations, including the Security Council.
• Announced that the Pakistani Independence Day (August 14) will be “observed in solidarity with brave Kashmiris and their just struggle for their right of self-determination”. It also announced that August 15 will be observed as Black Day.

It has also said it will be suspending bilateral trade with India. However, this move going to hurt Pakistan more than India. An as a large part of the trade between the two countries takes place through informal route meaning not direct recorded trade but through a third country, like UAE.

As per a recent report by ICRIER (Indian Council for Research on International Economic Relations, the total exports from India to Pakistan FY 2018-2019 was around $2 billion. But the latest data of informal exports as per the report which goes back to 2012-13, was $3.9 billion, nearly twice the current value of formal exports.

Similarly, the informal imports by India from Pakistan was recorded at $721 million FY 2012-13 and the latest formal imports (2018-19), is well short of that level at $494.8 million, showed the report.

Further, we can also see a major size difference between the two economies. As of now the size of India economy has grown to around $3 Trillion. On the other hand, the size of Pakistan’s economy is about $273 Billion. Which is in a dilapidated condition with forex reserves of around $17.4 billion, compared to India $420 billion.

Given the situation, it is highly dubious that the trade suspension by Pakistan would in any major way impact India and its economy. Further, India already has revoked the Most Favoured Nation tag given to Pakistan, which snatches away all the trade benefits Pakistan used to get earlier.