Pakistan’s Trade with its Regional Partners: India, Iran & Afghanistan

Regional trading blocs have helped their respective member states to become competitive and contributed greatly to their economic development. Pakistan borders 4 countries; these include Afghanistan, China, India and Iran. Of these four countries, it is only with China that the country has significant trading linkages, though this too is not across their land borders. With the other three neighbouring nations, Pakistan’s trade position is dismal. The Pakistan Business Council, in its publication Pakistan’s Trade with its Regional Partners: India, Iran & Afghanistan, explores the current trade patterns and potential trade with these three countries.

India, Iran & Afghanistan's Cumulative Share in Pakistan's Trade

As the figure above suggests, the share that the 3 regional peers have in Pakistan’s annual trade is extremely low; and has been on a decline over the past 5 years. While the share in exports is relatively higher than that for imports, yet the share if compared with countries with stronger cross-border trade accords is minimal.

Pakistan’s Bilateral Trade Position with its Regional Partners as of 2016
Imports (‘000 US$) Exports (‘000 US$) Trade Balance (‘000 US$) Share in Total Imports (%) Share in Total Exports (%)
India 1,644,388 348,102 -1,296,286 3.50 1.70
Iran 323,086 35,562 -287,524 0.69 0.17
Afghanistan 369,898 1,369,768 999,870 0.79 6.67

India has grown to become the 6th largest economy in the world with a total trade of $617 billion. However, Pakistan’s trade with India is very limited, despite having potential, due to political rivalry. On the Eastern front, trade with Iran has been restricted due to international sanctions on that country. There is a huge potential for Pakistan to import oil and gas and export processed and value-added industrial items to Iran. As for Afghanistan, their economy is largely underdeveloped mainly due to the ongoing war. Pakistan is the largest trading partner to Afghanistan; however, there is potential to further increase the exports which are mainly coming from India and Iran.

The Pakistan Business Council (PBC) is a private sector not-for-profit advocacy platform set up in 2005 by 14 (now 71) of Pakistan’s largest businesses. The PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives, activities and a soft-copy of this report can be found on our website: www.pbc.org.pk

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