Indo-Pak Trade Pact: India’s apparel industry not worriedWednesday, 02 May 2012
On its part, India has not only allowed, in principle, foreign direct investment (FDI) from Pakistan but also inaugurated a second integrated check post (ICP) on the border at Attari. “As a part of the initiative to promote trade, India has in principle agreed to allow FDI from Pakistan,” said Anand Sharma, Commerce and Industry Minister after a meeting with his Pakistani counterpart Makhdoom Amin Fahim recently. Sharma said the procedures and necessary requirements for allowing investments from Pakistan were in the formulation stage and would be notified soon.
In addition, both countries have also agreed in principle to allow opening of each other’s bank branches in their territories to facilitate financial transactions and ensure smooth trade. If the trade agreement gets through, which is expected to happen by December this year, many Pakistan-based brands waiting to make in-roads in India, would get the green signal and vice-a-versa. So does it mean more competition for Indian labels?
Reacting on the impact the pact Rahul Mehta, President, CMAI, says, “Any import from Pakistan will add to competition for domestic market. I do not anticipate Pakistan apparel industry to be as much of a threat to Indian industry as Bangladesh. I think the negatives of an FTA or reducing import duties with Pakistan will be less. Pakistan is good in fabrics and denim and is growing in knitwear. The Indian apparel industry will get broader fabric base and that will be an advantage. However, for the textile industry it will definitely mean additional competition.” It may be noted that an India-Pakistan Business Council is also on the cards. And as Fahim said talks are underway between the two countries on exploring opportunities in textile trade.
A Sakthivel, Chairman, AEPC believes it’s a win-win move for both countries. “Pakistan produces low quality cotton and yarn which will be imported from India along with PV, PC and made ups and garments. Whichever product India produces can be exported to Pakistan and whichever products India doesn’t produce could be imported from there. I don’t think the big retail stores and investors from Pakistan will invest in India.”
But D K Nair, Secretary General, CITI feels Indian manufacturers will have to gear up for intensive competition. “Investment will take place specifically for exporting to India. I don’t think much will happen to Indian textile industry once Pakistan is allowed to invest in India through FDI. Pakistan is not competitive in terms of brands,” he added.
According to FICCI, Indo-Pak bilateral trade stood at $2.75 billion (Rs 14,459 crores) last year, but has the potential to rise to $10 billion (Rs 5,25,800 crores), in the next four years. Trade primarily involves a trickle of trucks carrying perishable goods, sports goods, processed food products, machinery, and staple cotton amongst others across the Line of Control. It also includes expensive and time consuming transit trade via Middle Eastern capitals like Dubai and Tehran.