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    India’s Informal Trade with Pakistan

    Taneja, Nisha; Bimal, Samridhi | July 2016
    Abstract
    Informal trade continues to thrive between India and Pakistan despite recent measures undertaken by the two countries to normalize trade and reduce transport impediments. This calls for an in-depth analysis of India’s informal trade with Pakistan. This study (i) identifies factors determining informal trade, (ii) prepares estimates of India's informal trade with Pakistan (iii) examines the modalities of informal trade (iv) analyzes the transaction cost incurred in trading formally and informally and (v) proposes recommendations needed to shift informal trade to formal channels. The analysis, carried out on the basis of an extensive survey conducted in India and Dubai estimates informal trade to be US$ 4.71 billion. Of this, India’s exports to Pakistan are estimated to be USD 3.99 billion and imports from Pakistan USD 0.72 billion. The study concludes that informal traders in India and Pakistan have developed efficient mechanisms for contract enforcement, information flows, risk sharing and risk mitigation. Further, even though the transaction costs of trading in the informal channel are significantly higher than the formal channel, traders prefer to trade through the informal channel since it is more efficient than the formal channel. An important policy implication is that unless the environment of the formal trade improves, informal trade will not only continue to coexist with formal trade, but it will also impact its potential magnitude in the coming years.
    Citation
    Taneja, Nisha; Bimal, Samridhi. 2016. India’s Informal Trade with Pakistan. © Indian Council for Research on International Economic Relations. http://hdl.handle.net/11540/7358.
    Keywords
    Government Policy
    Regional Organization
    Regional Plans
    Economic integration
    Regional Development Bank
    Preferential tariffs
    International negotiation
    Protectionist measures
    Access to markets
    Economic agreements
    International trade law
    Regional integration
    Trade relations
    Regionalism
    Regional Economy
    Regional Trading Arrangements
    Regional Trade Integration
    Regional Economic Integration
    Regional Cooperation
    Interregional Cooperation
    Trade Disputes
    Trade Barriers
    Regional economics
    Regional planning
    Regional disparities
    Interregionalism
    Regional economic disparities
    Regional economic blocs
    Industrial arbitration
    Show allCollapse
    Citable URI
    http://hdl.handle.net/11540/7358
    Metadata
    Show full item record
    Thumbnail
    Working_Paper_327.pdf (1019.Kb)
    Author
    Taneja, Nisha
    Bimal, Samridhi
    Theme
    Regional
    Trade
    Labor Migration

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    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise