As the government withdraws Pakistan’s most favoured nation status, what will be the implications?

As the anger against Pakistan is rising across the nation, government has withdrawn the Most Favoured Nation (MFN) status of Pakistan. But what does it really mean? And will this really have any implications on Pakistan or is it just an eye wash move? Let’s understand.

What is Most Favoured Nation status?

The Most Favoured Nation or MFN status, enables two countries to access each other’s domestic markets with little to no hindrance of tariffs or quotas. The MFN status was accorded to Pakistan by India under World Trade Orgnization’s (WTO) General Agreement on Tariffs and Trade (GATT), to which both India and Pakistan are a signatory. The WTO principles state that eschew member country would treat each other as equal and “most favoured.” It must be noted that the Pakistan is yet to grant the MFN status to India.

What has the government done?

After the deadly attack on CRPF convoy in Jammu and Kashmir’s Pulwama, the nation started demanding strict action against Pakistan which sponsors terrorism in our soil. Following this, the government announced that they are withdrawing Pakistan’s MFN status. This means that now the government of India would be able to increase the custom duty to any level on any item coming from Pakistan. Currently the custom duty has been increased by 200%, and it is expected to rise even further in coming days.

What will be the implications?

The total amount trade between India and Pakistan was recorded to be somewhere around 2.41 billion in 2017-18. India imported goods worth USD 488.5 million in 2017-18 from Pakistan and exported goods worth USD 1.92 billion in that fiscal, said a recent PTI report.

The new move is expected to drastically bring down the numbers. The move can also slightly harm India; however, India, being a big economy can absorb the losses. However, on the other hand, Pakistan’s economy is fragile and therefore may suffer more economically.