India and Pakistan were once described as ‘natural trade partners’. If the two neighbouring countries shared friendly relations then trade between them would’ve flourished bringing economic benefits to both of them.

In wake of heightened political tensions, Pakistan suspended bilateral trade with India on August 9, 2019. This was after exercising restraint from retaliating in February 2019 when India had suspended cross-border trade and withdrawn Pakistan’s MFN status, and imposed 200% import duty on Pakistani products in contravention of commitments under the South Asian Free Trade Agreement (SAFTA).

Since then the bilateral trade reduced to unilateral trade — Indian exports continued unabated at a monthly average of $150 million while Pakistan’s decreased from $30 million to $4 million. Pakistan’s decision to suspend bilateral trade has pulled the plug on this one-way trade.

Neither Pakistan nor India is critically dependent on each other’s market, though the suspension of bilateral trade might, in the short term, affect the consumer welfare by increasing prices of a few agricultural and other products.

Here is a short video on why India is facing a shortage of onions and what it can do to solve it.

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