New Delhi: Following the Pulwama terror attack, India on Friday withdrew the 'most-favoured nation' status to Pakistan, a move which would enable India to increase customs duty on goods coming from the neighbouring country.
In a media briefing after the meeting of the Cabinet Committee on Security (CCS), Finance Minister Arun Jaitley said the most-favoured nation (MFN) status to Pakistan stands revoked.
What is MFN
MFN status is helpful for developing nations. The countries enjoying this status have broader access to a market for trade goods and get competitive cost for their export items owing to highly reduced tariffs and trade barriers.
The status also reduces the bureaucratic hurdles and varied kinds of other tariffs for import. These benefits help to increase demands for goods and naturally give a boost to the economy and export sector.
When was it given to Pakistan
India granted the MFN status to Pakistan way back in 1996, but the neighbouring country has not yet reciprocated.
The MFN status was earlier accorded under WTO's General Agreement on Tariffs and Trade (GATT). Both India and Pakistan were signatories to this; and are now members of the World Trade Organisation (WTO), which replaced the GATT.
Under the MFN pact, a WTO member country is obliged to treat the other trading nation in a non-discriminatory manner, especially with regard to customs duty and other levies.
So as WTO signatories, both the South Asian neighbours have to treat each other and the other WTO member countries as favoured trading partners, especially in terms of imposing customs duties on goods.
What happens when India removes MFN status:
Removal of this status means India can now enhance customs duties to any level on goods coming from Pakistan, a trade expert said. India can also stop export of materials like cotton and chemicals, which in turn may increase production costs for industries in Pakistan.
India-Pak Trade
Total India-Pakistan trade has increased marginally to $2.41 billion in 2017-18 as against $2.27 billion in 2016-17. India imported goods worth $488.5 million in 2017-18 and exported goods worth $1.92 billion in that fiscal.
India mainly exports cotton, dyes, chemicals, vegetables and iron and steel; while it imports fruits, cement, leather, chemicals and spices from Pakistan.
The CCS meet was chaired by Prime Minister Narendra Modi to discuss the security scenario in Jammu and Kashmir in the wake of the Pulwama terror attack on Thursday.
At least 44 CRPF personnel were killed and five injured in one of the deadliest terror attacks in Jammu and Kashmir when a Jaish suicide bomber rammed a vehicle carrying over 100 kg of explosives into their bus in Pulwama district.
(With PTI inputs)
