India weighs sanctions on Pakistan as part of Uri response

27 Sep 2016


India is mulling economic sanctions on Pakistan as part of a calibrated response to its terror act on the Uri Army base in Kashmir. Besides withdrawing all concessions granted to Pakistan under the South Asia Free Trade Area (SAFTA) agreement, New Delhi is also looking at a review of the Indus Water Treaty (IWT) between the two countries.

While a military war with Pakistan or any country for that matter is not a preferred option, Pakistan can be better tamed by an economic blockade, including the Indus Water Treaty option, feel many in the ruling camp.

The ''war minus the shooting'' could include withdrawal of the concessions given to Pakistan under the South Asian Free Trade Area (SAPTA) agreement and a review of the Indus Water Treaty (IWT) between the two countries.

Besides, India is also planning to drag Pakistan to the Dispute Settlement Body of the World Trade Organisation (WTO) for not extending trade benefits under the 'most favoured nation' (MFN) status.

Two-way trade between India and Pakistan stood at $2.61 billion in 2015-16, up 11 per cent from $2.35 billion in 2014-15.

While two-way trade between India and Pakistan is small compared to the potential of both countries, if Indian can get all SAFTA members on board, it would hurt Pakistan hard, making it even more dependent on its "all-weather ally" China.

SAFTA includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka as member-states and any action against only one or more countries have to be based on consensus.

As things stand, no country in the SAFTA block is likely to oppose will India's stance considering their recent statements.

The first casualty under trade action could be cement and India may decide to end duty-free import of cement from Pakistan, with the cement industry also clamouring for barriers.

India could also take Pakistan to WTO, given its failure to respond to India giving MFN status to that country. This will have a more adverse impact on Pakistan's economy.

Under WTO rules, MFN status implies that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods / services from all its trading partners.

Meanwhile, taking the diplomatic offensive forward, external affairs minister Sushma Swaraj in a sharp rebuke to Pakistan Prime Minister Nawaz Sharif's ''tirade'' on Kashmir, said those accusing others of rights violations must introspect, and censured Pakistan for the first time at the UNGA for perpetrating the ''worst form of state oppression'' in Balochistan.

Swaraj in her address at the 71st UN General Assembly (UNGA) session, said there are nations ''in our midst'' where UN-designated terrorists roam freely and deliver ''their poisonous sermons of hate with impunity'', an apparent reference to Mumbai attack mastermind and Jamaat-ud-Dawa chief Hafiz Saeed.

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