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India's decision to withdraw the 'most favoured nation' (MFN) status to Pakistan will adversely impact the neighbouring country's economy which is already in "deep trouble", Niti Aayog Vice Chairman Rajiv Kumar said on Friday.
He further said India's large market will now be closed for Pakistani exports.
India on Friday revoked the MFN status to Pakistan in the aftermath of the Pulwama terror attack.
Noting that India has always refrained from taking any trade and commerce related measures despite repeated provocations from Pakistan, Kumar said, "India has been forced to take the step of withdrawing MFN status for Pakistan after the latest extreme provocation in Kashmir."
Withdrawal of the MFN status would significantly hit Pakistan's exports to India, which stood at USD 488.5 million (around Rs 3,482.3 crore) in 2017-18.
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. Withdrawal of the status would mean that India could impose heavy customs duties on Pakistani goods.
Total India-Pakistan trade has increased marginally to USD 2.41 billion in 2017-18 as against USD 2.27 billion in 2016-17. India imported goods worth USD 488.5 million in 2017-18 and exported goods worth USD 1.92 billion in that fiscal.
After India announced the withdrawal of the Most Favoured Nation (MFN) status to the country, Pakistan said that it will not make any "emotional decision".
Advisor to Pakistan Prime Minister on Trade Abdul Razzak Dawood said,"India has removed us from the list of MFN nations but we will not make any emotional decision and will issue a response after making due thinking.”
He said the decision will, in fact, hurt Indians as after revoking the MFN status tariffs would be more on the about USD 500 million Pakistani exports, including items like cement and salt.
Pakistan exports fresh fruits, cement, petroleum products, bulk minerals and ores and finished leather to India.
But, it is believed that the decision might have long-term consequences as it will further dim the chances of normalisation of trade and tapping the potential of bilateral trade.
India accorded the MFN status to Pakistan in 1996 as part of the WTO free trade regime to treat all members of the world trading body on non-discriminatory basis.
(WITH PTI INPUTS)
