Trade in services between India and Pakistan

Abstract

This chapter discusses trends in services in India and Pakistan and assesses the feasibility of developing trade and investment relations between the two countries in services. In both countries, services contribute significantly to output, but India has outperformed Pakistan on services growth, trade, and investment flows. Competitiveness indicators suggest potential in IT services for India and in communications, transport, and IT services for Pakistan. Services trends in the two countries suggest possibilities for collaboration and commercial relations through various modes of supply, including the potential to collaborate through FDI. However, bilateral engagement in services is currently very limited. It is concentrated in a few areas and differs from the overall composition of their services trade and competitiveness, suggesting the presence of barriers specific to this bilateral relationship. An examination of specific services captures the prospects and challenges. In IT services, there is a scope to engage through collaboration and tie-ups between Indian and Pakistani firms. In health services, there is a potential for expanding medical tourism trade, cross-border investment telemedicine, and collaboration in research and training. In tourism services, both countries can leverage their social and cultural ties and focus on specific segments and target groups. However, there are numerous challenges to developing bilateral services relations in terms of visas, transport connectivity, the business environment, and political tensions. To move forward, an incremental, confidence-building approach is required, with private sector support along with political will and commitment at the highest levels.