Withdrawal of MFN status to hit Pakistan economy, says Niti Aayog VC Rajiv Kumar

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 Friday.

India on Friday revoked the MFN status to Pakistan in the aftermath of the Pulwama terror attack.

"The impact of India's decision to withdraw MFN status on Pakistan economy, which is already in deep trouble, could be significant.

"On the other hand, India's exports are marginally dependent on Pakistan's market and these can be successively diverted to markets in the Middle East," Kumar told PTI.

He further said India's large market will now be closed for Pakistani exports.

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."

In a media briefing after the meeting of the Cabinet Committee on Security (CCS), Finance Minister Arun Jaitley said the MFN status to Pakistan stands revoked.

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.

The MFN status was accorded under World Trade Organisation's (WTO) General Agreement on Tariffs and Trade (GATT). Both India and Pakistan are signatories to this, and are members of the WTO.

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. 

In 2012, Pakistan had committed to giving the MFN status to India but retracted later due to domestic opposition. Instead of MFN, Pakistan said it was working on granting Non-Discriminatory Market Access (NDMA) status to India but that also was not announced.

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.

India mainly exports raw cotton, cotton yarn, chemicals, plastics, manmade yarn and dyes to Pakistan.