Context:

• India increased customs duty on all goods originating from or imported from Pakistan to 200 per cent with immediate effect. It is not very clear whether this will affect the third-country trade which is going on between the two countries through places such as Dubai in the UAE and Singapore.
• The move comes after India withdrew the ‘Most-Favoured Nation’ status accorded to Pakistan following the Pulwama terror attack in Jammu and Kashmir that led to the killing of at least 40 CRPF personnel and injuring of many others. The decision was taken during a meeting of the Cabinet Committee on Security, which was presided over by Prime Minister to discuss the security scenario in Jammu and Kashmir in the wake of the terror attack.

Impact of withdrawal:

• Pakistan exported just $500 million of goods in 2017-18 to India, representing 1.5 per cent of its exports. However, it is believed to have exported goods worth about 3-4 times as much through third countries. While the official trade between the two neighbours in 2017-18 stood at $2.4 billion, the third-country trade between the two is estimated to have been $5-10 billion.
• The main items imported by India from Pakistan include fresh fruits, cement, petroleum products, bulk minerals and ores and finished leather. The major items that India exports to Pakistan include raw cotton, cotton yarn, chemicals, plastics, manmade yarn and dyes.
• According to analysts, the 200 per cent hike in the excise duty could hit cement and bituminous oil export by Pakistan as these are bulk commodities which are difficult to ship through third countries without impacting the costing hugely.