IMPLICATION OF PAK-INDIA TRADE RELATIONSHIP ON PHARMACETICAL AND AUTOMOBILE AND ECONOMY OF PAKISTAN BY USING COMPUTABLE GENERAL EQUILIBIUM MODEL (CGE) Model

Abstract

This research investigates the Impact of PAK-INDIA trade on Economy of Pakistan. Data were collected from GTAP-7 database and six sectors were included in the database, Textile, Pharmaceutical, Automobile parts and engineering, Agriculture, Financial and Insurance services and logistics. Data were analyzed by using GEM-software. Different simulation run on GTAP-7 database and various tariff rates applied. It was revealed that if India were removing the sensitive list item, in this scenario both countries would have positive impact on GDP, Export, Import and Employment of Pakistan. The results indicates that there in Agriculture, textile, Auto Pakistans is head on India in MFN status. In Pharmaceutical, Financial services and Logistics India has positive gain. It was further revealed that if Pakistan is given MFN status to India, Pakistans import decreased and Export increased and overall positive impact on Economy. This research analyzes the potential economic costsand benefitsof Pak-India trade in Textile, Pharmaceutical, Automobile parts and engineering, Agriculture, Financial and Insurance services and logistics. Thefirstscenariois when normal trading relation with India will be restored; it means that both countries will give the MFN (Most Favored Nations)status to each other. In the seconds cenario,the SAFTA will be operative andt here will be free trade between India and Pakistan and both countries will remove all tariffs and custom duties from each others imports.The Global trade analysis GTAP model is used to analyze the possible impact of SAFTA on Pakistan in a multicountry, multisector applied General equilibrium framework. After employing the simplified static analysis framework,the analysis based on simulations reveals that current demand for Pakistani Textile, Pharmaceutical, Automobile parts and engineering, Agriculture, Financial and Insurance services and logistics will expand after the FTA and consumer surplus will increase.The drop in the domestic prices of dates will increase the production ofmany down stream industries,which will have pleasant multiplier effects on the economy of Pakistan.The government may reduce MFN tariffson industrialdates before implementing the FTA.