Prospects of Wheat and Sugar Trade between India and Pakistan: A Simple Welfare Analysis

Due to a long history of strained political relations between India and Pakistan, trade possibilities between the two neighbouring countries have rarely been studied [Nabi and Nasim (2001), Mukherji (2004)]. However, the recent thaw in India-Pakistan diplomatic ties and the stated need for confidence building measures (CBMs) between the two nuclear neighbours has generated a lot of interest in discovering possibilities of opening up of trade in more sectors at the levels of the two governments and the business communities. Moreover, the agreement on South Asian Free Trade Area (SAFTA), signed by seven member countries of South Asian Association for Regional Cooperation (SAARC) in January 2004, envisages expanding intra-regional trade, which is another driving force for studying extended trade possibilities between the two countries. Since then, India-Pakistan trade has become the subject of intensive discussions between trading bodies of the two countries, and a focus for policy oriented research