The India-Pakistan Chamber of Commerce and Industry, set up in the euphoria of an agreement between the two prime ministers in February 1999 in Lahore, set a bilateral trade target of Rs. 100 million by 2003. But political tensions, tariff barriers and cumbersome visa and customs procedures have stifled trading activity. India has fought three wars with Pakistan since both countries became independent in 1947 and tensions between the two South Asian neighbors remain high over the disputed territory of Kashmir. Although both countries are members of the World Trade Organisation, Pakistan has not yet granted most-favored nation status to its neighbor.
Bilateral trade is, therefore, governed by a Pakistani restricted list of importable items.
Chemicals, pharmaceuticals and capital goods are India's major exports to Pakistan. Last month, Islamabad banned sugar imports from India under pressure from local industry. Tea has emerged as a potential area of trade following Pakistan's decision to buy 10 million kg of tea this year, seven million kg more than last year.