India is deploying its ‘big guns’ in preparation for an “economic war” on Pakistan as a calibrated response to the recent terrorist attack on the Uri military camp.

This “war minus the shooting” could take the form of a withdrawal of the concessions given to Pakistan under the South Asian Free Trade Area (SAPTA) agreement and a review of the Indus Water Treaty (IWT) between the two countries.

India is also mulling the option of dragging Pakistan to the Dispute Settlement Body of the World Trade Organisation (WTO) for not extending trade benefits under the ‘most favoured nation’ (MFN) status.

Economic, not military, war According to sources, while India may not be keen on a military war against Pakistan in retaliation for the September 18 attack, the consensus within the government is to wage an “economic war” instead.

Two-way trade between India and Pakistan stood at $2.61 billion in 2015-16, up 11 per cent from $2.35 billion in 2014-15. While this is small relative to the economies of both the countries, India reckons it is well placed to turn the heat on Pakistan.

The action contemplated on the SAFTA front is illustrative. According to Prof Biswajit Dhar of Jawaharlal Nehru University (JNU), any action within SAFTA — which has Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka as member-states — has to be consensus-based. However, he said, no country will oppose India’s move considering their recent statements. The government has also come under pressure from the cement industry to immediately stop duty-free import of cement from Pakistan.

Similarly, there has been a clamour for India to withdraw the MFN status it had given Pakistan in 1996. However, highly placed sources told BusinessLine that India is planning an “alternative and more feasible” option that will have an adverse impact on Pakistan’s economy: challenge Pakistan before the WTO.

Under WTO rules, MFN status implies that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods/services from all its trading partners.

“Withdrawing the MFN status at this stage will only be a symbolic gesture. But we should weigh the pros and cons of challenging Pakistan at the WTO as it can seek exceptions and turn the case in its favour,” said Jayant Dasgupta, former Ambassador of India to the WTO. Pakistan, he added, may cite ‘Security Exceptions’ in Article XXI of GATT (General Agreement on Tariffs and Trade), under which a member-country may not grant MFN to another member on grounds of security.

Last year, when External Affairs Minister Sushma Swaraj was in Pakistan, both sides decided to restart the Comprehensive Bilateral Dialogue, under which India offered to give preferential trade access to Pakistan under SAFTA provided Pakistan extends MFN benefits to India.

Pakistan came close to giving India MFN status in 2012, but it has missed several committed deadlines for its implementation. When Prime Minister Narendra Modi met Nawaz Sharif in April last year, normalising trade relations was one of the top items on the agenda Much water has flowed down the Indus since then. And after the Uri attack, the powder is being kept dry for an all-out economic war on Pakistan.

Sushma offensive at UNPTI adds : In a sharp rebuke to Prime Minister Nawaz Sharif’s “tirade” on Kashmir, India today said that those accusing others of rights violations must introspect, and censured Pakistan for the first time at the UNGA for perpetrating the “worst form of state oppression” in Balochistan.

Taking a veiled dig at Pakistan, External Affairs Minister Sushma Swaraj in her address at the 71st UN General Assembly (UNGA) session, said there are nations “in our midst” where UN-designated terrorists roam freely and deliver “their poisonous sermons of hate with impunity”, an apparent reference to Mumbai attack mastermind and Jamaat-ud-Dawa chief Hafiz Saeed.

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