THE ECONOMIC WEEKLY February 3, 1951 Pakistan Economy in 1950 l ( Contributed )

AKISTAN is perhaps the first the surplus in her jute trade with very nearly at the old level. Total P State in the world which is India. imports also show an increase pro­ split into two widely separated parts. Statistics of me foreign sea-borne bably due to cheaper prices of Territorial contiguity, regarded by trade of Pakistan are published but imports. political theorists as a condition for full information is not available It is not possible here to analyse statehood, does not exist. The only relating to the land-frontier trade the various considerations which unifying factor for these two parts with India which forms an import­ prompted Pakistan to refrain from is religion; in all other aspects, phy­ ant part of Pakistan's foreign trade. devaluing its rupee. But the desire sical features, the way of life, lan­ An attempt is made below to study to exploit their monopoly of raw guage and culture, and natural re­ Pakistan's trade position in the two jute must have been one of them. sources, there is more dissimi­ years 1948-1950 by re-working If India could be made to pay a larity than similarity between the the absolute figures and the per- higher price for jute, foreign ex­ two parts. centage shares of the different coun­ change earnings could be increas­ In the sense, in which a nation is tries after combining the land-fron­ ed considerably, while the high rate defined in international trade tier trade figures as available in of exchange would ensure cheaper theory, West and East Pakistan have India with sea-borne trade figures imports of essential capital goods the character of separate nations. as published in Pakistan. Be­ and luxury consumer goods. They may have the same currency tween 1.948-49 and 1949-50, both system, but the process of price imports and exports have declined It is possible that Pakistan had equalisation and the mobility for but when compared to the specta­ also thought out the implications of factors of production it is expected cular decline of 33 per cent, in the failure of the twin objectives. to promote is so far retarded by the exports, the fall in imports is negli­ The failure of exports would have obstacles to free movement, that in gible. Imports from the USA. UK affected cotton and jute especially many ways the trade between the and Italy have increased consider- the latter but then the authorities two halves of Pakistan partake of ably while the exports have not knew that the impact of the loss of the character of triangular trade kept pace. export markets would be on Paki­ the normal pattern of which ap­ stani agriculturists, and particularly India's share in both the import pears to be for West Pakistan to severe on East Pakistan which was and export trades was the highest run a deficit with India; this is off­ earning the major part of foreign in both the years. The magnitude set in large or small measure by the exchange. Previous to September of the deterioration in the trade exeess of exports or out payments 1949 the higher money incomes with India can be judged Iron) by the Eastern province. flowing from the export surplus, the facts that India's share in Severe dents may have been made had raided the propensity to spend Pakistan's imports fell from about and. with it, the price level. The on this pattern of trading by the 54 per cent, in 1948-49, to 31 per exchange deadlock but it has not latter could have been brought down cent, in 1949-50 while her share of only by importing more consumer been completely destroyed: nor can Pakistan's exports jail from 62 to it be completely destroyed, judging goods into East Pakistan. But the 35 per cent. The balance of trade controls have been such as to from the terms of the last trade trade with India which was agreement and the present move permit imports into West and not heavily in favour of Pakistan equally into East Pakistan. The for a barter deal in which coal i' in 1948-49 to the extent of .Rs. 31.3 exploitation of East Pakistan by to by exchanged for jute. crores. has turned adverse to the West Pakistan is an old story: the This dichotomy in the eco­ extent of Rs. 3.66 crores in 10,49- complexion of the Government and nomies of the two parts has been 50. Imports from India fell by administration was such that ex­ one of the major factors of stress 43 per rent, and exports to India by and strain in the body politic of ploitation of E. Pakistan for the be­ 03.2 per cent, owing largely to the nefit of the Punjabi was inevitable. Pakistan. The most controversial shrinkage of jute sales to India. event of late 1949, non-devaluation Evidence about this discrimination of the Pakistan rupee, had different Pakistan is mainly an agricultural can be found in the columns of the, effects on the two parts of Pakistan economy and has no industries local press, e.g. Pakistan Observer and an attempt will be made to worth the nature. Most of her of Dacca. This inflation in East study this aspect also briefly. imports therefore are consumer Pakistan had been a major head­ In 1948-49, Pakistan had a goods, like textiles, tobacco, drugs ache of the Pakistan Government. favourable balance of trade; imme­ and medicines, vehicles,, etc. This If prices slumped in East Bengal diately after India's devaluation- is seen from the Table 1. due to non-devaluation 4 because due to the cessation of purchases of The export trade of Pakistan is India refused to buy), it could be raw jute by India—, the balance of mostly with India, the UK and got rid of; and at the same time trade became unfavourable. Paki­ USA.' India could be conveniently made stan is an economy held aloft on Principal exports are set out in the scape-goat for the miseries of one pillar—jute; and Indian pur­ Table II. East Bengal. chase of jute is the support for that As a result of non-devaluation. These expectations haw been pillar. Whatever deficit Pakistan Pakistan's trade with the devaluing more fully borne out than perhaps incurred in her trade with the rest countries declined, while trade with the Pakistan authorities would have of the world, sheemet that from the hard currency area remained liked. Finding Pakistan prices pro-

135 February 3, 1951 hibitive, India decided not to buy, agreed to buy 50 lakhs of bales in ' permissive' and riot obligatory causing a slump in East Pakistan 1948-49 and 40 lakhs in "1949-50). there .is no guarantee, therefore, When prices fell, the fall in jute The Board tried to keep up morale that trade to the agreed amount, or prices was greater than that in rice by announcing export quotas for to any amount, will necessarily ma­ (see Table III); this added to the countries other than India. It also terialise. The countries concerned miseries of the East Bengal Muslim negotiated Trade Agreements with merely undertake to issue import cultivator and was probably res­ a number of countries which agreed or export licences upto the amounts ponsible for the outbreak of Muslim to buy the surplus jute. Such trade agreed to. The Board also an­ fanaticism in Bengal in February- agreements, however, are merely nounced, the establishment of bal- March 1950. Several other normal exports from East Bengal to Calcutta suffered from the trade deadlock — fish, poultry eggs and other perish­ able goods, petel-nuts, etc. And at the same time, transport in East. Bengal was brought to a stand­ still by the lack of coal, electric sup­ ply in towns was affected, and cine­ mas closed down, making for urban unrest. Pakistan tried to buy coal at higher rates from Europe but more recently Europe herself has a coal shortage. This brings us to a study of the major commodities of Pakistan's trade. The output of jute in Paki­ stan in 1949-50 was unofficially put at 70 lakh bales; the official esti­ mates put it at 33 lakh, but Mr. Nurul Amin, the East Pakistan Premier, admitted in February last that the output was 50 lakhs. In 1950-51 output is expected to be 65 lakh bales according to unoffi­ cial and 43 lakhs according to offi­ cial estimates. Following the non-devaluation decision and India's refusal to buy, the Government set up the Paki­ stan Jute Board to stabilise prices of jute. The finance for the pur­ pose was to come from the National Bank of Pakistan, which was set up (with a. capital of Rs. 6 crores). The Board fixed minimum buying prices for raw jute and appointed ''strong'1 agents who were under an obligation to make these prices effec­ tive. These agents however failed to make these prices effective and jute was reported to be selling at as low a price as Rs. 12 per maund. This induced smuggling and the airlift of jute from Agartala.) This plight was mainly due to the re­ fusal of India to buy (India had THE ECONOMIC WEEKLY February 3, 1951 ing presses in East Pakistan, rhe ports to India during the period plan to establish three jute mills April to August 1949 were due to: and to develop the port of Khulna. There was a time when India Actual exports did not attain the (a) high prices for comparatively ranked second to US, not only agreed quotas. inferior qualities from as a producer of cotton but as March onwards. Pakistan an exporter of medium and short The Board also tried to force cotton prices were out of staples to the East and the West. India into the purchase of raw jute parity with world cotton The peak was reached in 1936- by holding up Assam jute in tran­ prices; 37. Then came the war. With export markets closing down one sit, and Pakistan jute bought and (b) inelasticity in Pakistan's li­ paid for prior to devaluation. India after another and the growing censing policy—large quotas need for producing more food retaliated by stopping supplies of were held by comparatively coal to Pakistan, Previously India grains, the acreage under cotton inexperienced shippers and went down by one-third i.e. from a had only put an export duty on new-comers in whom Indian mustard oil and coal to Pakistan. normal pre-war acreage of 22 njil- purchasers had little or no lion acres to around 14½ million Pakistan, however, had banned confidence. acres. The short fall in production the export of fish, milk and poultry Out of the quota of 6½ lakh did not make itself felt immediate­ to India and this had caused a fur- bales provided for in the cotton year ly as the mills could fall back on ther loss of income to the Pakistan September 1948 to August 1949 un- their large war time accumulation of cultivator. All these had added to der the Indo-Pakistan Agreement, cotton stocks which had risen to 59 East Pakistan's miseries and the Jute India purchased only 3,79,515 bales lakh bales on 31st August 1944. Board must have felt relieved when up to the end of August, 1949 and Slowly, the picture changed. On the Indian Jute Mills Association the balance of about 2,70,500 bales 31st August 1947, the stocks had proposed a barter deal of 8 lakh lapsed. But purchases had already gone down to 41 lakh bales. After bales of jute (hubbi-jubbi, cuttings, tapered off towards the latter half partition, the situation changed fun­ rejections) for 20,000 tons of jute of the season, total purchases by damentally. The large cotton pro­ manufactures. This was embodied India during the period April to ducing acres in the West Punjab in the Agreement of 21st April 1950 August 1949 being only a meagre and Sind went to Pakistan. Small between the two Governments. 46,361 bales. After September crops in India in 1948-49 and 1949- There were other commodities 1949, cotton purchases by India 50 coupled with the loss of the which India was to give and there ceased altogether as Pakistan's Pakistan styles of cotton caused a were others which could be freely non-devaluation decision upset the rapid shrinkage of the carry over traded between India and Pakistan. entire price structure. Total exports figures and when the 1949-50 cotton This firmed up jute prices in East by Pakistan during 1949-50, how­ year ended, mills and trade stocks Pakistan considerably. ever, increased by 32 per cent over were down to about 16 lakh bates. the preceding year. Imports of foreign cotton in Bom­ For the new jute crop the Board bay during the last two cotton years announced its minimum buying In 1950 the US restricted cotton were as follows; prices on October 10, 1950. On acreage and consequently export the whole, they are only slightly curbs were announced last October. lower than the last season's but This raised cotton prices the world they are still higher than the maxi­ over; the Pakistan Government step­ mum buying prices fixed by Indian ped in and enhanced the export Jute Mills Association in Calcutta. duty on raw cotton to Rs. 300 per Perhaps both the countries were bale. This affected previous con- banking on a solution of the trade tracts, there were defaults and the deadlock from the verdict of the Karachi markets closed and cotton International Monetary Fund on prices have come down disastrously. Pakistan's par value. It appears The Pakistan Government have however that the purchase of Paki­ therefore announced now the crea­ stan jute would no longer affect the tion of a Cotton Board to stabilise saleability of Indian jute manufac­ cotton trade. tures as world prices are now rising Total imports in India aggregat­ due to the rearmament boom. Hides and skins were mainly ex­ ported to Spain during 1948-49, ed 1,249,000 bales as against' 1,024,000 bales in 1948-49. Of cotton, the second most im­ her percentage share being 44.6; portant export of Pakistan, dur­ USA followed with 12.2 per cent; Partly on* account of the two ing 1948-49 India was the largest Italy 10.4, India 5.9, Turkey 5.6, month old strike in Bombay milk importer taking 25.1 per cent; So­ Greece 4.8 and UK 3.6. In 1949- and partly on account of limited viet Union the second best custo­ 50, however, Spain practically dis­ supplies, consumption by mills dur­ mer, took 18.2 per cent,, and China appeared from the market. Ex­ ing the season 1949-50 was almost took 13.2 per cent. During 1949-50 ports to Germany, USA, UK and at its lowest at 3,684,000 bales dur­ India's share dropped to 18.9 per Italy improved. Indians share drop­ ing the last ten years. The con­ cent, while exports to the UK, Japan ped from 5.9 to 2.8 per cent. Total sumption of domestic cotton de­ and Hongkong increased by 2.7, exports of hides and skins during creased to 2,544,000 bales as against 13.8 and 2.3 per cent, respectively. 1949 fell by 43.5 per cent, below 3,123,000 bales in 1948-49 while Exports to the Soviet Union fell by the preceding year due to the ab­ foreign cotton consumption increas­ 9.6 per cent, during 1949-50 while sence of exports to Spain. ed to 1,140,000 bales as against exports to Germany increased by (To be continued) 1,131,000 bales in the previous 2.5 per rent; The decline in ex­ aeason.

137