India is likely to move the World Trade Organisation first before it withdraws the Most Favoured Nation status accorded to Pakistan. India is likely to move the World Trade Organisation and say that Pakistan has not reciprocated India's grant of MFN.
Following this India is likely to tell the WTO that it would be withdrawing the MFN status accorded to Pakistan in the year 1996.
The Prime Minister of India, Narendra Modi will be convened on Thursday on this issue. This is part of India's strategy to build up pressure on Pakistan following the Uri attack.
While this is not the first time that India has decided to approach the WTO, officials say that this time around the issue is serious. India is doing everything it can to isolate Pakistan. The meeting regarding the Indus Water Treaty was also a step in that direction, officials also say.
India says that the MFN status granted by it to Islamabad in 1996 has not been reciprocated.
Pakistan has always been apprehensive of according MFN status to India calling it an enemy nation. Pakistan has also said that its industry has opposed any such move as their business interests could be hurt by Indian goods. Pakistan however came up with the Non-Discriminatory Market Access agreement due to lack of trust with India.
What is MFN about?
MFN is accorded to a trade partner which will ensure non-discriminatory trade. WTO rules state that a member country cannot discriminate between its trade partners. If the government today decides to revise the MFN status, then it would shut down trade with Pakistan.
The MFN status is considered to be beneficial for developing nations as it gives accesss to a wider market for trade goods. It leads to more competitive trade. There would be access to a wider market, reduced cost of export items due to reduced tarrifs and trade barriers.
On the downside, the country will have to hand out the same all trade partners who are members of the WTO. This could result in a price war and the country will not be able to protect the domestic industry from cheaper imports.