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The issue was raised during bilateral discussions under the joint study group, which met for the first time in New Delhi.
The study group, headed by India's Commerce Secretary S N Menon and his Pakistani counterpart Tasneem Noorani, also set up two internal groups to hold detailed discussions on specific irritants in the way of boosting bilateral trade.
The government officials told Business Standard that one group was set up on Customs procedures comprising Customs officials from both the countries, while the second group would deal with sanitary and phytosanitary measures and non-tariff barriers.
The terms of reference of the two groups are expected to be finalised on Wednesday.
Sources said the Pakistani side also enquired about the system of the fee-based compulsory certification by the Bureau of Indian Standards, which was adding to the mark-up price of Pakistani goods being sold in India.
Earlier, inaugurating the study group, Commerce and Industry Minister Kamal Nath said the two countries should exploit the complimentarities of their economies by sourcing goods from each other rather than from third countries to boost bilateral trade, which has a potential to increase five-fold from the current $500 million.
"We must identify goods that are sourced from third countries but can be sourced from each other. Such goods should be immediately removed from the negative list. The transaction costs will become much cheaper. Once we have dealt with this, we can get more ambitious and identify other goods and services that can enhance our trade," Nath said.
Speaking on the occasion, Noorani said the Pakistani delegation had come with great expectations and an open mind. "Trade between the two countries has not achieved its potential but we need to do whatever we can to push the process forward. The process has been stunted for so long, but it is necessary to hold discussions in detail," Noorani said.
The secretary pointed out that because of the long disengagement, the business community and even the government machinery were not aware of the detailed trade regime in India and added that the joint study group would be helpful in this context.
The minister said the two sides should also exploit existing infrastructure in the form of road and rail linkages.
"One of the major constraints for rapid growth of trade between our two countries is the limited access to transport cargo through land routes. We have roads and rail linkages that are useable round the year. This is not only a cost-effective option but also has the potential to create jobs for a large number of ancillary activities along these routes," he said.
Commerce ministry officials said bilateral trade was expected to touch $500 million this fiscal year from around $340 million in 2003-04.
The unofficial bilateral trade at over $2 billion continues to surpass official figures. Of the $500 million bilateral trade, India's exports to Pakistan are valued at around $286 million.
There are around 768 products that are freely importable from India. Officials pointed out that the list had been expanded from 680 products earlier in November 2004. India mainly exports products pertaining to pharmaceuticals and commodities like sugar and tea.
