With the Saarc (South Asian Association for Regional Cooperation) countries looking resolved to create a South Asian Free Trade Area by 2006, Indian tea industry, hit hard by depressed global prices, has never been closer to bagging the big Pakistani market.

Pakistan, which currently imports 150 million kg of tea, mainly from Kenya, seems to be a readymade market for Indian exporters, as consumers there prefer the tea India offers.

The agreement for creating a free trade area in the region (Safta), which is expected to be signed at the Saarc summit beginning in Islamabad on Sunday, is also likely to boost Indian exports of auto parts, consumer durables, pharmaceuticals and films.

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Indian tea industry is facing troubled times -- surplus production, falling exports and declining global prices.

Pakistan has the highest per capita consumption of tea at 750 grams; it imports huge quantities of tea that India can offer at cheaper prices.

If a free trade area comes into being, a substantial part of Pakistani market is expected to be diverted to India because of price competitiveness, easy transportation and popularity of Indian tea.

Presently, India accounts for less than four million kg of Pakistani tea imports. That too through indirect route shipped to Karachi via Colombo, Singapore and Dubai, making Indian tea costly, industry sources said.

Apart from cheap imports of these items from India, Pakistan could benefit by exporting cotton and textiles to the Indian industry which is faced with spiralling cotton prices.

Indian auto industry too would benefit from Safta. Suzuki Mehran, the Pakistani equivalent of Maruti 800, is one of the most popular cars in Pakistan and is currently available at almost double the Indian price.

Ditto for pharmaceuticals. India, an emerging global supplier of generics, can not only find a market but also can facilitate availability of cheaper but quality drugs in the neighbouring country.

The illegal trade between India and Pakistan was estimated at nothing less than $1.5-2 billion, while official trade stood at $262 million in 2002-03.

The agreement would also increase India's trade with Afghanistan, Iran and Tajikistan besides its Saarc neighbours.

At present, intra-regional exports for Saarc is a meagre 5.3 per cent as against 51.7 per cent of Nafta, 55.2 per cent of EU and 20.4 per cent of Asean.