Normalisation of Indo-Pak ties would not only augur well for bilateral trade but will also lead to an increase in regional trade by 15 per cent, the Governor of State Bank of Pakistan has said.

"If India-Pakistan establish direct trading relations it could result in decline in production costs and the trade within the South Asian region could expand to 10-15 per cent within the next five years," Husain was quoted as saying in the media.

His comments followed Pakistan Prime Minister Mir Zafarullah Khan Jamali's announcement in Islamabad two days ago to include 78 items for tariff concessions to India under South Asian Preferential Trading Arrangement.

The 78 items include oil cakes, wrist-watches, safety glass, water gas generators, ceramic wares, mica waste and groundnut oil.

Trade under SAARC amounts to less than 4.5 per cent of total regional trade compared to 40 per cent for the Association of South East Asian Nations and 64 per cent for the European Union, he said.

Stating that a lot of trade is taking place through third countries like UAE and Singapore, he said this was raising costs.

"In rest of the world, regional trade is expanding and it is one of the major stimulants, which insulates them from global recessions," Husain said.