Round The World

New Delhi, 17 April 2012

Indo-Pak CBMs:

WILL ECONOMICS LEAD TO NORMAL TIES?

By Monish Tourangbam

Research Scholar, School of International Studies (JNU)

Will trade and economics lead to normalisation of Indo-Pakistan ties? The question is still far-fetched and given the nature of ties between the hostile neighbours, none would dare predict anything. But, one can hardly ignore some unprecedented economic steps taken recently along-with whether both Governments would be able to sustain the momentum translating in profits whereby a major headway would be made in the sub-Continental economic graph. Other countries in South Asia have often accused the India-Pakistan imbroglio of scuttling growth in the region and over-shadowing important issues.

Indeed, trade between the warring neighbours has never had the chance to achieve its potential owing to the tenuous political track since Partition right to the post-Cold War period of heightened cross-border terrorism in the Kashmir valley.

The trajectory of ties has always been by failed efforts to resolve age-old issues and notorious adventurism from Pakistan-based terrorists that weakens support for active normalisation. Hence, amidst the bonhomie resulting from trade liberalisation, terrorism with its deleterious effect still remains a major headache for sustenance of people-to-people contact and improved business inter-actions.

Pertinently, in the last two decades, India has managed to maintain stable growth, becoming one of the fastest growing economies in the world, thus it makes economic sense for Pakistan to increase its trade with its neighbour if its living standards are to be improved and sustained. A scenario which would be beneficial for the entire region as it continues to lag behind other global areas in making optimal use of its economic prospectives.

Importantly, intra-regional trade in South Asia has suffered majorly because of historical tensions that have poisoned relations and created a trust deficit among the countries; and of all animosity Indo-Pak hostilities continue to hog the limelight.

According to a study ‘Cost of Economic Non-Cooperation to Consumers in South Asia’ by a Jaipur based think-tank CUTS International, trade liberalisation across the five South Asian countries (India, Bangladesh, Nepal, Pakistan and Sri Lanka) would result in a consumer welfare gain of at least $597 million to India and $2 billion to the region. As intra-regional business represented only five per cent of the overall trade flows and was a drag on economic growth.

According to the study, progress in easing trade barriers was possible through simplifying banking facilities for import financing, developing better communication and transportation infrastructure, simplifying visa procedures and improving information and support for traders.

Significantly, in quick succession to President Zardari’s symbolic India visit followed by the successful ‘Lifestyle Pakistan’ trade fair in New Delhi, both nations inaugurated a new trading post on the Attari-Wagah border. Sources aver about 200 trucks cross the border daily with restricted merchandise which accounts for about Rs. 1,500 crores of annual business.

Further, another ASSOCHAM study stated that with the Integrated Check Post (ICP) at Attari-Wagah becoming operational and Pakistan granting the Most Favoured Nation (MFN) status to India, annual bilateral trade would increase from $2.6 billion to $8 billion within the next two years.

Also, there are plans to open more trading facilities on the borders, with demands to allow trade from Fazilka and Hussainewala borders in Ferozepur district with Pakistan.  As a follow up step to these economic developments along-with increasing people-to-people contact, New Delhi and Islamabad could soon sign a more liberal bilateral visa regime. This awaits the Pakistani Cabinet’s decision. The new visa regime would facilitate movement of businessmen, elderly, children and spouses putting behind the restrictive 1974 visa agreement.

Moreover, India has decided in principle to allow foreign direct investment from Pakistan. Both countries have also agreed in principle to allow opening of bank branches to guarantee smooth trade after several rounds of talks between Reserve Bank of India and the State Bank of Pakistan with an India-Pakistan Business Council in the offing.

Undoubtedly, it is imperative to make strategic calculations more inclusive, with increased emphasis on the economic dimensions as also taking a political economy route to furthering India-Pakistan ties. Given the ties are still characterised by seemingly intractable differences over Kashmir, terrorism and water sharing issues. A long-term vision of trade and economic integration needs to be worked out that could be immune from the vagaries of highly inflammable Indo-Pak differences over security issues.

Unhindered trade and standard business inter-actions on a regular basis could actually serve as major pedestals in the long run to both becoming more accommodative of each other’s concerns and provide a common ground to try and resolve some of the more contentious issues.  New Delhi and Islamabad have come a long way since the 26/11 carnage that had put relations in total limbo.

Notwithstanding, regular meetings at the highest levels coupled with visible incremental progress, the issue of terrorism is still very much real for the Indian electorate as domestic politics is a different ball game altogether. Not to take away any credit from the prospective trade and economic engagements being made, the crucial matter of anti-India terrorism emanating from Pakistani soil, supported by some elements of the Pakistani military and intelligence would remain a hurdle. Clearly, any change of heart in Islamabad would be a major CMB for Indians.

For instance, Islamabad continues to dilly-dally when it comes to Hafiz Saeed, the main accused in the 26/11 case. Recall, the US announced a $10 million bounty for any information leading to his arrest and conviction recently.  However, Islamabad continues to cite lack of evidence on Saeed thereby frustrating Indian officials working on his case. What's more, President Zardari after his meeting with President Patil reportedly asserted that Pakistan needs “substantial evidence” before it arrests the terrorist.   

It is no secret, Pakistan itself is engulfed by terrorist violence and bloodshed, as it struggles to control the Pakistani Taliban which continues to target the ‘most secure’ installations with impunity. One can hardly forget the daring attack launched by insurgents at the Mehr Naval Air Base in Karachi.

Recently, scores of Taliban insurgents armed with automatic weapons and rocket propelled grenades, stormed a prison in the country’s north-western town of Bannu and freed nearly 400 prisoners, including many terrorists, thus putting the Pakistani security arrangement to shame.

In sum, it is high time Islamabad understood the pain terrorism has given to Indian citizens over the years; and takes sincere steps to rein in elements that support anti-India groups nestled inside Pakistani soil. But this is easier said than done; given the hold the military has on the Pakistani political set-up. ---- INFA  

(Copyright, India News and  Feature Alliance)