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Can Economics Prevail over Politics in India and Pakistan?

By Tridivesh Singh Maini 

In an attempt to boost trade between India and Pakistan, Indian Commerce Minister Anand Sharma was in Pakistan from February 13th to 16th. Sharma's delegation included some top Indian industrialists. Along with his delegation he visited Lahore, Karachi, and Islamabad. During his visit, apart from having comprehensive talks with  his Pakistani counterpart Makhdoom Fahim, he also met with Prime Minister Yousaf Raza Gilani. While both sides want to increase trade, domestic politics on either side of the border risk turning Sharma’s well-meaning trip into just another dog-and-pony show. 

The Commerce Minister participated in The India Show, an exhibition of Indian goods. There were interactions with members of the Pakistani business community as well and visits to several cities in Pakistan. The primary aim of the visit, however, was to  push the level of annual bilateral trade from the current figure of $2.7 billion to $10 billion.      

This included deliberations on issues pertaining infrastructure problems, current cargo facilities, and the issuance of multiple entry visas to businessmen of both countries. India has promised to make revisions to the 1974 visa agreement with Pakistan. Agreements were also signed to reduce trade barriers. They included: a customs cooperation agreement to avoid arbitrary stoppage of goods at each other’s ports; an accord regarding acceptance of certificates of internationally accredited laboratories and a third aimed at redressing grievances in case of any dispute.       

One of the major dampeners for those pushing for greater trade between both countries was the forthcoming announcement by Pakistan granting Most Favored Nation trade status to India. This will have to wait for the moment since the 'negative list' of items for trade is not likely to be finalized by the end of February as stated by Sharma's counterpart, Makhdoom Amin Fahim. It is also believed that some Pakistani businessmen harbor apprehensions that Indian goods will flood the domestic market.      

Indian Prime Minister Manmohan Singh’s vision and Sharma's initiative should be hailed as a much-needed step forward for relations between India and Pakistan. However, even though it promises to be the most realistic bridge builder between both countries, a few crucial obstacles may yet impede progress on this front.        

Firstly, both countries, especially Pakistan, will face incredible pressure to retract on commitments made regarding cross-border trade. Many influential anti-India elements in Pakistan oppose such a move. They include Hafiz Saeed, head of the banned terrorist group Jamaat-Ud-Daawa and founder of Lashkar-e-Taiba, the terrorist group responsible for the attack on Mumbai in 2008. While voicing his criticism, Saeed invoked the emotional issue of India stealing Pakistan's water in a fiery speech in January and virulently opposed giving Most Favored Nation status to India. Interestingly, he was snubbed on a Pakistani talk show by senior Congress leader, Mani Shankar Aiyar, only a few days back. Yet while some sectors of the business lobby in Pakistan would be opposed to Saeed’s stance, there are also sizeable elements of the population who agree with him, possibly making it politically untenable for the leadership to sell the idea of expanding trade with India.        

Saeed might have sympathizers in the Pakistani military. Contrary to the wishful belief that the mindset of the Pakistani army with regard to India is changing, it is quite plausible that the parts of the army which are miffed with Prime Minister Gilani's aggressive stance towards them may try to scuttle further movement in the realm of bilateral trade and instead prop up Saeed, who is contemplating a political career. The delay in MFN status is also being attributed to hardline elements in the army and outside, who can not be ignored.      

There is also substantial opposition in India to engagement with Pakistan. They tend to point to the sharp contrast in the two nations’ responses to terrorism, such as the Samjhauta attacks carried out five years ago. On February 18, 2007, twin blasts ripped through two coaches of the Samjhauta Express near Panipat (Haryana), when the bi-weekly train was heading from Delhi to Lahore in Pakistan. The majority of the 68 people who died in the blast were Pakistanis. While India has already nabbed the culprit of the Samjhauta attacks, Kamal Chauhan, Pakistan, on the other hand, has taken no action against Saeed who roams about freely making inflammatory speeches. These anti-Pakistan elements would argue that to conduct business in such a an insecure climate is senseless and that India’s counterterrorism efforts against threats emanating from Pakistani soil would be unacceptably diluted. The delay in granting MFN status to India will only vindicate their stand. The Indian Prime Minister has already faced scathing criticism; being dubbed weak for his policy of engaging Pakistan.        

Secondly, apart from political impediments, the tardy pace of infrastructure development at the border threatens to be a major impediment to cross border trade. A perfect example of this is the slow development of the Integrated Check Post (ICP) at Attari, which was supposed to be functional on February 13th. During the course of a joint inspection Sharma took of the international check post on February 14th along with his Pakistani counterpart, he stated that it will not be operational before April of this year. Delays in development of border infrastructure are routine in India, and this is one of the primary reasons that cross-border trade with its other neighbors, aside from Pakistan, is not taking off. India has not realized the importance of borders as “connectors.”      

With significant political and logistical impediments such as the ones discussed above, it would be utopian to expect that trade between India and Pakistan would kick off overnight without significant hiccups. But if both sides hope to move past their violent, conflict-ridden history and build a lasting, mutually beneficial partnership, they must continue their efforts to overcome these obstacles.      



Tridivesh Singh Maini is an Associate Fellow with The Observer Research Foundation in New Delhi.    

[Photo courtesy of  radicaleye]

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