Breaking the ice
India and Pakistan are both members of the South Asia Free Trade Area (SAFTA) but the trade between them is strikingly small. Economics would predict that trade between the two largest economies in South Asia should be far greater, given the existence of common history, language, culture and the borders. But a variety of political and infrastructural impediments have virtually paralysed bilateral trade relations.
The total trade between the two countries averages only US$2.5 billion a year. Currently, Pakistan accounts for less than 0.5 per cent of India’s trade and India represents little over 3 per cent of Pakistan’s total foreign trade.
Though trade can prove to be a starter in breaking the thaw between the two arch rivals there seems to be ample room between India and Pakistan to create an atmosphere free of distrust and violence.
India follows a neighbourhood first policy to engage for mutual benefit with its neighbours and thus its relationship with Pakistan is of key importance. It is uniquely challenging. Both countries share deep historical, cultural, linguistic, religious and ethnic bonds. They face similar economic challenges as well.
The Indo-Pak ties strained after the terror attacks by Pakistan-based militants in 2016 and India’s surgical strikes inside Pakistan-administered Kashmir. The ties further nose-dived in 2017 with no bilateral talks taking place between them. India has been maintaining that terror and talks cannot go together.
However, trade links can prove to be ground breaking if both the nations wish to realize their dream of ending poverty and witnessing growth and prosperity for their people.
In 1996 India granted most favoured nation (MFN) status to Pakistan, but this did not improve trade relations as Pakistan chose not to immediately reciprocate. Only 16 years later in February 2012 did the Pakistan government declare it was ready to grant MFN status to India? The decision could have been a turning point in trade relations between the two countries. But the 2013 deadline was missed, largely due to opposition from Pakistani stakeholders, especially agriculturalists.
India remains a popular destination for medical tourists from Pakistan while thousands of members of divided families visit each other. According to a recent World Bank report, trade potential between the two countries stands at USD 37 billion per annum.
Trade and humanitarian initiatives occupy an important place in building trust between the two countries and with Kartarpur Corridor already addressing the humanitarian initiative, trade can be the second such plan that will bridge the divide further.
Though some small initiative like opening trade routes along the LoC between the two separated parts of Kashmir were initiated few years back, the steps can be enhanced further and initiated at a massive level in other states as well.
This will not only ensure people to people contact but intermingling of economies as well.