Time for India to show ‘Vishwaguru’ credentials. Start trade with Pakistan

It is difficult to believe now that India was Pakistan’s largest trading partner till 1956. While trade fluctuated after that, it survived the 1971 war.

Prime Minister Narendra Modi (Photo/ANI)

The Indian Deputy High Commissioner to Pakistan recently made a rather surprising statement. At a talk at the Lahore Chamber of Commerce and Industry, he said that India wants to move toward normalising business ties with the neighbour, stressing that today’s diplomacy focuses on tourism, trade, and technology because “money speaks its own language”. That is true enough. In fact, it’s the basic mandate of diplomats everywhere nowadays, as economic constraints bite, and ‘connectivity’ becomes the new mantra. Nonetheless, given the severe downturn in relations with Pakistan, the statement was, as unexpected, as it is welcome.

Not that the statement is likely to find much favour in New Delhi. Even reputed commentators argue that Pakistan should be left to stew in its own mess. Indeed, the Ministry of External Affairs was reiterating its standard post-2019 position — of ‘good relations’ only in a ‘conducive environment which does not support terrorism or violence’ — only a month earlier. It seems then that the government has quietly decided that trade and cooperation with Pakistan suits its own interests. That shouldn’t come as a surprise. After all, this is actually the first time that India and Pakistan cut off not just trade, but all other ties which has survived three wars and a conflict, and years of terror.

The thing about trade

It’s true enough that it was Pakistan that cut off all trade, postal ties, and even diplomatic representation, after India passed the Jammu and Kashmir Reorganisation Act 2019, making it into two Union territories—Jammu and Kashmir, and Ladakh. After the February 2019 Pulwama attack, India withdrew the Most Favoured Nation (MFN) status operating since 1996, and imposed heavy customs duty on imports. Months later, cross-LoC (Line of Control) trade, which started in 2006, was suspended following intelligence that it was being misused for terrorism purposes.  A seminal paper by a think tank, the Bureau of Research on Industry and Economic Fundamentals (BRIEF), highlights that almost overnight, over 50,000 persons in Punjab and another 954 families in Kashmir were deprived of jobs and livelihood. That included petrol pump attendants, porters, helpers and a slew of people involved in trade. There is no data on how many were similarly affected on the Pakistani side.

Imports of cement, gypsum, rock salt and other commodities all ended, sending prices skyrocketing. While alternative sources were found, they are unlikely to have been cheaper than importing from just across the border.  It’s not that trade at the time was overwhelming. In 2019, trade was just $2.9 billion, much below the $37 billion potential estimated by the World Bank. But that’s the thing. There is immense potential, especially when one adds possible trade through Pakistan into Central Asia. India’s outreach to the region demands an exponential increase in trade, that currently stands at $2 billion, by exploiting its rich energy sources, and even potentially into Russia and Iran.

Political or military roiling?

It is difficult to believe now that India was Pakistan’s largest trading partner till 1956. Even after that, while trade fluctuated, it survived the 1971 war, largely owing to the Simla Agreement, and later the Lahore Declaration which furthered exchanges of delegations, banking facilities. All these efforts received a fillip after 2005, when the sea route for trade opened up giving access to each other’s ports to lift cargo for a third country. Then came the opening of Wagah-Attari border and the LoC for trade.

What is curious is that each of these initiatives was almost immediately followed by a terror attack. Like the Mumbai attacks, which occurred just 35 days after the agreement on cross- LoC trade, or the attack on Indian Parliament in 2001 that came shortly after the Agra Summit.  In fact, Nawaz Sharif in his third term actually wondered aloud what it was that caused terrorism to take place immediately after an India-Pakistan rapprochement move. Clearly, there were inimical forces in Pakistan who wanted none of this.

The question then arises is whether these forces have since abated or not. The earlier Chief of Army Staff General Qamar Javed Bajwa had twice proposed ‘burying the past’ and boosting regional connectivity, but nothing came of it. Two Prime Ministers, Imran Khan and Nawaz Sharif, did a quick ‘U turn on opening trade – Khan in April 2021 after his own cabinet committee okayed import of sugar and cotton and Sharif more recently in January 2023 when he called for peace, though he also included the “burning issue of Kashmir’. Even that seemed unacceptable to someone within Pakistan, since this was reversed by a spokesman of the PM’s office that talks could only take place after Article 370 was nullified.

There also seems to be difference of position between his party and his coalition partner. Foreign minister Bilawal Bhutto used the UN platform to be completely ‘uncivilised’ in his remarks while  the Minister of State Hina Rabbani Khar was emphatic that Prime Minister Narendra Modi was not a ‘‘viable’ partner for talks. That was just days after Sharif’s offer. In keeping with tradition in Pakistan, efforts by one political party to talk to India is stymied by the other. Khar conveniently forgets that it was Modi who set a positive note with an invitation to his swearing in, and dropping in for the former PM’s granddaughter’s wedding in 2015. Many believe it to be the reason Sharif was sent packing. That’s Pakistani politics for you.

Cooperation vital in a shaky global economy

The reality, however, is that even apart from trade, a global economy that is hit badly by the Ukraine war, the pandemic, and climate change makes cooperation vital. The last has already made itself felt in the form of severe floods in Pakistan, while Indian farmers were hit by a heat wave last year, and now unseasonal rain. Demands for compensation to farmers is likely to strain even Delhi’s resources. Fertiliser price increases have led to a 47 per cent rise in subsidies over last year.

Both countries suffer from similar problems such as a low water table, depleted soil, and shrinking cultivable land. A search for common solutions, including cooperation on scientific ways to reduce water use, could benefit large segments of the population on both sides. Meanwhile, Pakistan desperately needs sources of revenue. And cross-border connectivity would provide that, buying time to make systemic corrections to the economy and infrastructure. True, it will need much more — for instance, reviving a damaged irrigation system. But that’s in the longer term, and will come only if Pakistan is seen as fit for investment. That’s Islamabad’s choice.

The bottom line is fuzzy

The bottom line to all this is whether the ‘establishment’ in Pakistan will allow this to happen. Even if it does, will this be allowed to sustain? Benefits of connectivity send immediate relief to those working on the ground, while new infrastructure will benefit industrial families like the Nishat Group. Trade will also provide urgently needed food supplies. Whether this will be enough to motivate even popular leaders such as Imran Khan to take a risky path is unclear, but higher revenues will certainly benefit a military that is seeing its budget slashed.

Then there is the key question. Is this in India’s interest? The Modi government seemed to think so, since it did take on board the late Ambassador Satish Lambah’s gargantuan effort to work out a peace plan. That included no redrawing of borders; minimum military formations on both sides of LoC; self-governance for internal management and free movement across the LoC, and a complete end to terrorism. That was the bottom line then in 2017. To that can be added all cooperative measures that common sense dictates to deal with the present global multiple crises. And remembering also that even when nuclear war threatened during the height of the Cold War, the superpowers continued to talk.

Today a climate war threatens, and no one country, not even if they are superpowers twice over, can manage it alone. That’s something the US and Russia have still to acknowledge, as they fight a senseless war. This might be the time for India to show its ‘Vishwaguru’ credentials. Meanwhile Islamabad needs to realise that every disaster offers an opportunity. The problem is that having known little else for decades, it might not immediately recognise that it’s sinking into a serious soup.

Tara Kartha is a Distinguished Fellow at the Institute of Peace and Conflict Studies, New Delhi. She tweets @kartha_tara. Lt Gen P.R. Shankar (retd) is former DG Artillery and presently professor at the Aerospace department, IIT Madras. Views are personal.

(Edited by Anurag Chaubey)