FLICKER OF HOPE ON TRADE AFTER FIVE-YEAR FREEZE
Pakistan’s desperate economy stands to gain if ties resume with India, but major domestic and geopolitical considerations still stand in the way
Recent remarks by Pakistan’s foreign affairs minister on “seriously” considering resuming trade with India have again drawn attention to the prolonged suspension of dialogue between the neighbours since 2019, even as Islamabad later confirmed there would be no change to its economic policy.
Mohammad Ishaq Dar made the remarks at a London press conference recently following his participation in the Nuclear Energy Summit in Brussels. His statement marked the first indication of a potential shift in diplomacy towards New Delhi since the newly formed PML-N government assumed power, sidelining popular leader Imran Khan.
Pakistan ceased trade with India in 2019 after Delhi revoked the semi-autonomous status of Jammu and Kashmir, a disputed territory between both sides since independence from British rule.
Ajay Bisaria, a former Indian High Commissioner to Pakistan, said the notion of reviving trade was not novel, driven by Pakistan’s dire economic conditions and a shift towards geoeconomics, prioritising economic strength over military power. “Pakistan’s economy and, particularly, its textile and pharmaceutical sectors, stand to gain from trade with India given their dependence on raw materials from India.”
He said internal consultation on the issue was required from Pakistan, coupled with some quiet diplomacy with India so that the proposal would be on the table when a new government took office in Delhi in June.
But on Thursday, Pakistan’s foreign office spokeswoman Mumtaz Zahra Baloch denied the possibility of resuming trade. “Pakistan-India trade relations have been non-existent since 2019 … There is no change in Pakistan’s position on it,” she said.
Some analysts in Pakistan also criticised Dar’s comments.
“Ishaq Dar spoke about trade with India – continuing a habit among Pakistani elites of seeking a hand of friendship that simply does not exist. This is a matter of concern – but hardly new,” said Mosharraf Zaidi, columnist and public policy expert.
Trade with India has been a major concern for Pakistan’s business community, which feels burdened by the necessity of importing the same items via Dubai or other countries. Although Pakistan had previously considered importing sugar and cotton from India, the idea was rejected by the Khan cabinet.
For Dar, trade with India is already occurring but through a much costlier route, imposing higher costs on Pakistan. Direct trade between the two nations is seen as a logical step towards fostering better economic growth.
Moreover, strained relations with Afghanistan and challenges on the western frontier with Iran exacerbate Pakistan’s economic woes. These factors underscore the urgency for Pakistan to explore avenues for economic revitalisation amid ongoing crises.
Its gross domestic product is 10 times smaller than India. In the 1970s, Pakistan’s per capita income was about twice India’s; today India’s is 50 per cent higher.
Bisaria said trade should not be viewed in isolation, rather, it could be part of a basket of low-hanging fruit within the normalisation of bilateral relations. He stressed the necessity of a political signal preceding discussions on trade, connectivity and fostering people-to-people links.
A natural first step, Bisaria suggested, would be for Pakistan to propose an exchange of high commissioners upon the inauguration of the new Indian government. “India would also expect some strong reassurance on curbing terrorism emanating from territory controlled by Pakistan.”
He added: “There is a reason for cautious optimism: a ceasefire has held for four years at the border, we have gone without spectacular acts of terrorism for five years … and two new governments will be in place, willing to look at fresh ideas to address the relationship.”
In the past, Pakistan signed agreements such as the South Asian Association for Regional Cooperation to foster preferential trade with India. Yet, the nation has shown tepid interest in the process, with its leaders and foreign office maintaining a steadfast stance: demanding India address the contentious Kashmir issue before considering any normalisation of economic relations.
The current chairman of the Pakistan People’s Party and former foreign minister during 202223, Bilawal Bhutto Zardari, has adopted a hardline stance against India in recent years, presenting a challenge for the new government regarding the potential trade resumption with India.
India, perhaps influenced by the approaching elections, has remained mum. However, analysts speculate that India will be reluctant to engage in trade with Pakistan without significant steps from Pakistan to address terrorism in Kashmir. They suggest that immediate progress between Delhi and Islamabad is “unlikely”.
Afaq Hussain, co-founder and director at the Bureau of Research on Industry and Economic Fundamentals, said the decision was within the framework of Pakistan’s historical proclivity towards economic ties with India under previous governments.
Citing a 2018 World Bank report projecting annual bilateral trade potential at US$37 billion, Hussain said this indicated “untapped opportunities awaiting exploration”. He reiterated the significance of trade as a diplomatic tool for fostering bilateral engagement, suggesting it could serve as a precursor to broader discussions on political issues.
But Michael Kugelman, director of the South Asia Institute at the Wilson Centre, was sceptical about trade ties improving any time soon.
“I don’t expect India to be more receptive to trade after its elections, as the ruling party will likely return, and it will maintain its consistent position of not engaging until Pakistan acts on India’s concerns about terrorism, even though Pakistan claims these concerns are unfounded.”
India would also expect some strong reassurance on curbing terrorism AJAY BISARIA, A FORMER INDIAN HIGH COMMISSIONER TO PAKISTAN