The Prospects for Peace, trade and economic development

Will the twenty first century see a positive transformation of IndiaPakistan relations?
Ironically, it all began with both the countries acquiring the nuclear

bomb in May 1998.

Noises of belligerence, of course, emanated from both New Delhi and

Islamabad immediately in the wake of the nuclear-weapon tests in Indias Pokharan desert and Pakistans Chagai hills. the change in the geopolitical situation in South Asia.

A top leader in the Indian government asked Pakistan to take note of A lesser leader even dared Pakistan to declare a war on us now. Their counterparts in Pakistan, too, had no choice but to respond with

their own nuclear tests and let out a collective howl of joy after their own triumphal tests as though the country had just rebuffed an Indian aggression.

Aftermath of Nuclear tests

After the nuclear tests came the international sanctions

against both the countries, and threats of more. That cut short the celebrations, accompanied by much machismo and muscle-flexing. Both New Delhi and Islamabad suddenly saw an imperative need to present a common front as responsible nuclearweapon states, a contradiction in terms that only members of the nuclear club had called themselves so far. By February 1999, then Prime Minister Atal Bihari Vajpayee was riding a bus to Lahore, the first in a road transport service introduced between the two countries in many years. His meeting with then prime Minister Nawaz Sharif led to the signing of a Memorandum of Understanding envisaging confidence-building measures (CBMs) on the nuclear front.

CBMs and a new way of thinking..

This was the cue for security experts of both academic

and bureaucratic kinds to come out with their optimistic forecast of India-Pakistan relations based on their nuclear rivalry. Now that the neighbors had both acquired nukes, they argued, there wont even be a conventional war between them ever again. The assumption was absurd, of course, but had to be proved so in practice, which it did, as they conflict between India Pakistan took a much more indirect turn and became a dirty proxy war, the kind that Pakistan took most of the brunt.

Do we have hope for a change?

Introduction
South Asia is home to one fourth of the human race

and has the largest middle class anywhere in the world. But the region also accounts for the majority of the world's poor, is confined by sectarian and caste beliefs and spends a disproportionate share of its resources to meet non-productive ends. Most significantly, South Asia has not been able to forge a cooperative framework to match the European Union or the Association of South East Asian Nations. The South Asian Association for Regional Cooperation (SAARC), now more than 25 years old, remains inactive.

Is there are hope for a change?

Relations within the region, particularly between India and

Pakistan, have always been troubled, with three open conflicts and repeated near-war situations resulting in frequent breaks in bilateral engagement. Both countries are also conscious of the fact that they are now nuclear powers. And yet the situation is not as dismal as it might appear from the outside. Saner elements in both countries have consistently worked for better relations. There have been serious discussions on a No-War Pact and a Treaty of Peace and Friendship. First Mr. Vajpayee's then Musharrafs Agra initiative showed that an imaginative leadership can push the envelope on India-Pakistan relations.

Conflicts and Military Expenditure

Military expenditures of India and Pakistan 1. India - US$21.7 billion 2. Pakistan - US$ 4.14 billion Conflicts between India and Pakistan 1. Conflict Area I: Kashmir 2. Conflict Area II: Siachin 3. Conflict Area III: Sir Creek 4. Pakistan India Water Dispute

Our current trade status with India

India's Top Ten Exports to Pakistan (US $ million) (Pildat Stats)

Continued.

India's trade balance with Pakistan which was US$ 94.7 million in 2001

has increased to US $ 948.6 million in 2006 and currently stands at US $ 1987.4 million as of 2010. Furthermore, the share of Pakistan's import from India in its global imports has increased from 4 per cent in imports from Pakistan remain negligible. This (trade balance in favor of India) often results in political rhetoric, further hindering cross-border trade. Though the statistics reveal a definite growth in favor of India, yet it does not define the true potential that can emanate from strong bilateral relations. Owing to high trade costs, an estimated US $ 3 billion of informal trade happens between the two countries. Another estimate of the value of goods smuggled over the border range from US$250m to US$10bn, although it is more likely to be towards the lower end of the range and is dominated by Indian goods (since India has granted Most Favoured Nation or MFN status to Pakistan, there is less need to smuggle Pakistani goods across the border).

Reality Vs fears

Benefits of Mutual Trade

India has a middle class of approximately 300 million people, with

rising purchasing power that matches that of southeastern Europe, while Pakistans middle class is approximately 30 million. Even a 10 percent share of the Indian middle-class market would double the market size of Pakistani companies and businesses

It is estimated that trade between India and Pakistan could increase

threefold if Pakistan followed Indias example and accorded India Most Favored Nation (MFN) status, and both countries imposed a maximum tariff rate of 50 percent. A State Bank of Pakistan study came to the conclusion that bilateral trade could increase fivefold if MFN status were granted and nontariff barriers were removed by both India and Pakistan
India granted MFN status to Pakistan as on January 1, 1996 which is yet

to be reciprocated, though Pakistan has showed its willingness to extend MFN to India in 2012.

Who will benefit from Peace with India?

In the face of massive economic challenges, a burgeoning population, energy and water shortages, and huge and growing numbers of unemployed workers, especially youth, Pakistan needs to look for ways to move itself out of the economic hole into which it has fallen. Greater trade with India offers an immediate and rich possibility of economic growth for both Pakistan and India. Recently, both countries appear to have yielded some good intentions to increase trade from its current level of $2 billion a year to $6 billion and above, still well below what many scholars estimate to be the potential. Yet, the obstacles remain, in the form of rules and regulations that inhibit

trade, and in the lack of private-sector initiatives that would surmount governmental foot dragging. In the end, it is the private sectornot official tradethat will boost incomes on both sides of the border. So its the common man, the common consumer, the unemployed youth, who will benefit from peace with India, it will open up the transit boundaries between India Afghanistan and Pakistan, thus creating billions of jobs. Pakistani Cities like Lahore, Rawalpindi and Peshawar will become the central hubs for trade, brining Pakistan revenues in form of trade.

Pakistan a winner (if there is peace in the region)?

China has overtaken Germany to become the largest

exporting country, and has surpassed Japan to become the second-largest economy in the world. China and India are projected to be the two fastest-growing economies of the world over the next several decades. Pakistan is a neighbor to both of these large and expanding economies. Its national economic interests dictate that it should expand its trade with both of these countries and penetrate their markets on the basis of its comparative advantage in a number of sectors. India, sharing a larger and more-accessible common border with Pakistan, offers the biggest immediate gains from trade.

Major Impediments to Normal Relations

The leaders of India and Pakistan will have to address

at least five issues which have become major impediments to turning their desire to improve bilateral relations into concrete policy measures. These are the issues of attitude and disposition of the society and a self-serving view of history that makes it difficult for a large number of people to overcome the burden of the past and attitudinal biases

1.

Competing Narratives of History

the present focusing on the nation-state. Each narrative projects itself as noble, correct and justified and the other side as evil and trouble maker. In New Delhi, you can get a catalogue of unfriendly and hostile actions by Pakistan. In Islamabad, you will find a competing list of grievances against India. The aura of self-righteousness and projection of the other side as belligerent is inculcated among the young people through education, media and other agents of socialization. This has created an in-built bias against each other on both sides which makes smooth interaction quite difficult. This trend has been re-inforced by the efforts of Indian and Pakistani Governments to compete with each other in the regional context or at the global level. This is a vicious circle, India and Pakistan oppose each other because they view each other as adversaries. As they oppose each other or work to build diplomatic and military pressure on each other, the notion of adversary gets strengthened

India and Pakistan have created two competing narratives of the past and

2. Domestic Politics
India-Pakistan relations are closely linked with the domestic politics of

each country. There are groups and parties on both sides, i.e., religious hardliners and political far right, that entertain serious doubts about the intentions of the other side and are not favorably disposed, if not opposed, to improving relations. They are ideologically opposed to normalization of relations. At times, the top leadership may not find itself strong enough to override such opposition. The political circumstances may force the Governments to slow down the dialogue process in order to deflect domestic pressure. On July 16, 2009, the Prime Ministers of India and Pakistan agreed at Sharm el Sheikh to take definite steps for improvement of relations. However, India's Prime Minister could not follow up the commitment because of domestic opposition that also came from his close circles. The Pakistani Government also faces such pressures from various political cirlces.

3.

Role of Media

The media in both countries plays a varied role. There

are people in the media who support improvement of relations and there are those who dont want to; They often switch sides according to the growing trends in an attempt to improve the ratings of their programs by using highly inflammatory or passive rhetoric against the other side The media needs to show restraint and present the issues in a balanced way with a commitment to calming down tensions and speaking the truth bluntly and honestly without any bais

4. Discourse on Doom
There are people on both sides who offer a doom's day

scenario for the other side. Some analysts in India think that Pakistan is going to collapse and therefore there is no need to work towards improving relations with it. Similarly, there are people in Pakistan who think that India would become a dysfunctional state because it faces insurgencies and dissident movements in several states. These perspectives can be described as negative wish-lists that are not likely to materialize. A stable Pakistan is in the interest of the region. Both India and Pakistan need a friendly and stable relations to address the huge list of internal problems they are facing.

5. Issue Overplay
There is a tendency on the part of Pakistan and India to overplay a

single issue and make the dialogue process hostage to that single issue. For years, Pakistan insisted that the resolution of the Kashmir problem was a pre-condition for meaningful trade and other interaction, now we see a U-turn on that stand. Pakistan took a long time to realize that the Kashmir First strategy was an impediment to improvement of relations. It changed the policy and adopted a pluralist approach of talking on all issues at the same time with full understanding that all issues will not be addressed at an equal pace India resorted to this strategy after the Mumbai terrorist attack when it discontinued the dialogue and insisted on Pakistan satisfying India on the terrorism issue before the dialogue could be resumed. This insistence unnecessarily delayed the resumption of the dialogue. While both India and Pakistan can have different order of priorities for raising the issues but it is not advisable to get obsessed with a single issue, i.e. terrorism for India and Kashmir for Pakistan.