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FDI for peace
Gestures from Delhi can make it easier for Islamabad to commit to the bilateral thaw
Delhi’s unilateral decision to allow Pakistani citizens and companies to invest in the Indian market is an important gesture signalling the strong commitment of the UPA government to deepen economic ties with an important neighbour that has been an adversary for so long. The move is a political one, not based on any economic calculation of substantive investments flowing in from a country that is struggling to cope with a profound financial crisis of its own. Coupled with the recent move to invite the Pakistan cricket team to India, the decision on FDI underlines Prime Minister Manmohan Singh’s determination to impart some momentum to the peace process. Talks with Islamabad had broken down in the wake of the 26/11 attacks. Rejecting the widespread reluctance in Delhi to engage Pakistan without progress in bringing the plotters of the Mumbai outrage to book, the UPA government renewed the dialogue with Pakistan two years ago.
While the results have not been significant on the political front, progress in the commercial sector has been surprisingly swift. The first move came from Pakistan last November when the civilian government led by Asif Ali Zardari broke the long-standing domestic consensus that normal trade relations with India can only follow the resolution of outstanding political disputes. As a first step towards granting the MFN status to India, which Islamabad has promised to implement by the end of this year, Pakistan opened the door for more imports. Delhi, in turn, addressed Islamabad’s concerns about non-tariff barriers against Pakistan’s exports. India and Pakistan opened an integrated checkpost at the Attari-Wagah border in April.
With a rare show of political will in both capitals simultaneously, the two sides have announced a sweeping agenda for trade liberalisation. An agreement to ease visas for businessmen has already been finalised. Talks are on for establishing banking contacts, exporting petroleum products from India, and opening an additional land route for trade on the Rajasthan-Sindh border. Pakistan is considering an expansion of the list of permissible imports via land and India has promised to shorten the sensitive list of banned imports from Pakistan. Like all else in India-Pakistan relations, the slip between the cup and the lip is never far away. Given the uncertain political environment in Pakistan, it is entirely possible that the commercial spring in Indo-Pak relations could be short-lived. India has every reason to act, unilaterally if necessary, to implement its side of the trade bargain with Pakistan and make it easier for the civilian government in Islamabad to reciprocate.
Gestures from Delhi can make it easier for Islamabad to commit to the bilateral thaw
Delhi’s unilateral decision to allow Pakistani citizens and companies to invest in the Indian market is an important gesture signalling the strong commitment of the UPA government to deepen economic ties with an important neighbour that has been an adversary for so long. The move is a political one, not based on any economic calculation of substantive investments flowing in from a country that is struggling to cope with a profound financial crisis of its own. Coupled with the recent move to invite the Pakistan cricket team to India, the decision on FDI underlines Prime Minister Manmohan Singh’s determination to impart some momentum to the peace process. Talks with Islamabad had broken down in the wake of the 26/11 attacks. Rejecting the widespread reluctance in Delhi to engage Pakistan without progress in bringing the plotters of the Mumbai outrage to book, the UPA government renewed the dialogue with Pakistan two years ago.
While the results have not been significant on the political front, progress in the commercial sector has been surprisingly swift. The first move came from Pakistan last November when the civilian government led by Asif Ali Zardari broke the long-standing domestic consensus that normal trade relations with India can only follow the resolution of outstanding political disputes. As a first step towards granting the MFN status to India, which Islamabad has promised to implement by the end of this year, Pakistan opened the door for more imports. Delhi, in turn, addressed Islamabad’s concerns about non-tariff barriers against Pakistan’s exports. India and Pakistan opened an integrated checkpost at the Attari-Wagah border in April.
With a rare show of political will in both capitals simultaneously, the two sides have announced a sweeping agenda for trade liberalisation. An agreement to ease visas for businessmen has already been finalised. Talks are on for establishing banking contacts, exporting petroleum products from India, and opening an additional land route for trade on the Rajasthan-Sindh border. Pakistan is considering an expansion of the list of permissible imports via land and India has promised to shorten the sensitive list of banned imports from Pakistan. Like all else in India-Pakistan relations, the slip between the cup and the lip is never far away. Given the uncertain political environment in Pakistan, it is entirely possible that the commercial spring in Indo-Pak relations could be short-lived. India has every reason to act, unilaterally if necessary, to implement its side of the trade bargain with Pakistan and make it easier for the civilian government in Islamabad to reciprocate.