Engaging a nation in bilateral trade and economic ties does bring lower the trust defecit. This arrangement is a step taken towards non-hostile or at the most a country with minimal relations. But with a hostile country the first important issue is conflict resolution. Unless conflict between India and pakistan is resolved any investment in pakistan can be potential loss.
Although, India welcomes a civilian government in Pakistan, there has been no shift in policy towards India and still the military junta in pakistan has tight grip on the leash of the civilian government. Unless there is a singular power faction in pakistan it will be very difficult for any conflict resolution. Diplomatic conflict resolution is ought to be a process between two parties, but in this case its difficult to gage whether India need to engage the civilian or the military of pakistan to have any significant change in policies towards kashmir and terrorism.
In the aftermath of the recent events like the dastardly attacks on Indian soil, there has been no clampdown on any of the state/non-stat actors responsible for the misdoings. Pakistan's ISI was known to be the prime conspirators for attacks on Indian embassy in Afghanistan. these covert actions of lead to destabilization of any peace initiatives of the people on both sides who actually want to have a meaningful dialogue.
On the Indian side, there is arrogance because of its newly acquired might and political clout of the new millennium. Any terror activity on Indian soil causes nullification of all the peace talk progress and going back to Status quo. And as time passes Indian posturing is becoming more and more stiff.
Do we need bilateral trade with Pakistan, Answer is Yes.
Is this the right time , Answer (IMO) is NO
The actual need is not selling Nano's to pakistan and buying pakistani cement and sporting goods,
the need of the hour is to be patient with pakistan to get its internal turmoil in order. Progressively softening our posture in kashmir conflict resolution and arriving to some kind of an agreement acceptable to both the parties. Ensuring end of State/Non-state sponsored terrorism from Pakistan.
First we need to learn to tolerate each other, then end animosity, then build trust which may or may not lead to friendship... then think of bilatral trade and cultural exchange.