India’s decision to overturn the ban on foreign investment from Pakistan represents a positive development in relations between the two countries. Historically fraught relations between the neighbouring countries, primarily centered on the seemingly intractable Kashmir dispute, have been showing sings of gradual improvement over recent months. In April this year a second trading gate was opened along the Wagah-Attari border, increasing the number of vehicles crossing the border from 150 to 600 a day. The two countries have also stepped up dialogue on energy cooperation, easing visa restrictions and allowing cross border banking.
By the end of the year, Pakistan will grant India Most Favoured Nation (MFN) status which will place Indian exports in the same category as exports from all other countries. This means that all items, excluding those in the South Asian Free Trade Agreement sensitive list, will get preferential access at the peak tariff level of 5% by the end of 2012. The granting of MFN status will allow India to export 6,800 items into Pakistan; at present India exports 2,000 items to Pakistan. The two countries aim to boost bilateral trade to $6 billion within the next three years. Trade between the two countries currently stands at $2.7 billion.
Coming to terms with its imperialist past, the searing experience of Partition and the burning conflict over Kashmir has manifested in ongoing violence and acrimony. During India’s colonial subjugation, the country was Britain’s most lucrative imperial possession and the British secured and consolidated their occupation by promoting communal schisms. In line with the divide-and-rule traditions inherited from its colonial past, fractures and discord have overwhelmingly defined Pakistan and India’s relationship. The move towards greater economic cooperation therefore represents a significant development between the nuclear-armed neighbours.
The liberalisation of bilateral trade would not only stimulate development and prosperity in both economies but would also work towards removing the barriers to regional integration within South Asia. This would help to bring much needed economic development in the region which has the highest number of people living below the poverty line.
But to ensure the development of a cohesive South Asian bloc and lasting peace in the subcontinent, the Kashmir dispute must be settled with a recognition of the right to self-determination for the people of Kashmir.