India and Pakistan: The Promise of Peace
Weekly Pulse
30 May-5 June 2014
Since his election as prime minister for the third time last year, Prime Minister Nawaz Sharif has been quite clear about resuming peace process with India by “picking up the thread” from Lahore Declaration—the historic agreement he had concluded with former Indian Prime Minister and BJP leader Atal Behari Vajpayee in February 1999. And a major reason why this promising development could not happen was because his Indian counterpart Prime Minister Manmohan Singh lacked the political capital to move boldly in resolving major differences over terrorism and lingering disputes like Kashmir. This limitation is now over: For, beyond the exchange of pleasantries and rhetorical pronouncements of peace, the debut meeting between Sharif and Modi on May 27 has indeed had tangible outcomes.

To start with, Sharif and Modi were able to build mutual rapport. Modi shared his happiness on twitter about the care Pakistani leader had for his mother, and how Sharif and his mother were moved by watching on TV Modi paying respect to his mother in Gujrat before traveling to Delhi. Such symbolic expressions of mutual warmth are very important in South Asian cultural context.

Secondly, even in their declaratory stances reported in the press, Indian and Pakistani leaders seem to have a shared vision for the future—which is grounded in the welfare of respective people. They owe this to the people who have bestowed them with popular mandates. Economic development is thus their key priority, which necessitates security and peace between the two countries and the region.

Third, although this was not a meeting to discuss threadbare the core issues of bilateral concern, but a slight reference to them in press talks was indeed expected. So India renewed its demand from Sharif that he should not let Pakistani territory be used for cross-border terrorism and must expedite the trial in Mumbai terror case. When Sujatha Singh, the Indian Foreign Secretary, was asked about whether any progress was made on Kashmir, she said the two leaders had agreed to resume talks between their Foreign Secretaries.

The resolution of bilateral disputes may take a while, but India and Pakistan must keeping talking in the meantime. Seen from this perspective, one concrete outcome of the Sharif-Modi meeting is the decision to resume dialogue. The resumed diplomatic process may soon lead to the revival of Composite Dialogue, which began during Sharif-Vajpayee regimes in 1997 and led to the historic Lahore Declaration within two years.

The fact that Prime Minister Modi has accepted Sharif’s invitation to visit Pakistan is equally important. Both of them have strong political constituencies and can afford to take resolute steps for meaningful resolution of intractable political conflicts. However, trade is one area where quick progress is possible, and the Indian prime minister has been quoted as reiterating his resolve for the purpose.

India and Pakistan have increasingly demonstrated a shared interest in expanding the current level of bilateral trade, which stands at US $2.6 billion. This is largely because they find the cost of trading through third countries such as the UAE as increasingly untenable. Pakistan has in principle agreed to grant Non- Discriminatory Market Access to India. As and when this access is granted, trade between the two countries could grow tenfold within years to an estimated $20 billion. Indian consumers can benefit from relatively cheaper and qualitatively better textile and other goods from Pakistan. India’s strength in sectors such as financial services, software technology, mechanical and chemical engineering could accrue economic benefits for Pakistan.

The growing overlap of Indo-Pakistani interests in expanding regional trade and energy links further stimulates this potential game changer. A Transit Trade Agreement with Afghanistan concluded in 2010 allows the transport of Afghan goods through Pakistan’s territory to India. Pakistan could be central to fulfilling India’s trade, investment and energy ambitions in Afghanistan and Central Asia.

India and Pakistan have been partners in the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project since 2008. A win-win option for the two countries, TAPI could help overcome Pakistan’s chronic energy shortage and contribute to India’s economic growth. However, its implementation hinges on the resolution of Afghan conflict and improvement of security in Pakistan—as other crucial issues concerning financing of the project and pricing of the gas have been sorted out. Both countries have mutual stakes in the project, and, therefore, a pragmatic interest in finding a common ground for conflict resolution in Afghanistan.

Once both nations normalise trade relations, they will be able to save enormous amount of money that is consumed on defence, which can instead be spent on economic development and social empowerment.

A recently released report of the Atlantic Council titled ‘India and Pakistan: The Opportunity Cost of Conflict’ states: “India and Pakistan seriously need to invest efforts in expanding trade and investment to the fullest extent possible. An annual bilateral trade between India and Pakistan may result in a GDP trajectory that could be as much as 1.5 percent more than present. This will represent a four-fold increase in trade and both sides have much to gain in terms of lower prices and timely supplies.”

One estimate suggests that defense budgets of the two countries will reduce by 25 per cent in such eventuality. Pakistan will be able to save $2 billion annually, and India $9 billion. In the next 20 years, they will save a total of $550 billion (Pakistan $89 billion, India $461 billion). Earnings worth billions of dollars accruing from the currently untapped trade, investment and energy cooperation within and outside the region will be an additional benefit. This constitutes a major opportunity cost for both nations.

The Atlantic Council report also states: “Unless both sides can begin a dialogue on economic and military relations, they will continue to feed their defense budgets, increasing the opportunity costs of such expenditures. Such spending, even by an economically growing and more powerful India, will be at the expense of its massive segment of poor people, roughly a fifth of whom live at subsistence or below subsistence level. The foregone benefits in the economic and social sectors in Pakistan, which has a smaller economy overall and will likely be one sixtieth the size of India’s economy by 2030, are huge.”

Of course, formidable barriers to peace cannot be overcome overnight. However, even while mutual distrust and security tensions have repeatedly prevented the final resolution of disputes, tremendous scope for the purpose does exist. In fact, a solid base for a workable roadmap for peace between India and Pakistan is already there.

Through Composite Dialogue and Track-Two diplomacy, for instance, both nations had managed in the recent past to draft a peace formula for Kashmir and to nearly resolve other territorial disputes such as Siachen Glacier and Sir Creek. Moreover, they continue to largely adhere to scores of nuclear, conventional and other Confidence Building Measures aimed at managing and preventing crises concluded in the past over three decades.

As their economic interests in the region increasingly converge, how can India and Pakistan build upon past achievements in the peace process? A conflict resolution mechanism rooted essentially in geo-economically-driven cooperation can help them overcome trust deficit, turn draft formulas into formal treaties, find a common ground in Afghanistan and achieve strategic stability in relationship.

Realism dictated their previous approaches towards each other, whose cost in Pakistan’s case is most obvious. India managed to grow politically and economically without resolving security conflicts. However, in times of economic stagnation, it is in India’s pragmatic interest to resolve these conflicts. Likewise, it is in Pakistan’s interest to sort out counter-terrorism differences with India, so as to overcome its security and economic woes. If realism is all about securing national interest, then current conditions in both countries and the region require charting a new path in India-Pakistan relationship.