Indo-Pak ties: Trade first, diplomacy later

Written by Nisha Taneja | Updated: Sep 19 2014, 09:42am hrs
Two important eventsthe Alishan Pakistan exhibition held on September 11-14 and the agreement on gas pricing, concluded on September 15, that has fixed the price for gas export to Pakistanseem to have given a very powerful signal to India-Pakistan trade. While the former is a clear step to enhance market-access, the latter will provide the much-needed lifeline for the Pakistan economy.

Ever since the BJP government took charge, there has been confusion as to what the new governments stand on

Indo-Pak trade is. An invitation to

Pakistan PM Nawaz Sharif, along with other South Asian leaders, to attend Narendra Modis swearing-in ceremony set the expectations soaring. However, the subsequent cross-border firing in the last few weeks drew strong statements from the leadership stating that Pakistan is engaging in the proxy war of terrorism. This was followed by the announcement of the cancellation of Foreign Secretary level talks scheduled on August 25 at Islamabad in which it was hoped that that the dialogue on India-Pakistan trade would resume. Many analysts felt that the link between trade and politics had been re-established.

With the Alishan Pakistan exhibition and the successful conclusion of the gas pipeline talks there seems to be a clear message from the Indian government that it intends to normalise trade ties with Pakistan.

The four-day long Alishan Pakistan had over 150 exhibitors displaying a vast array of Pakistani fashion, textiles, jewellery, accessories, furniture, marbles and agro products. The exhibition is an exemplary initiative on the part of the Federation of Indian Chambers of Commerce & Industry (FICCI) and the Trade Development Authority of Pakistan (TDAP) to build on the success of the first exhibition held in 2012. These exhibitions offer a platform to businessmen in India to interact with Pakistani counterparts and establish business partnerships. The rush witnessed at Pragati Maidan in Delhi, the venue of the exhibition, is indicative of the enormous trade interest.

The exhibition was organised successfully despite strong opposition by several right-wing groups. Days before the exhibition, Vishwa Hindu Parishad (VHP) sent a memorandum to the Prime Minister, Lieutenant Governor, Police Commissioner, Ministry of External Affairs and the Ministry of Home Affairs demanding the cancellation of the event. The government stood firm and ensured that the exhibition took place. On the first day of the exhibition, massive protests were staged outside Pragati Maidan demanding that the event be called off. As a response, the government beefed up the security arrangements outside the venue and utmost care was taken so that the event was not disrupted.

The agreement on the fixing of gas price between the state-run gas utility Gas Authority of India Limited (GAIL) and Pakistan's Inter State Gas Systems (ISGS) is a major breakthrough two year long negotiating process came to a successful ending. During the commerce secretary-level talks in September 2012, India expressed its willingness to export gas to Pakistan. The proposal was to supply 5 million metric standard cubic metres a day (mmscmd) of lean gas to Pakistan for a period of five years. Under this proposal, GAIL would lay 110-km-long pipeline, from Jalandhar to the Amritsar-Attari border. Technical working groups were set up to discuss and finalise the modalities of this trade and finally the technical feasibility of laying the gas line up to Lahore was drawn out after five rounds of negotiations between both sides. The only negotiations that remained unsettled were related to the price at which Pakistan would purchase gas from India.

Now, both sides have agreed on the export price for gas. The talks between the two state authorities were held without any official announcement. To add to this, India's FY15 budget clearly mentions exemptions from basic customs duty being granted on re-gasified LNG (liquefied natural gas) for supply to Pakistan. This would be an added advantage and make the energy trade more lucrative. With energy demand rising and power crises in Pakistan, energy trade could be a game changer in India-Pak trade and economic relations.

Interestingly, in the sphere of India and Pakistan relations, commercial decisions are preceding the dialogue process. On one hand while the trade dialogue is yet to resume, state enterprises and business bodies of the two countries have joined hands to make a major breakthrough in trade relations. This has been made possible in the backdrop of the new political equation between the leaders of the two countries. The stage is set for a new paradigm where silent messages are more powerful than loud statements.

Nisha Taneja & Samridhi Bimal

Taneja is Professor at ICRIER and Bimal is Research Associate.

Views are personal