After all, both the countries have existed since 1947 and a period of 50 years is long enough to achieve higher growth rate and high living standards for the population in both the countries. The GDP growth still continues to be low in both the economies. Unless policy-makers are able to devise policies which raise higher living and consumption standards, the conflict could go on for another couple of decades. This is not in the interest of any either India or Pakistan.

Comparison of the macro-economic parameters of the two countries indicate that Kargil is damaging both the countries. Though the degree of damage may differ, and consequently, the time period required tocorrect the damage could vary. The macro-economic parameters indicate that the damage to the Pakistani economy which is already weak, (GDP growing by just 3.4 per cent in 1998-99 as compared to 5.8 per cent for India, export growth declining by 10.1 per cent for Pakistan in contrast to India' s export growth of 3.7 per cent) is greater than for India. Though foreign investment provides stimulus to the two economies, stimuli for Pakistan when foreign investment is just about $286 million as compared to $2,020 million for India is another factor which would slow down the growth and thereby increase the differential between the two countries in the near future.

Further, foreign debt as percentage of GDP is 23 per cent in India and it is almost more than double at 53.3 per cent in Pakistan. Thus, in order to repay the foreign debt, greater efforts will be required in Pakistan than in India. While there is a sluggish rate of investment, the per capita defence expenditure in Pakistan is $22.24 whereas it is lessthan half at $10.37 in India. If the living standards of the people are to be improved, then deployment of greater resource for investment than for military is of paramount importance.

A critical indicator of the country to sustain short-term shocks is the level of foreign exchange reserves; in the case of India the foreign currency assets at end-March, 1999 were $29.5 billion whereas in the case of Pakistan these were US$ 1.6 billion. Though for Pakistan there was some improvement during the last six months from $0.5 billion in October 1998 to $1.6 billion in March, 1999, the exchange reserves still continue to remain inadequate. This uncertainty in the movement of foreign exchange reserves reduces the ability of the country to meet the short-term liability, and can create restrictions on the capacity of the country to import vital goods required for higher consumption standards and for investment in industries.

According to recently released Mega Ace Analysis, which gives details about the arrangementsthat Pakistan had with IMF, the release of the next $51 million has been approved. With this, the total drawing of Pakistan under Extended Fund Facility (EFF) increased to $153 million. But the country could draw further on the resources of the IMF under EFF to the extent of $459 million before October 19, 2000. The need to broaden the tax base and further strengthening of the tax enforcement including accelerating of structural reforms has been suggested by IMF. Currently, the IMF has viewed Pakistan's macro-economic situation difficult.

In order that Pakistan is enabled to carry out the reform process and continue the process of economic development which is in the interest of both India and Pakistan for peaceful coexistence, it is necessary that policy-makers in both countries develop a relationship of trust. The past events indicate that when the Simla Agreement was signed, the then Prime Minister Indira Gandhi released more than 90,000 prisoners of war in Indian camps. Not only these prisoners wherereleased, but they were treated extremely well. In fact, at that time she could have held on to these prisoners for a longer time, but it was her magnanimity that she allowed Pakistan's Zulfiqar Ali Bhutto to save his position in his own country and this act was similar to that of rescuing a companion from a fallen position. But Bhutto never kept his word thereafter, and India today is still feeling the effect of that treachery.

History has virtually been repeated at Lahore 28 years later. The foreign ministry of India Jaswant Singh, a man not usually given to intemperate language, has described Pakistan's action as amounting to treachery. Prime Minister Atal Behari Vajpayee said, he had gone in good faith on the much ballyhooed bus ride to Pakistan only to be betrayed in his trust by the Pakistani leadership which plotted a subversive operation behind the facade of bonhomie and goodwill expressions. If Pakistan has now come rushing to make peace with India, it is because it is now feeling the ill-effectsof a `botched up operation,' as Jaswant Singh chose to describe it.

Though authorities in Pakistan have repeatedly denied that they have nothing to do in the Kargil conflict and it is the militants which are engaged in. However, recent events have shown that the conflict was backed by the overlordship of the Pakistani military authority which led to creation of conditions at Kargil. One can possibly draw the conclusion that while the negotiations for peace were being held under Lahore Declaration, the military authorities in Pakistan were preparing themselves which has resulted to the present conflict. Thus, the trust reposed was shaken by Kargil.

The events now show that trust needs to be built up so that both India and Pakistan divert their resources towards economic development rather than engage in a war-like situation and in an environment of mistrust. Needless to say that present generation is impatient, and if their economic conditions are not improved, the best of brains in the respectivecountries would emigrate and deprive the countries of the valuable human capital required in the fast changing world of technological change.

The millennium is around the corner. Military adventurism has not succeeded in the past nor is it likely to succeed in the near future. The new generation which has come up during the last 50 years desires to achieve convergence between the living standards enjoyed by the youth in the western world and Pakistan. This lack of convergence in consumption among the new generation in Pakistan represents a bomb ticking within their own country, and it is this which will have to be contained by building up a trust with its neighbours and divert their resources expended now in military to those for economic development.

The author is research director of Mega Ace Consultancy (India) Ltd, Mumbai