India−Pakistan visa deal: a boost for trade and bilateral cooperation?

Author: Sandy Gordon, ANU

On 8 September, India and Pakistan agreed to liberalise their visa arrangements.


The deal came during a three-day meeting between Pakistani foreign minister Hina Rabbani Khar and her Indian counterpart S.M. Krishna in Islamabad. Under the deal, eight categories of visas are to be liberalised. Changes include the provision of a visa on entry at the land border for the elderly and young, and most importantly, the provision of multiple-entry and multiple-city visas for business people with annual turnovers of over Pakistani Rs 3 million (US$32,000).

The latter is particularly significant in view of recent trade developments. These include Islamabad’s decision to grant most-favoured nation (MFN) status to India — India having granted the status to Pakistan in 1996. Pakistan has promised to grant MFN status to India by December this year by moving from a system in which only items stipulated on a ‘positive list’ could be traded, to one in which a small ‘negative’ list covers excluded items, for example those relating to defence. India has also liberalised its regime by agreeing to remove yarn and textiles from its negative list and allowing Pakistani businesses to set up in India.

India sees such developments as consistent with what Krishna refers to as its ‘step-by-step approach’ to the relationship. India has for many years held the view that this is the best way forward, rather than pushing for dramatic developments in relations, for instance over Kashmir. New Delhi believes that a Pakistan that is more solidly stitched into the Indian economy is more likely to abjure the highly disruptive tactics in support of trans-border terrorism that have been witnessed from Pakistan in recent years. India is also keen to support what it sees as the delicate process of civilianising the Pakistani polity, consonant with its belief that it has been the military — and especially the Inter-Services Intelligence — that has been most heavily engaged in supporting terrorism.

The step-by-step approach is also seen by New Delhi as being consistent with its persistent demand that Islamabad do more to bring those responsible for the 26 November 2008 attacks on Mumbai, and other attacks on India, to justice. For India, this is the ‘bottom line’ in terms of achieving any significant breakthrough in relations. For its part, Islamabad claims that it doesn’t have sufficient evidence to progress with the cases. The issue is complicated by the arrest in India of Abu Jundal, who allegedly planned the 26 November attacks, and has claimed under interrogation that the ISI was involved — a claim similar to that made by David Headley, another Lashkar-e-Taiba operative associated with the attacks, during his trial in the US.

Indian prime minister Manmohan Singh is set to visit Islamabad some time before the Pakistani election, which is scheduled to take place in the first half of next year. But so far New Delhi has not committed to a date, saying the visit would need to achieve something significant, probably in reference to a breakthrough on terrorism. Such a breakthrough is currently unlikely. Even if the civilian government wished it, the military remains attached to its ‘tame’ terrorist groups like Lashkar-e-Taiba and the Haqqani Network as a potentially useful force de frappe in the context of Kashmir and Afghanistan.

The outcomes in trade, too, may be slow and painful to realise. Trade between India and Pakistan is currently minimal at US$2.7 billion. According to the Wall Street Journal, even with MFN status, non-tariff barriers, such as onerous labelling provisions and lack of trade facilitation at the borders, are likely to keep trade low for some time.

Meanwhile, Chinese goods are flooding into Pakistan under its MFN arrangement with Beijing. India also faces challenges from Chinese manufacturing. A further challenge is that the Indian and Pakistani economies are not particularly complementary. Even with the best will in the world — which is currently lacking — progress will be incremental. Where there could be greater trading traction, however, is at the local level between the two Punjabs, both of which are dynamic sub-regions of their respective economies. Niche items like Pakistani light cotton products for women’s fashion, which could prove popular in India just as they have in Pakistan, could also benefit from the new regime.

The most recent developments may still be seen as a positive step forward for India−Pakistan relations. The challenge now is to maintain positive momentum of the step-by-step approach to improving bilateral relations. However, a terrorist attack that is seen to have originated in Pakistan could derail this process at any time.

Sandy Gordon is Visiting Fellow at RegNet, College of Asia and the Pacific, the Australian National University.

An earlier version of this article was first published here on South Asia Masala.