A welcome step, but a long way to go still
The slow movement in the improvement of relations between India and Pakistan has diminished the earlier euphoria witnessed on both sides. Decisions taken after lengthy talks remain unratified as was the case with the easing of the visa regime. Meetings have been postponed as happened with the commerce secretaries’ talks. There has been no development vis a vis the import of petroleum products and electricity from India. Ditto about the export of cement, textiles and fashion wear from Pakistan. When initiatives on people to people contacts and mutual trade remain blocked, one can hardly expect advance on a host of more complicated issues like Siachin, Sir Creek and and Kashmir. There is obviously a lack of political will to proceed combined with bureaucratic inertia from both sides. The two military establishments have yet to overcome the Cold War era view of each other as the principal enemy.
The announcement by New Delhi allowing foreign investment from Pakistan would therefore be welcomed with caution. Not that the investors are unwilling to do business on the other side of the border. In fact they are keen to do so. In April one of the prominent Pakistani businessman was in New Delhi, with plans to launch franchises to sell his textiles in every major city, buy technology from India, set up a cement processing plant and open branches of his bank. A popular fashion wear house from Pakistan already doing business in the Gulf wanted to open a string of outlets in India. Some of the Pakistani business houses currently trading with India through Dubai would like to directly enter the market. Many however complain of bureaucratic hurdles or non tariff barriers.
With the quarter-on-quarter annual growth rate in the group of 27 European Union countries falling to near zero in the first quarter of 2012, from 2.44 a year earlier and growth further decelerating in the US, Asian economies relying on exports are going to suffer. The rot has already started. In India, GDP growth in 2011-12 was down to 6.5 percent as compared with 8.4 percent in 2010-11 and 8 percent in 2009-10. Pakistan too is bound to suffer from the decline of purchasing power in the developed economies. For a better economic future in South Asia, India and Pakistan need to develop friendly ties and promote mutual trade and investment to benefit from the physical proximity and a number of common factors. The lifting of the ban on Pakistani investors is welcome, though India also needs to remove the current restrictions on Indian businessmen desirous of investing in Pakistan.