Sharif's government gives boost to Indo-Pak business relations

Usually when governments change, so do the economic policies of the country. In a remarkable show of maturity the recently elected government in Pakistan has decided to push ahead with economic reforms. More crucially, the Nawaz Sharif government is adding momentum to trade and investment relations between India and Pakistan.

The process had begun in late 2011 with the first ever visit of the Pakistan trade minister to India. Soon after that there were business delegations while the governments on both sides encouraged changes in policy.

Pakistan even accorded the MFN status to India at last as an important symbol of rising maturity on trade relations. This step aims to lower the tariffs of goods imported from India. Even India announced that it would welcome and encourage foreign direct investment from Pakistan.

There was much anxiety about the future of Indo-Pak trade relations after Nawaz Sharif won the elections. The worry was that prime minister Sharif would go slow or reverse economic links since the process was initiated by his predecessor. At best he would postpone decisions that facilitate trade. And at worst, he would raise fresh barriers to cross border trade and investment.

All such worries were belied. Sharif displayed great vision by fully endorsing the normalization of economic relations.

Business has been quick to move ahead. A conference of leading industry heads was held in Islamabad in late June to take forward the process. Sharif met the first ever gathering of the Indo-Pakistan Joint Business Forum and urged it to work on a detailed roadmap for strengthening economic links.

The joint business forum discussed agriculture and textile exports, trans-border gas pipeline, visa regime and enhancing banking processes. Other issues included air and rail connectivity to facilitate movement of professionals and goods.

This private sector initiative has now moved into the next gear with the setting up of 10 teams that will identify specific steps in as many sectors. These include textile, agriculture and education where trade and transactions can begin soon.

The frequency of business visits between the two countries is rising consistently. A delegation from Pakistan will soon finalise import of gas from India through a 120-km pipeline. Pakistan is ready to offer a sovereign guarantee to India’s Gail to construct the pipeline. In fact India will also export power to get Pakistan tide over its energy crisis.

Moreover a company will soon be set up to begin work on bringing gas from Turkmenistan to Pakistan and India via Afghanistan.

A few months ago, such developments would have been difficult to imagine.
“Business and government on both sides are now working on the nitty gritty of policy changes that will remove irritants to trade,” says Sunil Kant Munjal, former president of CII and Jt MD of Hero MotoCorp who led the Indian business delegation to Pakistan. The Pakistan delegation was led by Syed Yawar Ali, chairman of Nestle Pakistan.

The change in government in Pakistan has only firmed the resolve of the country to focus on economic development. Stronger business links with India and South Asia will play a critical role for Pakistan.

As it prepares for elections next year, observers feel that India must maintain maturity and policy momentum to build on the work done so far.

The author tracks India’s political economy and its engagement with the world.