Pakistan Bulletin

An up-to-date and informed analyses of key issues of Pakistan.

Peace in India and Pakistan: Amidst hope and dismay

April 2024

For decades, India and Pakistan have had strained relations due to the Kashmir conflict and regional power rivalry. The situation worsened in August 2019 when India revoked the special status of Kashmir. Since then, there has not been any improvement in their relationship.

India and Pakistan became independent from each other and from British colonial rule in 1947. Conflict in India and Pakistan can be traced back to postcolonial transition and rivalry – among other developments – that emerged following the partition. Both states, from inception, treaded on the path of creating a narrative of the so-called “enemy” being responsible for all their ills and failures on politics, economy and law and order.
Among several efforts to de-escalate tension and install a peace process a significant move was made in the year 2004 when, a bilateral dialogue process was initiated by India and Pakistan. As a result of this so-called “composite dialogue”, a bus service was established that enabled people to have contact across the Line of Control (LoC), and for some families to reunite with their loved ones. Limited trade has also been re-established across LOC.
However, the formal peace process largely remained stalled since 2008. The terrorist attacks in Mumbai (2008), as well as subsequently in Pathankot (2016) and in Pulwama (2019) and ongoing border skirmishes led to serious military escalation, including air strikes in 2019. The accusatory rhetoric between the two nuclear South Asian states easily reaches boiling point and still permeates widespread public discourse.

Analysis of India-Pakistan relations has been often dominated by security undertones with comparatively less attention given to the untapped trade opportunities between the two neighboring countries. According to a 2018 World Bank report “A Glass Half Full: The Promise of Regional Trade in South Asia”, India-Pakistan trade has the potential to increase from US$2 billion to US$37 billion if both countries were willing to take steps towards removing tariff and non-tariff barriers such as sensitive lists, strict visa policies, strict quality standards and lengthy procedures and waiting periods at the border. However, decades-old animosity and mistrust have contributed to regular setbacks and significant barriers to normalizing trade relations.

According to a 2018 World Bank report, India-Pakistan trade has the potential to increase from US$2 billion to US$37 billion if both countries were willing to take steps towards removing tariff and non-tariff barriers.

Prior to August 2019, Pakistan’s exports to India included vegetable products, textiles, dry dates, rock salt, cement, leather, surgical instruments, carpets, and gypsum. While India’s exports to Pakistan consisted of cotton, organic chemicals, dyes and pigments, machinery, pharmaceutical items, teas and spices, iron and steel and plastic goods. Informal trade between the two countries also takes place through smuggling via land borders or third countries, such as Thailand, the United Arab Emirates, and Singapore. From 2012-2013 informal trade between India and Pakistan was reported at US$3.9 billion—almost double the formal trade. Informal trade between the two countries further increases when formal trade is suspended.
While there have been efforts by prior Indian and Pakistani governments and regional organizations such as the South Asian Association for Regional Cooperation (SAARC) to normalize trade relations, any escalation in political or security tensions puts any warming of trade relations at risk. Soon after the Pulwama attack in February 2019 India withdrew the Most Favored Nation status (MFN) that was awarded to Pakistan in 1996 and imposed 200 per cent custom duties on Pakistani goods, leading to a significant negative impact on Pakistan’s exports to India.
After August 5, 2019 it is estimated that the suspension of trade ties between the two countries has been causing a monthly loss of US$4.2 million to the bordering city of Amritsar and has affected 50,000 people in the city. Similarly, Pakistan’s exports to India were recorded at a mere US$16.8 million during the first half of Fiscal Year 2019-2020 while these stood at US$213 million in the first half of 2018-19. Imports from India also fell from US$865 million to US$286.6 million in the same period.
Besides trade and business potential, both countries are also locked in similar climatic crises which required joint strategic actions and plans. Nevertheless both countries have failed to set any such bilateral or regional mitigation plans in motion, hence facing repeated catastrophic consequences such as floods, heat waves and smog.
The ongoing conflict which also escalates armed conflicts time and again, including cross border terrorism, indicates fault lines in internal politics and democratic dispensation. Populist politics in India has also used anti-Pakistan narrative for its political gains. This jingoistic politics is equated by “Hindu state” as enemy within Pakistan’s politics and security narrative. Hence the space for a constructive bilateral dialogue for setting peace has shrunk to its lowest level in the recent past.

Apparently there is no change in the Indian policy towards Pakistan as the current Indian Prime Minister Narendra Modi uses the “cross border terrorism” pretext to project a negative image of Pakistan. Kashmir remains the centre of conflict for both the nations. However, India has the advantage of cementing its hold on the region and the Modi government has shown limited regard for the UN resolution with regard to the disputed territory status of Kashmir, as it went ahead to revoke the special status of the region, and initiating a number of other policy actions leading to fears of change in its demography and

In terms of regional politics, the developments in Afghanistan have proved the narratives of both India and Pakistan wrong as the two contested for space and influence in the conflict riddled state. Following the pull out of the American forces from Afghanistan and takeover by the Taliban, all apprehensions of India taking a centre stage or Pakistan using the Afghan soil to expand its influence has proven wrong.

The truth is there is a conflict-fatigue on the part of public at both sides. A new constituency of bilateral trade, business cooperation, and peace activism is developing as both nations struggle to respond to rising inequality in their respective territories.

However, bilaterally, India’s current policy of isolation and non-engagement with Pakistan has only increased unprecedented risks and uncertainty in the relations between the two countries. The new broad-based multi-party government in Pakistan is undertaking a policy of trade and friendly relations with all its neighbors and other regional partners including China, Iran, Afghanistan, Saudi Arabia, Russia and some South Asia countries. This policy is likely to result in expanding the country’s trade options and prospects for economic development. As India heads to elections, pre-poll estimates confirm another BJP-led government will take the lead. While there is indication of the next Indian government continuing its anti-Pakistan rhetoric, the truth is there is a conflict-fatigue on the part of public at both sides. A new constituency of mutual trade, business cooperation, and peace activism is slowly finding its way in public discourse as social and economic inequality stands at all-time high in both the countries, and both governments explore regional platforms to deliver on their mandate of economic development in their respective territories.

Irfan Mufti


The writer is a political economy expert and a people’s rights campaigner. He works as Deputy Executive Director at South Asia Partnership Pakistan.

Join Our Mailing List

Get the latest news and updates from our team