Pakistan's decision to give India Most Favoured Nation (MFN) status is a big leap forward in bilateral relations. Paradoxically, the term of art connotes the opposite of what it means in common speech — under MFN a country agrees to treat another country equally with all the other countries with which it trades, as part of the agreement in the World Trade Organisation on non-discriminatory trade practices. As India and Pakistan are WTO members, this should have happened as a matter of course, but their uniquely poor relations ensured that even the routine was difficult. India accorded MFN to Pakistan in 1996 but Islamabad, which had linked improvement of trade ties to the resolution of the Kashmir issue, was propelled by the logic of its own position to withhold reciprocity. The change of heart now might have been prompted by a realisation in Pakistan that it can no longer afford to isolate itself from India's economic growth. As a next step, Pakistan would have to replace its positive list for trade with India with a negative list. New Delhi too has agreed to address the Pakistani grievance of Indian non-tariff barriers against its exports. But MFN status also means that Indian goods must compete in Pakistani markets with products from China or any other country, and vice versa. Both countries must now facilitate trade with each other through all possible routes, including the contentious land crossing at Wagah. They must also operationalise their part of the South Asian Free Trade Area agreement.

Prospects for improved India-Pakistan relations seem better now than at any time in the past three years. There have been some positive political developments as well: India recently backed Pakistan's entry into the United Nations Security Council; Pakistan supported another term for India's Kamlesh Sharma as the Commonwealth Secretary-General. A potential spat over the crossing of an Indian helicopter into Pakistani airspace was quickly averted — the Pakistani military sent the helicopter back after properly forcing it to land and questioning the Indian Army officers in it. There are still influential hawkish sections in both countries that stand in the way of rapprochement. The Pakistan government has drawn much criticism internally for the MFN overture to India. It can only be hoped that the forward momentum will be sustained.

More In: Editorial | Opinion