The challenge for both sides this year will be to insulate gains in the economic relationship from wider strategic anxieties.

Commerce Minister Anand Sharma is leading an 80-strong business delegation to Pakistan this week to advance what has been a remarkable turnaround in bilateral economic ties over the last year. In April 2011, both governments agreed on a structured process to promote trade. They intensified senior official contact, consulted experts and chambers of commerce on ways to address sector-specific and non-tariff barriers, encouraged greater business-to-business interaction and set to work on improving the trading infrastructure at Wagah (due to be complete in a couple of months time). A liberal visa regime for businesspersons is reportedly in the works and there have been discussions on petroleum and power trade. Bureaucrats improved trust by making important tradeoffs. India lifted its block on EU concessions for Pakistani textiles. Islamabad reciprocated by agreeing to move (shortly) from a positive to negative list of tradeable items and to, further on in the year, grant India MFN status. Constant engagement has prompted ambition. Mr. Sharma and his Pakistani counterpart Makhdoom Amin Fahim announced in September plans to double bilateral trade to $6 billion by 2014, up from the modest $2.7 billion during 2010-11. The CII declared last week that if obstacles are addressed in time the volume of Indo-Pak trade can reach $10 billion by 2015.

A good year

All of this was unthinkable a little over a year ago. In the weeks prior to the Foreign Secretaries Nirupama Rao-Salman Bashir meeting at Thimphu last February, it was still unclear if the relationship had recovered from recriminations following Foreign Minister Shah Mehmood Qureshi's outburst at the press conference with S.M. Krishna at Islamabad in July 2010. Mr. Qureshi's criticism of India's former Home Secretary's comments about the ISI's role in the Mumbai attacks had provoked fresh doubts in Delhi about the extent of the Pakistan Army's support for Indo-Pak dialogue.

But a range of factors allowed both sides to get back together and transact more at the table. Prime Ministers Manmohan Singh and Yusuf Raza Gilani tackled the issue of bureaucratic mistrust by instituting regular contact on a range of subjects. Their summit meeting amid the festive exuberance of the World Cup cricket match at Mohali in March and the Indian media's exaggerated attention on Foreign Minister Hina Rabbani Khar during her visit in July improved wider atmospherics. Meanwhile, the Indian middle class acquired a greater familiarity with Pakistan's internal crises, owing to increasing media coverage of the series of terrorist attacks on markets, shrines and Pakistan Army targets. And sections of the Indian strategic community discerned changes in the Pakistan Army calculus as its relations with Washington deteriorated rapidly after Osama bin Laden's killing in May. Sceptics in Delhi began coming round to the view that Rawalpindi may, out of self-interest, back improvements in relations with India, at least on the trade front. All of this incrementally helped Dr. Singh win the domestic debate on the merits of continuing dialogue despite the lack of movement on the Mumbai trials in Rawalpindi.

After trade

Both sides may have reconciled to the significance of enhancing interdependence through trade, but such consonance is, however, unlikely to extend to core political issues, at least in this year. This is largely owing to internal political constraints on both sides, the uncertain endgame in Afghanistan and the bilateral impasse over issues like Kashmir and Siachen.

To begin with, discussions on contentious issues cannot proceed till political turbulence in Pakistan subsides. The civilian government's tussles with the Army and the judiciary have already had a procedural impact, delaying elements of the bilateral calendar. The planned Home Secretary talks in December and the Foreign Ministers meeting in January (as announced during the Krishna-Khar talks in July) have been deferred. For now, India is content to watch developments across the border with interest and provide Pakistan's civilian government the space it needs to reset its relationship with the Army which is vital for making further progress with India.

Dr. Singh has his own difficult climate to contend with. The outcry against corruption has not stalled; the issue is getting a regular refresh either through a spike in civil society activism or judicial injunction. The UPA government's relations with the opposition remain fraught, undermining scope for consensus on key policy issues. And the results of the ongoing Assembly elections will likely affect the government's political authority. A poor result for the Congress will undermine Dr. Singh's ability to take bold steps on his Pakistan policy. The Prime Minister has a history of taking bold steps on foreign policy from a position of apparent political weakness. But under the circumstances that he finds himself in, Dr. Singh may prefer pushing economic reform in an attempt to bolster the Congress' chances in 2014 rather than choose to work towards a grand political entente with Pakistan.

This has largely to do with the shadow of Afghanistan on Indo-Pak relations. Both countries are competing there for influence; they back different sides and do not trust each other's intentions. Islamabad is wary about India training an increasing number of Afghan National Army troops, as agreed under the Strategic Partnership Agreement with Kabul. There are concerns in Islamabad that New Delhi will develop an Afghan army with an “Indian mindset”. India fears that Pakistan will ultimately succeed in securing a place for its Taliban and Haqqani network clients in the dispensation that will ultimately emerge at Kabul or push those actors towards confrontation with India's traditional non-Pashtun allies if peace talks fail. India and Pakistan will thus wait for the fog of war (and peacemaking) in Afghanistan to clear before deciding to address other contested issues of Kashmir and Siachen.

The enabling conditions for resolving Jammu and Kashmir are, in any case, not in sight. Delhi and Islamabad are yet to agree on the starting point of negotiations. India is keen on picking up from informal agreements reached in the Satinder Lambah-Tariq Aziz back channel talks during the Musharraf years, which were based on the principles of soft borders, self-governance, demilitarisation and joint management. But in an effort to distance itself from the Musharraf legacy, the Gilani-led PPP regime disavows the so-called ‘four point formula' on grounds that the former President did not secure domestic support for his ideas, which they reckon is key for such a totemic issue in Pakistan. Perhaps wiser by the Indo-Pak back-channel experience, India and China have recently agreed to prepare a “jointly agreed record” of boundary-related talks held over the years between NSA Shivshankar Menon and Chinese State Councillor Dai Bingguo — to serve as the starting point for future talks with the latter's successor.

Equally, Delhi has been unable to make the necessary headway in pacifying Kashmir or using the relative quiet of 2011 to develop a consensus between the regions of Jammu, Kashmir and Ladakh on restoring autonomy provisions for the State — on which the Prime Minister has expressed his openness. The report of the three J&K interlocutors is presumed to have spelt out political options for the Centre, but Union Home Minister P. Chidambaram's plans to initiate a public debate on the report's findings have not seen the light of day, owing to the constraining climate that the Congress finds itself in. Likewise, both sides are unable to agree to a deal on Siachen since Delhi has become risk averse after the Kargil intrusion in 1999 that was partly aimed at choking Indian access to the glacier. As a result, the Indian stand of delineating ground positions as part of a negotiated deal has reportedly become a sticking point.

Indian and Pakistani diplomats are, therefore, likely to focus on consolidating economic links, especially by addressing non-trade barriers, while continuing high-level engagement on other issues this year. The key challenge for both sides will be to insulate economic discussions from wider strategic anxieties. India will rightly continue to insist on the prosecution of Mumbai attackers. Lack of movement on the trial may not in itself derail dialogue but Delhi will need, to use Nirupama Rao's phrase, a “proper closure” to sustain popular support for continued engagement. Needless to say, another major terrorist attack can unravel progress all too quickly.

(Sushil Aaron is a Political Adviser at the British High Commission, New Delhi. These are his personal views. Email: SushilAaron@yahoo.com)

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