Chill setting in, India puts trade talks in deep freeze

India has decided to put “on hold” all official initiatives to boost trade with Pakistan, the first casualty of the chill in ties after the Mumbai terror attacks.

India has decided to put “on hold” all official initiatives to boost trade with Pakistan, the first casualty of the chill in ties after the Mumbai terror attacks. The Government has also called off a trip to Pakistan by a Planning Commission delegation which was to lay the groundwork and finalise dates for a visit by Deputy Chairman Montek Singh Ahluwalia.

Confirming the freeze, Minister of State for Commerce and Power Jairam Ramesh said: “Quite clearly, the environment being what it is now, we have put everything on hold. The way forward depends on their (Pakistan’s) response. If it is positive, we can go back to doing all that both sides had proposed on improving trade.”

India was in the process of setting up a modern Integrated Check Post (ICP) at the Wagah border to facilitate smoother trade and planned to commission more trains between the two countries to transport goods like cement. Opening up foreign direct investments (FDI) from Pakistan on a case-to-case basis was on the Indian agenda and it was hoped that IT companies like Tata Consultancy Services could set up shop in Lahore.

The timing of the Mumbai attacks couldn’t have been worse. With the Pakistan economy in a downward spiral, Indian exports to Pakistan, worth crores of rupees, had come to a virtual standstill with Indian banks refusing to accept letters of credit (LCs) from Pakistan-based banks.

Another key initiative the two nations had agreed on earlier this year was to allow their banks to open branches in either country. The idea was to start with two bank branches each. But given the circumstances, it seems unlikely there will be further headway, especially since terror financing will now be under the scanner.

The two countries had set an ambitious trade target of $10 billion by 2010.

The Mumbai attacks have also put off a Planning Commission trip to Pakistan. A delegation headed by Commission Secretary Subas Pani was to leave last week but sources said “the trip was called off on the insistence of the Ministry of External Affairs following the terror attacks”.

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The delegation was to visit Pakistan to lay the groundwork and finalise dates for Ahluwalia’s visit. Invited by Pakistan counterpart Salman Faruqui and Federal Minister Farzana Raja, Ahluwalia wanted to see, among other things, how Lahore had evaded infrastructure bottlenecks despite rising population.