Jyoti Malhotra: Open the purse strings to Pak

India must enhance the financial stakes with its neighbour

A strange and sombre mood seems to have descended on the establishment as it gets ready to welcome Pakistan’s Commerce Minister Makhdoom Amin Fahim to India on September 26. This is in striking contrast with the upbeat atmosphere that prevailed during Pakistan Foreign Minister Hina Rabbani Khar’s visit a few weeks ago.

Khar’s trip, in fact, was not only notable for her Chanel perfume and other earthly trappings that became the talk of town, but also for that one-liner in the joint statement that talked about “non-discriminatory trade” that Pakistan and India were now conjoined to do, code language for Most Favoured Nation (MFN) status.

Except, now it seems, that Fahim is most likely not arriving bearing good tidings for Dussehra and Diwali. That may, in fact, be part of the problem as powerful lobbies in Islamabad – including the most powerful of them all, the Pakistan army – have somehow convinced themselves that granting MFN to India amounts to granting it a favour and that before this happens Delhi must pay a suitable price to it.

It all sounds so tragically and terribly familiar. Decades have just slipped by as both states have sought to trip up each other because of real and imagined insults and humiliations. Meanwhile, ordinary people with few stakes other than the desire to get to know each other better, have grown old and faded, with little left to hold on to except second-hand memories.

But before this column turns into a celebration of the candle-lighting brigade at Wagah-Attari, I would like to argue that irrespective of what Islamabad imagines what should or should not be done, Delhi should go ahead with what it has been planning for some time. That is, open banking channels between the two and lift the ban on investment.

Here’s a third idea: India should toughen its spine and do what it did with Bangladesh when the PM went there recently, that is, demolish the tariff quota for Pakistani textile exports into India, perhaps the only competitive industry Pakistan has left as its economy continues to plunge.

As he goes around the table, Manmohan Singh may not be able to collect too much support from his Cabinet colleagues on all three counts. In fact, several are likely to argue against a bail-out for Islamabad, especially since Pakistan has hardly moved on prosecuting those accused in the Mumbai terrorist attacks, or because its army-ISI combine continues to control anti-India terrorists or because Indian intelligence has begun to increasingly believe that home-grown terror groups are being funded by the Pakistanis to create mayhem within.

The fact is, there is so little trade between the two countries that unilaterally demolishing the “positive list” – only those items on this list can be traded, a complete reversal of commonsensical trading values – will have negligible impact on India’s economy.

The argument to hold firm against Pakistan is, admittedly, a strong one. None other than the US, arguably the most powerful country in the world even though China is snapping at its heels, on Thursday passed the Senate Appropriations Bill that makes all financial assistance conditional to Pakistan taking action against the Haqqani network, which targeted the US embassy in Kabul last week.

It’s clear to see that the Americans are furious. Perhaps they will now understand what India has been going through, all these years. The point, however, is that the Americans are invoking their financial leverage with Pakistan in an effort to change their behaviour.

It’s like a parent disciplining a recalcitrant child that is hooked on to a dangerous toy and refuses to give it up. By withdrawing the source of its pleasure – in this case, financial gain – America hopes that the political establishment in Pakistan will either assert itself against the all-powerful army or at least make it understand the terrible consequences of going broke.

The point is that while India and the US are pretty much in the same boat, in terms of being victims of terrorism, unlike the US, Delhi has little or no leverage with Pakistan at all.

Indeed, how can India retaliate when it is hurt by Pakistan? Using nuclear weapons or going to war or beginning even a limited Kargil-like conflict, is out of the question. Silly gestures like recalling the high commissioner, shutting down flights or reducing the number of visas, have made absolutely no difference at all. In fact, the all-powerful Pakistani army’s intransigence has only been strengthened.

If, on the other hand, India enhances the financial stakes with its troublesome neighbour, it might find that in times of crisis, those influential Pakistani businessmen and industrialists might be able to influence their governments/ISI/army to modify their behaviour towards India.

So, beef up your security measures but open up your purse-strings. Welcoming Makhdoom Amin Fahim with unilateral gestures could go a long way in not only transforming the bilateral relationship, but what could be much more fascinating — it could even affect the balance of power inside Pakistan.