India to boycott Islamabad SAARC Summit

New Delhi to review its grant of MFN status to Pakistan

A day after holding a meeting to review the 1960 Indus Water Treaty, the Narendra Modi government on Tuesday upped the ante against Pakistan. The government announced that it will boycott the Saarc (South Asian Association for Regional Cooperation) Summit that Pakistan is slated to host in November.

Blaming Pakistan and the Uri terror attack of September 18 in which 18 Indian soldiers were killed, New Delhi said the environment wasn’t conducive for the Indian Prime Minister to travel to Islamabad because of increasing cross-border terror attacks.

Earlier on Tuesday, New Delhi made clear its intent to launch an economic offensive against Pakistan. It said the PM will chair a meeting on Thursday that will revisit the Most Favoured Nation (MFN) status unilaterally granted to Pakistan in 1996. Pakistan never reciprocated the gesture.

Ministry of External Affairs Spokesperson Vikas Swarup said not only will India not attend, but it understands “that some other Saarc member states have also conveyed their reservation about attending the Islamabad Summit in November 2016.” Sources said Bangladesh, Bhutan and Afghanistan were also likely to spurn Pakistan’s invite.

The political space for Modi to attend the summit had shrunk beyond redemption after the Uri attack. New Delhi also served its second démarche, a protest lodged through diplomatic channels, to Pakistan’s High Commissioner Abdul Basit.

Foreign Secretary S Jaishankar told Basit that India had in its custody two men from Pakistan-occupied Kashmir (PoK), believed to be the local guides of the terrorists who had carried out the attack. Pakistan had insinuated, both at the UN after External Affairs Minister Sushma Swaraj’s speech on Monday and later in Islamabad on Tuesday, that the Uri attack had been self-inflicted. The evidence, sources said, nailed Pakistan’s lie.

On its decision to boycott the biennial Saarc Summit, New Delhi didn’t directly name Pakistan, but said it has conveyed to current Saarc Chair Nepal “that increasing cross-border terrorist attacks in the region and growing interference in the internal affairs of (Saarc) member states by one country have created an environment that is not conducive to the successful holding of the 19th Saarc Summit in Islamabad in November 2016.”

It said “India remains steadfast in its commitment to regional cooperation, connectivity and contacts, but believes that these can only go forward in an atmosphere free of terror.”

Swarup said: “In the prevailing circumstances, the Government of India, is unable to participate in the proposed summit in Islamabad.” The first summit was held in 1985 and the last, the 18th edition, in Kathmandu in 2014.

This would have been the third time Islamabad hosted the summit, but the first one that Indian will boycott. Indian prime ministers did travel to Islamabad on the two previous occasions — Rajiv Gandhi in 1988 and Atal Bihari Vajpayee in 2004.

However, Pakistan termed as “unfortunate” India's decision to not attend the summit, in a statement issued Tuesday night.

A foreign office spokesman said Pakistan has noted from Indian spokesperson’s tweet about its refusal to participate. “While we have not received any official communication in this regard, the Indian announcement is unfortunate,” the spokesman said.

As for its decision to review the MFN status to Pakistan, sources conceded that India enjoyed a trade surplus with Pakistan. According to commerce ministry data, India-Pakistan bilateral trade was a measly $2.6 billion with India’s exports being $2.17 billion — a meagre 0.83 per cent of its exports. According to industry estimates, India-Pakistan trade potential is $10.9 billion, much of which currently takes place through unofficial channels via West Asia.

An option for India is to take Pakistan to the World Trade Organization (WTO)'s dispute settle mechanism for not reciprocating New Delhi's granting MFN status. WTO norms mandate that member countries grant each other non-discriminatory market access. According to Article XXI of General Agreement on Tariffs and Trade (GATT), a WTO member country can take trade actions for the protection of its essential security interests.

Traders said India mainly exports raw material and chemicals needed by Pakistan's industry. They said scrapping MFN status could increase the cost of production of these industries, but hurt India little. "Their cost of manufacturing will go up," Federation of Indian Exporters Organisation (FIEO) Director General Ajay Sahai said.

On Tuesday, in Islamabad, Sartaj Aziz, advisor to the Pakistan PM on Foreign Affairs, said Pakistan will approach the UN and the International Court of Justice if India suspends the 56-year-old Indus Water Treaty. Aziz said revocation of the treaty can be taken as an "act of war".

Amid the increased tensions, Pakistan Army Chief General Raheel Sharif chaired a security meeting in Peshawar. "We are closely monitoring the developments on the eastern border (Indo-Pakistan border) and we are fully prepared to respond," military spokesman Lt Gen Asim Saleem Bajwa said after the meeting.