Why Pakistan needs to get India to yes on trade
Ishaq Dar raised more than a few eyebrows last week when he said — almost as an aside — that his country’s new government would “seriously look into matters of trade with India”. A resumption of trade would be something of a climbdown for Pakistan, which cut off economic ties when Indian Prime Minister Narendra Modi unilaterally withdrew Kashmir’s special constitutional status in 2019. Until now, Pakistani leaders have insisted they wouldn’t restore relations until the decision was reversed.
Dar’s statement should not come as a complete surprise. His party, the Pakistan Muslim League-N, has a very particular class basis: It’s an alliance between the semi-urban petty bourgeoisie and large industrialists such as its leader, former Prime Minister Nawaz Sharif. These constituencies have always seen the benefits — for themselves and for Pakistan — of normalizing trade ties with a large and growing India.
Those gains are potentially substantial, especially for a country as desperate for hard currency as Pakistan is today. The World Bank estimated in 2018 that Pakistan’s exports could increase by as much as 80% — about $25 billion at that point — if trade with India reached its potential.
At this point, Pakistan simply can’t afford to forego billions of dollars. Its economy is on life support, stumbling from handout to handout. It just managed to secure the last tranche of a $3 billion bailout from the International Monetary Fund, and Prime Minister Shehbaz Sharif — Nawaz’s brother — indicated that more money would soon
