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Regular-article-logo Thursday, 09 April 2026

TIME FOR ENTERPRISE - India should join Pakistan in making money

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Writing On The Wall - ASHOK V. DESAI Published 28.05.13, 12:00 AM

The general election in Pakistan has brought to power a government with zero investment in hostility towards India. Governments tend to be slow and conservative in their international relations; this is particularly true of the government under our present prime minister. But even he would see that the triumph of Pakistan Muslim League-Nawaz creates a favourable environment, and should ask himself how he can use the opportunity.

A change in government does not change the people. Pakistan will continue to harbour people intent on spreading terror, murder and disorder in India. As long as they exist, the Indian government will continue to be cautious on movement of people. A more trivial step is difficult to imagine than visa-free movement of the very young and very old that was introduced some time ago; I doubt if a single person has crossed the borders under this concession. But this is the kind of action that government types come up with. One cannot expect any better of them. They may perhaps be prepared to make it easier for sick Pakistanis to come to India for treatment; it would have been very good, for example, if Malala had been able to come. Starting from there, they may be prepared to allow flows of professionals — doctors, engineers, scientists, economists etc — on medium-term visas. If they feel very brave, they may even allow some students. But that is the limit of what can be expected on movement of people.

Goods, however, cannot hurt once they have been checked by bomb experts and customs men; services do not even have to be checked, though officials will want to police messages. Hence bolder action may be possible on trade. Here, the Indian government has a well-defined policy. It has made a negative list of a few hundred goods whose import it allows only with a licence; and it imposes absurdly high import duties on some agricultural goods, principally foodgrains. Both lists are irrelevant when it comes to South Asian countries. Except for Bangladeshi jute and Pakistani cotton, none of them produces anything in significant volumes that can compete with India; and Indian producers can live with South Asian competition even in these two commodities if the government would allow it. The time has come for introduction of what I call unilateral free trade: everything from South Asian countries should enter India duty-free.

The government will still want to quibble about rules of origin: it would not allow other countries’ goods to jump our import restrictions by entering through a South Asian country. There are few goods that are entirely South Asian or entirely foreign. That means that the government would want to define what proportion of the value of a product must have been added in a South Asian country or, what comes to the same thing, what should be the maximum import content of a product if it is to enter India duty-free. It favours a low import content like 20 per cent; it should learn to be more liberal and allow, say, up to 50 per cent. Import content can be difficult to estimate since inputs into a product themselves may contain imports. But our customs men have centuries of experience in calculating import content. We have too many of them because import liberalization has reduced their work. A few hundred should be stationed in each of the neighbouring countries; and they should be given liberal travel allowances so that they would go to exporters’ factories and farms and do their calculations on the spot. Similarly, India should give visas to hundreds of customs men of neighbouring countries to come and police the value added in Indian exports. It would be stupid to give liberal visas to customs men and be stern with importers and exporters; the visa regime should be liberalized for them too, and for all producers.

The goods that move between South Asian countries will have to be transported; if trade is to become significant, transport capacity will have to be increased. Air India has too many planes and people and too little business; it should be made to fly to all major Pakistani cities. And there is no harm if it undertakes hopping flights in Pakistan. Pakistan International Airlines has virtually collapsed, and Pakistanis will not mind travelling across Pakistan even in Air India. If that offends them, Air India can set up a subsidiary called Dosti Airline.

But a far bigger opportunity awaits Indian Railways: railways are much cheaper, and can move goods and people on a much bigger scale. Hitherto, the government has allowed insignificant, symbolic services like the occasional train to Lahore. It should rebuild and renovate old rail connections to Karachi and Lahore from Gujarat, Rajasthan and Punjab. It is always short of resources, and may not want to run services into Pakistan. But Pakistan’s railways have an enormous stock of nonfunctional engines and carriages because it does not have the capacity or money to repair them. Indian railways should offer to put them back on rail provided they are used on services from and to India.

If the Indian government can go this far, it should think of the most ambitious step: revive the Grand Trunk Road, take it from Rangoon to Kabul and Samarkand, and build a modern, fast railway along it. It will make enormous profits, if the costs it would save are any indication. Instead of going by boat all the way around India, Bangladeshi and Pakistani goods will be able to zip across via Delhi. Instead of going all the way to Iran and then carried by road, Indian goods will be transported across (Pakistani) Punjab and Sind to the Khyber Pass and beyond.

That brings me to my final idea — that is, before I run out of space. It is an Indian Rupee Area. India gives considerable aid to Afghanistan, and some to Bangladesh; if Pakistan cooperates, India may give it aid too. All this aid should be given in Indian Rupees, to be spent in India; but any South Asian country may pay any other in Indian Rupees. Thus, Afghanistan can use Indian Rupees to pay for anything it buys from Pakistan; Pakistan may give those Rupees to its own importers to get anything they want from India. That way, trade with South Asia will not contribute to India’s balance of payments deficit, and India can allow its growth without worry. Pakistan would collect much Indian currency and use it for direct imports from India, instead of importing indirectly through the United Arab Emirates and paying much more; it would also find India a much cheaper source for many goods it imports from elsewhere. Pakistanis would find the business — in goods as well as in currency — so profitable that they would do everything to expand it. They would become major traders in Indian wares, buying them in Trichy and Ujjain and selling them in Samarkand and Bokhara. Babar would have liked that: if you cannot beat them in battle, join them in making money.

At this point I must stop before I start being fanciful. There is a window of opportunity; the prime minister must open it.

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