Will Modi Normalize India’s Trade Relationship with Pakistan?

Posted by Reading Time: 3 minutes

DELHI – After an unprecedented meeting between Indian Prime Minister Narendra Modi and his Pakistani counterpart Nawaz Sharif last week, investors are hopeful the normalization of economic and diplomatic ties between the two countries may be on the horizon.

After advocating for a hardline approach to India-Pakistan relations during his election campaign, Modi’s invitation to Sharif and other regional leaders to attend his official swearing-in ceremony last Monday took many analysts by surprise. In what would have ordinarily been regarded as controversial, and the subject of considerable debate in India, Modi’s invitation was instead overshadowed by the right-wing BJP’s landslide victory in parliamentary elections.

After sitting down with Modi for a meeting in New Delhi on Tuesday, Sharif expressed optimism that the two leaders’ common interest in economic growth and development would potentially foster progress towards improved trade relations between the two countries.

“I explained to the prime minister that we have a common agenda of development, which is not possible to achieve without peace and stability. Engaging in accusations and counter-accusations would be counter-productive. My government, therefore, stands ready to discuss all issues between our two countries in a spirit of cooperation and sincerity,” Sharif said.

Sharif’s visit to New Delhi is the first by a Pakistani leader since accusations of Pakistani involvement in the 2008 Mumbai terror attacks dealt a near-fatal blow to the two countries’ relationship and froze progress on the resolution of outstanding political and economic issues.

RELATED: Pakistan to Grant India “Most Favored Nation” Trade Status

Scheduled to last only 35 minutes, the nearly hour-long meeting resulted in the two leaders promising to have their foreign secretaries address “all issues, without exception” in the near future.

While some labelled Modi’s meeting with Sharif strictly symbolic, others see a sincere desire to make India an economic and political leader on the world stage.

Traditionally, swearing-in ceremonies in India have been low-key to reflect the country’s semi-isolationist foreign policy and inward-looking approach to politics.

Modi, a Hindu nationalist, appears to now be seeking to elevate India’s international presence and prestige, however, and extended inauguration invitations to leaders throughout the region. Among others, Pakistan, Afghanistan, Bhutan, the Maldives, Mauritius, Nepal and Sri Lanka chose to accept Modi’s invite.

Historically, the BJP – despite its right-wing political orientation – has sought to improve India’s relationship with Pakistan upon taking office.

In 1999, during Nawaz Sharif’s first stint as Pakistani Prime Minister, BJP-affiliated Prime Minister Atah Behari Vajpayee met frequently with his Pakistani counterpart and established a warm relationship with Sharif that climaxed in PM Vajpayee travelling on the first bus between India and Pakistan in nearly half a century.

During Sharif’s visit to India last week, he met former PM Vajpayee at his residence to reflect upon their previous relationship and political accomplishments.

With Modi boldly breaking the ice with Pakistan during his first 48 hours as prime minister, the potential for the normalization of economic and diplomatic ties between the two historical foes appears inevitable.

As both nations seek to sharpen their focus on economic growth and development, many observers are hopeful that a willingness to focus on potential areas for cooperation and trade – while setting aside political and territorial disagreements – may set a new tone in India-Pakistan relations.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading

Narendra Modi and the BJP Win Landslide Victory

Narendra Modi’s New Cabinet

Foreign Investors Await Signs of BJP Action on Tax Disputes