India, Pakistan to allow trade across the Line of Control

For the first time in 61 years, India and Pakistan will allow daily commerce across the de facto border dividing Kashmir from Tuesday, moving to boost mutual confidence, promote economic dialogue and open a trade outlet for people of the Himalayan region.

The trading, one of the key so-called confidence building measures (CBMs) agreed to at a meeting between Prime Minister Manmohan Singh and Pakistan President Asif Ali Zardari in New York on 25 September, begins two days after India announced elections in the state of Jammu and Kashmir.

Trade across the Line of Control (LoC) will initially be restricted to 21 items: fresh and dry fruit, masalas, honey, Peshawari leather slippers, walnut-wood furniture, wall hangings, embroidery items, tamarind, green gram, carpets, shawls, black mushrooms, pillows and pillow covers, medicinal plants, rice, blankets, rugs, woollen garments, saffron and a popular vegetable known as kadam.

The trade will be duty-free and in either currency — the Pakistani or Indian rupee. Some analysts suggest this is an economic union of sorts between the two parts of Kashmir controlled by the two neighbours. To others, the move is an attempt by New Delhi and Islamabad to further trade ties, following a July initiative by Pakistan to allow more imports from India.

LoC trade, as it is being called, will be operational at two points — from Srinagar to Muzaffarabad and from Poonch to Rawalakot (to be formally opened on 28 October) — even while the two countries continue to observe the line as the de facto border. A commerce ministry official, who spoke on condition of anonymity, said LoC trade is “not really an international trade”.

“Conceptually you are trading within the territory of the same country. There will be no concept of customs duty,” this official said. “The moment you charge import and export duty you are recognizing bilateral trade, which would imply the recognition of the disputed Pakistan-occupied Kashmir as part of Pakistan.”

In their New York meeting, Singh and Zardari agreed on several measures that would enable a closer economic dialogue between the two countries that have fought three formal wars — including two over Kashmir — since Pakistan was carved out of India in 1947.

Psychological suffocation

LoC trade is also designed to dent the isolationist approach adopted by separatist groups in Indian Kashmir and call the bluff of Hindu groups in Jammu that had blockaded Srinagar during the civil unrest that roiled the region this summer, by opening up an alternative trade route.