Fruit of economics

The protests in Kashmir over the economic blockade of the valley continued with a Hurriyat march to the UN offices in...

The protests in Kashmir over the economic blockade of the valley continued with a Hurriyat march to the UN offices in Srinagar to present a memorandum urging UN intervention for a permanent solution to the Kashmir problem. The people of the valley have a right to feel aggrieved: the blockade following the Amarnath land controversy has throttled the economy and livelihood of the people of the Valley. And once again politics in India has successfully throttled economics compounding an already fraught problem many times over.

From a purely economic point of view, one can hardly blame farmers in Kashmir wanting to sell their valuable but perishable agricultural and horticultural produce 8212; the second biggest source of livelihood after tourism in Kashmir 8212; to markets in PoK and Pakistan the reason cited for the march to Muzaffarabad if their access to markets elsewhere in India is closed off. Assocham estimates that the blockade and strife has already resulted in economic losses worth Rs 1,500 crore. There will be a dynamic effect too: an estimated 2.3 billion dollars have been committed in investment proposals in 2007 up from just 200 million dollars in 2001, which may now be in jeopardy.

The Central government8217;s response to J038;K8217;s economic problems has consistently been to shower fiscal largesse on the state government in an attempt to mollify the population. The Centre has been unable to grasp the simple fact that the ordinary Kashmiri farmer or industrialist needs access to more external markets whether in India or outside, not government money, which is more often than not siphoned off by corrupt politicians.

Objectively speaking, there is no reason why the trading route into PoK and Pakistan should be blocked leaving aside the current emotional hysteria, even if it is across an international or disputed border. The very limited trade between India and Pakistan is one of the most important downsides to the political conflict. Consider this: the value of India8217;s exports to Pakistan was just 1.8 billion dollars in 2007-08 which is just over 1 per cent of India8217;s total exports. India exports more to Bangladesh 2.5 billion dollars in value; more even to tiny Sri Lanka 2.7 billion dollars. The figures on imports are even more dismal 8212;Indian imports from Pakistan were valued at a miniscule 287 million dollars in 2007-08. Part of the problem of Indo-Pak trade is in the fact that it is often routed cumbersomely through Dubai. Proposals to open more overland routes to trucks 8212; including between Srinagar and Muzaffarabad are stuck in bureaucracy and politics.

There is, thus, plenty of potential, not only for Kashmir but also for the rest of India in trading with Pakistan. Even beyond trade, there is great potential for Indian business to invest capital in resource-scarce Pakistan. It seems absurd that India is now the second biggest foreign investor into geographically distant UK, but completely irrelevant in neighbouring Pakistan, whose 170 million people are a potentially giant market. The new Pakistan government in its latest trade policy has for the first time initiated discussion with three Indian firms8212;Tata, Reliance and Essar8212;on possible investment in the power sector. It has also opened discussion on possible investment into the manufacture of CNG buses. These are welcome but are far too little in the larger context. Pakistan should grant, and soon, India a most favoured nation MFN status in trade, which is a fundamental pillar of the international trading system.

To be brutally honest, no solution to the Kashmir problem can be found through politics alone. The solution to this problem, like the solution to many of India and Pakistan8217;s other entrenched problems, will happen once economics begins to throttle politics.

The solution in Kashmir, and this is by no means a new or original idea8212; but it gains renewed importance in the current context8212;lies in making borders irrelevant. And that8217;s where liberal economics has to play the critical role, much as it has done in Europe twice over. If one looks at the long history of the twentieth century no one could have quite predicted that a continent which first spent much of the period between 1900 and 1950 tearing itself apart on issues of nationalism, ethnicity and borders the World Wars and much of the period between 1950 and 1990 splitting hairs and indeed countries on ideology the Cold War, is now a role model for peace, integration and economic and social development. As of today, the only significant European countries outside of the much enlarged EU encompassing only enemies and rivals as diverse as the UK, France, Germany, Poland and Bulgaria, lie in the remains of the former Yugoslavia except Slovenia. There is a lesson in this too. Yugoslavia, united in the aftermath of World War II by Tito, and despite its flaws of the next 45 years, the richest country of Eastern Europe in 1990, has torn itself apart to violence, civil war and under-development, on political issues mostly ethnic and nationalist issues, whereas the rest of Eastern Europe has marched ahead8212;rapidly liberalising their controlled economies and democratising their authoritarian states8212;with a lot of help from integrated Europe.

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We can ill-afford a balkanisation of the subcontinent at this or any stage. Given the extremely high political temperature in Kashmir, and the inevitable churning in Pakistan following Musharraf8217;s resignation as president, trade and investment may now be the best routes to nudge the peace process forward.

dhiraj.nayyarexpressindia.com