Economic Initiative between India & Pakistan


To reduce tensions and build public support for the peace process in India and Pakistan by documenting and publicizing the potential economic benefits to all parties from a peaceful resolution of bilateral issues and close economic cooperation.


Government efforts to improve bilateral relations between India and Pakistan are constrained by public pressure that are opposed to the peace process. The potential upside of compromise and reconciliation has never been adequately documented or portrayed to counter public perception regarding the downside. The strategy envisioned is to shift the focus of bilateral relations from the military and political spheres to economics.

India's vibrant economic growth in recent years has been noted and become a cause of concern in Pakistan, which could remain content with slower economic progress so long as its larger neighbor fared no better. The realization that the Indian economy is gaining momentum while its own economy sputters is one significant reason for Pakistan's greater willingness to negotiate on bilateral issues.

Informed people in both countries understand that normalization of ties will be beneficial to both countries, but large sections of the population are unaware of the magnitude of the potential benefits that can be generated in terms of employment, growth rates, and foreign investment. Past efforts to document the potential benefits have been carried out under the regional umbrella of SAARC, but these studies have focused primarily on trade opportunities and limited to a mere listing of major tradable commodities. More recently public attention has focused on the proposal to construct a gas pipeline from Iran to India transiting Pakistan, which would provide cheap energy to India and significant transit fees to Pakistan. Trilateral negotiations between the three countries have progressed farther on the pipeline proposal than on any major project during the past five decades since both countries became independent. Projects of this type are indicative of a much wider potential that has not been adequately examined.

Several major political initiatives have been taken in recent years without adequate public understanding of their economic impact, including the breakup of the former Soviet Union and the reunification of East and West Germany. The cost of both initiatives was grossly underestimated. Political leaders in the former Soviet republics assured their people of enormous economic benefits from breaking up the USSR, but actually all the republics suffered a 50% or greater decline in GDP as a result.

A similar rationale applies to India and Pakistan in reverse. While everyone knows that elimination of conflict will reduce costs and open up opportunities for both nations, the true magnitude of these opportunities far exceeds what is commonly recognized. The scope for mutually beneficial economic cooperation between the countries is enormous. These opportunities include bilateral trade, energy, transportation infrastructure, industrial development and tourism. By one estimate, full utilization of these potentials could double the growth rates of both countries.

The purpose of this initiative is to challenge the conventional wisdom which says that economics necessarily follows politics. These are many examples to show that the reverse can also be true. It is generally argued that a dramatic improvement in bilateral political relations between India and Pakistan is necessary before the economic potentials can be tapped. For this reason, there has been little effort to even quantify the potential benefits. Rather than postpone evaluation of the economic potential until the political climate improves, this proposal is predicated on the belief that a full awareness of the economic costs and benefits can be a powerful lever for improving the political climate.

Efforts to Date

In 2000 and 2001, representatives of the Mother's Service Society had discussions with high level officials in New Delhi and Islamabad to ascertain their interest in the proposal. These meetings included --

In India --

  • L. K. Advani, Home Minister of India - two meetings
  • Jaswant Singh, External Affairs Minister of India
  • Brajesh Mishra, National Security Adviser and Principle Secretary to the Prime Minister of India - two meetings and several phone discussions
  • Farooq Abdullah, Chief Minister of Jammu & Kashmir, along with five members of his cabinet.
  • Sonia Gandhi and other senior officials of the opposition Congress I party in India
  • Richard Celeste, US Ambassador to India
  • Jasjit Singh, Direstor, Institute for Defense Studies and Analysis in New Delhi
  • Center for Policy Research
  • Ashraf Qazi, Pakistan High Commissioner to India
  • Abdul Ghani Bhat, President of the All Party Hurriyat Conference of Kashmiri militant organizations
  • Federation of Indian Chambers of Commerce & Industry
  • Confederation of Indian Industry
  • Punjab Harayana Chamber of Commerce & Industry

In Pakistan

  • Abdul Sattar, Foreign Minister of Pakistan
  • Shaukat Aziz, Finance Minister of Pakistan
  • John Schmidt, Deputy Chief of the US Embassy in Islamabad.
  • Sudeer Vyas, Acting Indian High Commission to Pakistan
  • Federation of Pakistan Chambers of Commerce & Industry
  • Institute of Strategic Studies
  • Institute of Regional Studies
  • Sustainable Development Policy Institute


  • Karl Inderfurth, US Assistant Secretary of State, and other representatives of the US State Department and Commerce Department.
  • Michael Clark, CEO, US-India Business Council
  • Robert Radtke, Vice President, Policy Programs, Asia Society
  • T.P. Sreenivasan, Indian Deputy Chief of Mission
  • Dr. Maleeha Lodhi, Pakistan Ambassador to the USA


  • Claude Smadja, Managing Director, World Economic Forum, Switzerland

Response to the Proposal

The response of the Indian and Pakistani Governments can be summarized as follows:

  • There is strong agreement that the scope for economic cooperation between the countries is very great and that the unassessed costs of continued confrontation are far beyond the amounts reflected in defense budgets.
  • There is strong agreement that documenting and building greater public awareness of the ‘upside' of peace will provide greater maneuverability and flexibility to the negotiations between the governments.
  • There is agreement that past bilateral efforts to explore the full scope for economic cooperation have been impeded by domestic political constraints.
  • There is agreement that a third party international initiative will be better received and more credible than an initiative by one or both of the governments.

Karl Inderfurth and other representatives of the US Government have welcomed and strongly endorsed the proposal as a valuable initiative that could strengthen public support in both countries to foster the peace process.

The Confederation of Indian Industry, the Pakistan Federation of Chambers of Commerce & Industry, the US-India Business Council and the World Economic Forum have all expressed initial interest in the proposal and are considering possible roles that they could play in the study.