The presumptive Prime Minister Nawaz Sharif is committed to improving ties between the two countries, with India's two demands high on his agenda namely the grant of Most Favoured Nation status to India and granting New Delhi the right to use land route for trade with Afghanistan and beyond to Central Asian Republics.
The two commitments were made by the PPP-led coalition government - the former on its own initiative while the latter was subsequent to US pressure and contained in a side letter of the Afghan Pakistan Transit Trade Agreement. However, the former government was unable to deliver on either commitment due to security concerns highlighted by the establishment, sources said.
Army Chief General Ashfaq Parvez Kayani recently met President PML-N in Lahore and discussed issues related to Afghanistan, India and the US with him.
Given that trade is the most important component of relations, the Commerce Ministry, sources said, will brief the new government on trade normalisation process which was started a couple of years ago with enthusiasm. Strong concerns against the grant of MFN status were later voiced by the agriculture sector, pharmaceutical, textile especially PSF and auto sectors which would also be part of the briefing.
"Stakeholders suggested to former Commerce Minister Amin Fahim that the issue of trade liberalisation with India should be reconsidered to protect the vulnerable sectors, however, their timing was delayed leading many to conclude that the establishment may have been behind their protest," the sources added.
Some analysts maintain that Pakistan should club trade normalization with resolution of other disputes including water issues. However, Commerce Ministry and Ministry of Foreign Affairs don't support this approach. "It is up to the government-elect to weigh the pros and cons of linking trade normalization with resolution of other disputes," they added.
An official familiar with composite dialogue (now suspended) said that this process deals with seven irritants in relations and it is not necessary that progress is uniform across all points so it is unwise to club trade with other disputes.
Indian businessmen and professionals said on Monday that Pakistan Muslim League-Nawaz's decisive victory in the elections has rekindled hopes of improved bilateral trade and the granting of MFN status to India.
In Pakistan exporters and imports argue that the two countries should take urgent measures for the removal of all non-tariff barriers (NTBs) to boost bilateral trade, as these are the main impediments to cross-border trade. Trade analysts suggest that Pakistan should grant MFN status to India but impose duties on those items which can hurt local industry through National Tariff Commission (NTC).
According to media reports bilateral trade between India and Pakistan increased by 21 percent to $2.4 billion last year, as Islamabad reaped the benefits of trade normalization more than the gains made by New Delhi.
The sources said Commerce Ministry is expected to recommend to the new government to implement the decision of cabinet of Syed Yousuf Raza Gilani.