Senior Research Fellow, Asia Programme

The announcement of a 'new chapter' in the relationship between India and Pakistan came, if not quite out of the blue, then as a surprise to many.

Both countries have been jostling for influence in Afghanistan as the draw-down in Western troops approaches and with Pakistan's ties with the US only just starting to bottom out after deteriorating to new lows, India may have been tempted to isolate Pakistan further. 

At numerous points in recent years India would have taken exactly that course. Instead, the statements following a meeting between India's prime minister, Manmohan Singh, and Pakistan's prime minister, Yousuf Raza Gilani, in the sidelines of the South Asian Association for Regional Cooperation (SAARC) summit this week, went in the opposite direction.

Despite domestic opposition, Pakistan has pledged to grant India most-favoured nation status, stating that it would bring to justice those linked to the Mumbai attacks of November 2008, and that Ajmal Kasab, the surviving gunman from that attack should be hung.

Both leaders agreed that the next round of the dialogue process should be more productive and results-oriented. India's foreign secretary Ranjan Mathai said that the talks marked an end to the period of 'accusations and counter-accusations'. If true, this would be a remarkable turnaround. Both countries must be aware of the potential fallout from a serious terrorist incident within India; the Mumbai attacks led to a sharp deterioration in the bilateral relationship. Yet if the rhetoric is taken at face-value, then Pakistan would seem at last to have accepted that its existential threat is not India but comes from within. 

The decision to provide India with most-favoured nation trading status of itself means little. However, it is a necessary first step to enable trade to be enhanced. India's foreign secretary has indicated that the two countries plan to move towards a preferential trade agreement which would give a boost to currently moribund bilateral trade. Prior to partition, around 70% of goods made in what became Pakistan, were traded with the rest of British India. They also pledged to liberalise the visa regime. Increasing people-to-people links has long been recognised as a means of building trust, but the current visa regime is tortuous. 

Only last month Pakistan voiced suspicions of the strategic partnership signed between Afghanistan and India. So what has changed? On the Indian side, Manmohan Singh, despite much domestic opposition, hopes that peace with Pakistan will be his legacy. This will require surmounting the issue of Kashmir, and domestic politics prevents either side from making any territorial concessions. Yet in 2007 Manmohan Singh and General Musharraf were close to reaching an agreement which would have 'liberalised' the Line of Control that divides Kashmir. Subsequent opinion polls have suggested that such a move would go some way to satisfying (if not exactly delighting) opinion within Kashmir. It is also clear that it is imperative to boost the economy of Kashmir; again, greater ties with Pakistan would help. Having put relations with Pakistan to one side – a necessary means of placating domestic opinion following the Mumbai attacks – Manmohan Singh appears to feel that now is the time to return to the 2007 position.

It is harder to assess what has changed in Pakistan, and questions remain. Is the military on-board for this new chapter? Perhaps the government has recognised that it needs to do something to kickstart its economy, and increasing trade with India could help. Does the government, and indeed the military, have the political will to push forward with a rapprochement? Given the virulent response within Pakistan to the decision to offer India most-favoured nation status, and ongoing rumours of early elections, few would be certain. 

An optimistic interpretation might be that the government of Pakistan, which knows it has a range of problems, has decided that improving relations with India will give it both political and economic benefits. While anti-Indian voices shout loudest in Pakistan, many, if not most, Pakistanis want better relations with their neighbour. It may be that there is a small window of opportunity within which both countries can produce results in their relationship. But both sides know they need results rather than words, and that is likely to prove more challenging.