The political economy of trade relations between India-Pakistan

A growing number of scholarly studies in and outside South Asia suggest the linkage between trade, economic development and peace between India and Pakistan. Despite many tangible political and economic gains of expanded India-Pakistan trade, the level of trade between India and Pakistan has remained anemic over the past six decades. Why hasn’t trade grown between India and Pakistan? What are the prospects of trade expansion between these two countries? Drawing on the growing political economy literature, we have identified four facilitating conditions to explain the growth of trade flows between a given pair of countries: distance, trade complementarity, rivalry, and government strength. In this article, we examine the dynamics and implications of these four conditions for trade relations between India and Pakistan. Following this analysis, we identify several key issues - trade liberalization, market access, energy cooperation, and regional stability - that can provide impetus needed to drive these two countries toward greater trade expansion.