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India Pakistan Cross LOC Trade suspended, Should India revoke suspension?

India Pakistan Cross LOC Trade suspended, Should India revoke suspension?

Tag:GS-2||International Relations|| India & it’s Neighbours|| Pakistan

What is the issue?

  • In April 2019, cross-LoC (Line of Control) trade was suspended by India.
  • With the increasingly strained relations with Pakistan now, it is wise that India makes a revised strategy on restarting cross-LoC trade.

When was connectivity established?

  • Shimla Agreement
    • It was in 1972 that the LoC between India and Pakistan was thought of, as a part of the Shimla Agreement.
    • Though the LoC was mostly an issue of contention, it was 33 years later that the two governments decided to take a significant step.
  • Karwaan-e-Aman’
    • On April 7, 2005, then Indian PM Manmohan Singh flagged the first cross-LoC bus, called ‘Karwaan-e-Aman’.
    • It was operated from the Sher-i-Kashmir stadium in Srinagar towards Muzaffarabad.
  • The Confidence Building Measure (CBM) came as a humanitarian reform reuniting divided families and friends.

How did trade come up?

  • In 2008, the two governments decided to take forward the existing transport potential to trade.
  • The Indian and Pakistani Foreign Ministers decided to finalize the intra-Kashmir trade and truck service modalities.
  • According to the barter system, cross-LoC trade began in October 2008.
  • It took place across Uri-Muzaffarabad and Poonch-Rawalakot for a list of 21 mutually agreed tradable items.

 How significant was this?

  • The purpose of the trade measure was to turn social interconnectivity into economic interdependence between the two different but distinct sides of the LoC.
  • It was correctly expected that commerce would prosper on the basis of people living on either side’s emotional capital.
  • In all, the LoC gave rise to hope in the virtuous cycle of trade, confidence, and people-to-people contact, bridge-building and re-connecting societies.
  • Cross-LoC trade was much more than simply an exchange of goods, as the sentiments of the people involved made it efficient.
  • Cross-LoC trade has been significantly successful in connecting the two divided sides of Jammu and Kashmir.
  • It thus created a peace constituency in a region that was otherwise tense.
  • Trade in the amount of 7,500 crore was transacted across the LoC during 2008-2018.
  • This resulted in more than 1.7 lakh working days and an approximate freight income of Rs.66.4 crore for J&K and Rs. 90.2 crore for workers.
  • A sizeable community of traders, businesses, transporters, and labourers have benefited from this trade.

What are the trade facilitation measures to be taken?

  • Given the present situation in J&K, it is imperative that India plans an outreach connecting all stakeholders including the ecosystem of cross-LoC trade.
  • Besides, there is a need for a revised strategy towards the re-initiation of cross-LoC trade.
  • Concerns around transparency have negatively impacted this trade over the last decade.
  • So, the lack of transparency needs to be addressed in the complete ecosystem.
  • The measures could include standard operating procedures, invoicing, GST norms, and trader registration.
  • Other steps to address the long-standing concerns around cross-LoC trade include –
    • Clarifications on harmonized system codes to avoid misrepresentation of commodities.
    • Rules of origin to avoid third country goods.
    • GST rates and inter-State taxation rules to avoid tax evasions.
    • A trader registration policy to ensure that credible traders are involved in the trade
  • Digitization of systems and procedures at the trade facilitation centers at Uri and Poonch is another important step to help take LoC trade to the next level.
  • Globally too, digitization of procedures and lower human intervention are the two major pillars that drive trade across borders.
  • Digital platforms to monitor invoicing, traders’ records, balancing and truck details will ensure real-time checks by the authorities, leaving lesser room for misuse.
  • Until the trade suspension, both bus links and trade had survived for more than a decade despite intermittent suspensions and ceasefire violations.

Way forward

  • The current suspension of LoC trade could be seen as a window of opportunity to address the concerns hitherto unaddressed.
  • The cross-LOC trade should be revived in a stronger and more organized manner.
  • In its new avatar, Cross-LoC trade could continue to prove the value of a peace-through-trade policy, and one that has stood the test of time globally.

 Mains model question

  • Suspension of cross LoC trade between Jammu & Kashmir and Pakistan-Occupied-Kashmir (PoK) is part of a larger change in the strategy for dealing with kashmir at the policy level. Discuss.

References