After the CRPF attack, India needs to go tough on economics
The CRPF attack may have been the worst in Kashmir since 2001. But, two things stand out in this case. Firstly, the outpouring of popular support appears to be immense. Secondly, the current government has made its intent clear. While the right diplomatic noises are already being made, the Indian government must actually use its increased economic clout to make a strong statement.
MFN status may not matter
In the first reaction to the terrorist attack in Pulwama, the government has already gone ahead and withdrawn the Most Favored Nation (MFN) status that had been accorded to Pakistan. As a consequence, the Commerce Ministry has officially notified that most of the goods imported from Pakistan would now attract 200% import duty, making them too steep to afford. However, the MFN withdrawal alone may not be really significant. The reasons are not far to seek. India’s total imports from Pakistan are to the tune of $300 million although a chunk of the $3 billion trade between India and Pakistan either gets routed through UAE or via unofficial channels. The official trade that will be hit by the withdrawal of MFN status will be too small to really matter and may most likely shift to the other routes. The real focus should be on trade with Pakistan’s major trading partners and its financers. That is what India really needs to hit at if they want to be effective.
Talking to Saudi Arabia
Saudi Arabia has promised billions of dollars in aid and investment to Pakistan. For Saudi Arabia, Pakistan remains an important ally in its bid to nurture Islamic power in the Asian region. Saudi Arabia also needs Pakistan to offset the influence of Iran. However, Saudi is keen to enhance oil exports to India. Frankly, India has a choice of Iran, Iraq, Saudi Arabia, Nigeria and Venezuela. It is time to play its cards smartly against Saudi Arabia to force them to reduce their tacit and patent support to Pakistan. Saudi Arabia is also a key channel for banking links with Pakistan and that needs to be monitored and controlled better by Saudi Arabia.
China is the X-Factor
While Saudi may be keener to placate India, China may be the tough card. But, the US has shown that if you hit China on trade they will be willing to negotiate. India runs a trade deficit of $60 billion with China and hence India cannot exactly be ignored. Be it investment commitments to Pakistan or support to terrorists holed up in Pakistan, China needs to be squeezed to mend its ways. Even as India plans to avenge the death of the CRPF Jawans, these are two stakeholders that India immediately needs to put pressure on. Neither of them will want to ignore a large consumer market. It is the time for India to makes its heft palpable!
