Severance of bilateral trading relations in the post-1949 period had forced both Pakistan and India to adopt economic adjustment programmes, which impeded their efforts for self-sufficiency. Pakistan imported coal, steel, iron and aluminum from the West, China and South Korea when she could have secured them from India at half the price. Even for an agricultural item like wheat Islamabad turned to Australia which she could have imported from India and save hard currency. At the same time India incurred considerable `opportunity cost’ in its economic rearrangement in the aftermath of Independence. For instance, areas more suitable for paddy cultivation were converted to jute cropping to meet the crisis caused by Pakistan’s prohibition of raw jute export to the other side of the border. India imported pig iron and iron scrap from outside the region, although she could have purchased it from Pakistan with a much lower transportation cost, especially for furnaces located in the western part of the country.

Informed sections of public opinion in the two countries are increasingly becoming aware of the economic loss suffered by India and Pakistan as a result of their politico-military rivalry. For instance, it has been estimated that an informal underground smuggling trade across the border operates to the tune of 16 billion Indian rupees a year, four times the value of official bilateral trade. The volume of this trade rises to 20 billion Indian rupees per annum if we consider the supplies received by India and Pakistan through third countries. But this undercover trade is denying both countries of substantial revenue. By the 1990s the Punjab-Harayana-Delhi Chambers of Commerce and the Federation of Pakistan Chambers of Commerce and Industries cooperated to prepare a potential inventory for normal bilateral trading relations between India and Pakistan. It was found that while Pakistan could instantly increase its import from India of such items as tea, medicine and textile machinery, Indian imports of Pakistani iron ore and pig iron could be significantly expanded in the short run.

Open bilateral trade can also create opportunities for the use of idle or surplus capacities in Indian and Pakistani industries to meet the demands of a larger regional market. The South Asian Preferential Trading Arrangement (SAPTA) - concluded in December 1995 - has already introduced an integrative trading arrangement in the region. The first round of SAPTA negotiations (popularly known as (SAPTA - 1) resulted in tariff concessions for 226 products by the participating countries. In the second round of SAPTA negotiations (SAPTA - II) the total number of products identified for preferential treatment rose to 2,013 - India offering concessions to Pakistan for 375 items and Pakistan reciprocating it for 230 products. By March 1997 the National Shipping Corporation of Pakistan also urged Islamabad to scrap the 1975 Protocol Agreement which prohibited Pakistani vessels to load cargo from Indian ports to a third country. Indian businessmen, too, are persuading New Delhi to unilaterally initiate an open full-fledged trade with Pakistan. New Delhi has already accorded Pakistan the Most Favored Nation Status. Reciprocation from Islamabad should be forthcoming, particularly in view of pressures from within Pakistan itself. A new favourable atmosphere for Indo-Pak trading relation was reflected in the signing of MOUs between the Federation of Indian Chamber of Commerce and Industries (FICCI) and The Federation of Pakistan Chamber of Commerce and Industry (FPCCI) on 23 December 1996. A suggestion was mooted for the formation of an India-Pakistan Commission on Free Trade - possibly headed jointly by the two Prime Ministers - to use the new congenial business spirit for promoting bilateral free trading.

Recent studies have demonstrated how a technical partnership between Islamabad and New Delhi would be immensely helpful to the former since about 60% of its development budget rely upon foreign credit for importing capital and intermediate goods. Bilateral cooperation for technological upgradation in textiles, leather goods, jute manufactures, tea, rubber products, micro-electronics, biotechnology and photo voltaic should be mutually beneficial in the face of global competition. In the 1980s large deposits of rock phosphate were discovered at the Hazara region of Pakistan which can be processed economically with Indian technology. Similarly, Indian enterprises like the Tata Iron and Steel Company can help the setting up of coal washeries to free the high ash content of Pakistani coal. Telecommunication networks across the border can promote flow of ideas. In paper production, too, India and Pakistan can collaborate to replace the wood-based technology with the relatively environment friendly bagasse-based technique. The Council of Scientific and Industrial Research (CSIR) in India is credited for having developed over 2000 patents in industrial technology and this knowledge can be transmitted to Pakistan. The Pakistan Council of Scientific and Industrial Research has likewise improved techniques in food and fermentation technology, ore processing, metallurgy, glass and ceramics, paints and plastics, fine chemicals, polymers, industrial chemicals and leather from which India can profit considerably. The space program of India and Pakistan can be coordinated for sharing research results. Proposal for a direct high-speed satellite data link has been also recently finalized between the Indian Meteorological Administration (New Delhi) and the Chinese Meteorological Administration (Beijing) for Indo-Chinese cooperation in meteorological science and technology. Such cooperative ventures between India and Pakistan should be forthcoming too. Besides, there are possibilities for Indo-Pak joint enterprises. Expert studies have confirmed that Indo-Pak joint enterprises would not necessarily threaten Pakistan’s consumer production but provide an economical and yet labour-intensive substitute for the expensive technology she imports from the developed world.

Another domain for Indo-Pak technological collaboration is productive utilization of a common eco-system, rich in biodiversity and genetic resources. The Indo-Pak Indus Water Treaty of 1960 has enabled the irrigation of about 24 million acres of land. An extension of this Indus spirit in harnessing water, energy and other natural resources for developmental purposes will be propitious for one-fifth of the humanity. Studies have already cited how an effective utilization of water resources can meet the projected shortfall in electricity in the region. A `synchronous Indo-Pakistani grid system’ - like the networks already operating in North America, Europe, Africa and Middle East - is not a utopian idea but is functional and economical. Both South Asian neighbours are deficient in natural gas. This shortage can be, however, met if India and Pakistan collectively tap the world’s two major natural gas deposits - the Persian Gulf and Central Asia. India and Pakistan can also fruitfully cooperate in maintaining surveillance on seismic, climatic and other environmental changes to provide advance warning against draught, flood and other natural calamities.