DEPENDING on one’s point of view, India’s move to open up investment from Pakistan can be welcomed or become cause for cynicism. Arguments against it stem from anxiety about Pakistan’s own weak economy and a desire to protect it: domestic problems mean investment here, both domestic and foreign, is falling. Pakistani investors are already sending their own money out to other countries, and this will give them one more destination. India recognises this, and wants to use the opportunity to attract more foreign investment for itself. But there is more at stake here than these near-term concerns. More trade between India and Pakistan is a good thing, and the reasoning for this — beyond the well-established economic benefits of trade — is simple. It is likely to increase stakes in each other’s stability over time, and any ties are better than no ties if the two are ever to move towards a closer relationship.

India’s move is particularly important because other initiatives on the commerce front that seemed to be within reach appear to have been stalled, such as granting MFN status to India and liberalising visa regimes. There are indications that Pakistan is delaying these out of fear that political and territorial disputes will get left by the wayside. But that defeats the purpose of the new diplomatic approach the countries are supposedly trying to pursue, in which closer trade links become the basis for building confidence and eventually addressing the tougher problems. India’s announcement is simply a starting point, and a lot more would have to be done to really open up trade and investment. Pakistan would have to make it easier for Indians to invest here, for example, and consulates would have to be opened in Mumbai, Karachi and perhaps even smaller business hubs such as Hyderabad in India and Lahore. And it isn’t clear yet to what extent Wednesday’s announcement will benefit Pakistan. Much will depend on the specific rules India frames on such things as investment levels allowed in different sectors and repatriating profits. But allowing Pakistani investors in was an important signal, and Pakistan should respond by speeding up trade liberalisation measures on which it is dragging its feet.