IT looked like the governments of India and Pakistan were at it again: warily engaging one another, downplaying expectations, aiming for improvements in atmospherics, not obsessing over this or that kind of dialogue but just powering on with trade talks. But once again, as happens so often in the murky world of Pakistan-India relations, what was expected, what was decided and what actually happened all turned out to be very, very different things.

Nearly two months after Pakistan’s Commerce Minister, Khurram Dastgir-Khan, reached across the table to shake hands with a beaming Anand Sharma, agreeing to allow the free passage of trucks and containers across Wagah and approving a more liberal visa regime for businessmen on both sides, trade talks has hit snags.

In what is being seen as a major U-turn in policy, the Pakistan government wants trade but not without the resumption of the composite dialogue, suspended last January after a series of skirmishes along the Line of Control.

The Most Favoured Nation (MFN) status is also off the table, replaced by what the Pakistani side feels is a more accurate reflection of where it wants the relationship to go: non-discriminatory market access (NDMA) for India.

One can imagine India disappointed.

“India asking for a unilateral concession at a time when the composite dialogue is suspended is pushing it too far,” Dastgir-Khan told this writer.

According to the commerce minister, a deal on trade without “four major accommodations” from the Indian side was impossible: a level-playing field for Pakistani exporters; the exclusion of Pakistan’s items of high export interest from India’s sensitive list; the implementation of SAFTA concessions, including pruning the sensitive list, in the shortest time possible; and an agreement on a mechanism to curtail a surge of exports from India once trade liberalisation occurs.

"If I get a call from Delhi saying they’re willing to accommodate us in all these ways, we’ll give them non-discriminatory market access tomorrow,” Dastgir-Khan said. “I’m an elected member of the national assembly. Give me a deal I can defend before parliament and the public.”

In a series of conversations with this writer, government officials and analysts offered their own assessments of the government’s change of heart.

For many, the about-turn is a face-saver by a Nawaz Sharif-led government that came to power promising to restart the peace process initiated in the late 1990s but which has been unable to score any major concessions from India.

With the Indian government faced with tough behind-the-scene pressures — an overactive establishment — dictating the Pakistan policy, appearing soft is not an option for Nawaz Sharif.

"The Indian army has become more conservative," said a senior government official, requesting anonymity. "Indian army chiefs now make public statements. It's a sign of the times."

On the Pakistani side too, the military remains wary, with officials arguing that attempts to normalise trade may collapse under the weight of new problems if the old ones aren't resolved first.

"It's a reasonable concern that you can’t have meaningful dialogue on trade if the biggest issues like Kashmir, that threaten to derail everything, are always lurking in the background," said analyst Athar Abbas, a retired general close to track-II initiatives.

But many also argue that at the core of the army's concerns vis-à-vis India is the situation in Afghanistan.

As US forces prepare to leave next year, President Hamid Karzai has turned to India for development aid and a strategic partnership deal, sparking suspicions in Pakistan.

On India's end, officials increasingly fear Pakistan-based militants may be preparing to take on India across the subcontinent once western troops leave Afghanistan, raising tensions between the nuclear-armed rivals and making the hopes of normalisation even more remote.What complicates matters further is the upcoming Indian election. Anxious not to go back to the drawing board with the change of government in India, Pakistan may be revving up the pressure to force quick results. But for India this is not the time for concessions to Pakistan.

"I personally feel that the election is the main hindrance," said minister for water and power Khawaja Asif, who has been engaged in talks to buy electricity from India for the last eight months, without any real progress.

But while the Indian elections will pass and Nato presence will fade, Pakistan will remain stuck at home with a radical right with considerable street power, noisily protesting against Pakistan becoming an "Indian market".

“We have to make sure that jihadist and right-wing elements are not in a position to blackmail us publicly," said a senior security official. "We have to remind them that we are moving on trade but we haven’t forgotten about the other issues they care about. You can’t ignore their concerns.”

Based in Islamabad, the writer is Pakistan correspondent with an international news wire agency.