India’s effort to transform the barter system of trade along the Line of Control (LoC) with Pakistan into a financial mechanism has not borne fruit, with the neighbouring country not giving its consent to New Delhi’s proposal till now.
Cross-LoC trade between the divided parts of Kashmir was initiated as a confidence-building measure in 2008. The trade, growing in both volume and value, has created multiple concerns for Indian security agencies over the possibility of the channel of border trade being used by cross-border terror groups for terror funding.
The Union home ministry is particularly concerned over the delay after having formalised the proposal wherein bank facilities for conducting the LoC trade were to be set up on both sides. The move would have allowed security agencies keep an eye on suspicious transactions and crack down on the hawala network for terror funding through the channel.
Apart from security concerns, the need to fix prices of exchange of all items and goods to achieve a “balance in trade” also played a pivotal role in New Delhi pitching to monetise the barter trade. But top government officials said that Islamabad has not responded to this “positive gesture”, raising eyebrows within the Indian security establishment.
The cross-LoC trade between the traders of the state of J&K and Pakistan-occupied Kashmir (PoK) has also been seen as one of the steps towards resolving the vexed Kashmir issue. The Centre-appointed Jammu&Kashmir interlocutors have also supported the government’s move to monetise the barter trade and increase the number of trading days. “We have already presented Pakistan a proposal for instituting a financial mechanism to replace border trade. But reciprocal steps have not been taken by Islamabad so far,” an official said.
Currently, cross-LoC trade takes place twice a week on a barter basis and is restricted to 21 items.