By Rupa Subramanya & Aarti Tikoo Singh

Recently, in a television interview, Prime Minister Narendra Modi rhetorically invited Pakistan and its people to join with him and the Indian people in fighting poverty and deprivation on both sides of the border.

Pakistan’s response? To ratchet up cross border terrorism through their terrorist proxies. In the most recent such incident, Jaish-E-Mohammed, a Pakistan terrorist proxy, attacked an army camp and civilian quarters in Jammu, killing five soldiers and one civilian.

Clearly, in light of these events, Modi is being too generous. Recall, that while India bestowed Most Favoured Nation (MFN) status on Pakistan under the aegis of the World Trade Organization (WTO), Pakistan has to date failed to reciprocate. Meanwhile, the Bollywood film industry in India has provided enormous opportunities for actors and artists from Pakistan, while the reverse has not been true. Also, India’s Minister of External Affairs, Sushma Swaraj, even at the height of deteriorating bilateral relations in the last three years has continued to routinely grant medical visas to Pakistanis in need. Most importantly, India continues to honour the Indus Water Treaty, a World Bank brokered agreement for water sharing across the border, which disproportionately benefits Pakistan.

It’s very clear that India has made a huge effort to reach out to Pakistan and work to improve the bilateral relationship. The economic relationship is already tilted in Pakistan’s favour, despite little or no reciprocity from their side.

If anything, Pakistan sponsored cross border terrorism has done enormous damage to the local economy, especially tourism in the disputed state of Jammu and Kashmir. Nor does this direct economic cost reckon with the opportunity cost of Indian defence and security expenditure aimed at securing the border and ensuring preparedness in the event of a flare up in hostilities with Pakistan.

While Modi’s appeal to the Pakistani people to join him in the work of development thus appears naive or premature at best, it is true that this is a propitious moment to shift the focus towards the state of Pakistan’s economy. This is especially important given the marked shift in the US position, as exemplified by President Donald Trump’s New Year tweet lashing out at Pakistan’s non-cooperation in fighting terrorism having received billions of dollars in US aid.

What is more, despite receiving injections of US financial support, the Pakistan economy seems to lurch from crisis to crisis. Last December, after the country’s currency lost 5 percent of its value in three days, it appeared that Pakistan might yet again need to seek a bailout package from the International Monetary Fund (IMF). On this occasion, Pakistani officials did not have to go to Washington hat in hand, but as recently as 2013, the country received a $6.6 billion loan from the IMF. It’s not just the currency which has been plunging: Pakistan’s exports have been in decline for three years, and the country is running a current account deficit which is 4 percent of gross domestic product, high by any standard.

There is no better opportunity for Pakistan’s leadership to rethink the country’s economic model and in particular its economic relations with India, which are extremely unbalanced. Given that the Pakistan economy is perpetually on life support and benefits disproportionately from its limited ties with India, economic logic suggests that Pakistan has much more to gain from normalizing economic relations than India.

In particular, lessened hostilities would allow Pakistan’s government to successively scale back its enormous military-security complex, which absorbs the bulk of expenditures. With increased tax revenues available to spend on infrastructure and economic development and with the possibility of increased cross border gains from trade, Pakistan would be much better poised than it is at present to jump start its faltering economy.

A putative partnership with India makes economic sense. However, rather than pursuing improved ties with India and de-escalating tensions, Pakistan’s leaders have made the dubious choice of throwing themselves into an embrace with China. The China Pakistan Economic Corridor (CPEC) will bring limited and uncertain gains for Pakistan’s economy but most certainly will saddle the country with a large debt burden. The end result will be that Pakistan will be in hock to China and even worse off than today.

Perhaps the most puzzling feature of the parlous state of the economy is the apparent insouciance of Pakistan’s government and its political elite. No doubt they reckon that given that Pakistan is evidently crucial to the US effort to fight Islamic terrorism in South Asia, they can always rely on a lifeline of US or IMF support whenever the economy falters due to mismanagement and corruption.

And there’s the rub. Pakistan’s political economy revolves around a military-security-industrial complex whose raison d’être is a perpetual “Cold War” with India, as recent cross border attacks amply demonstrate. If peace were to break out across the border, the grip of Pakistan’s military and security officials and its feudal overlords who game the system would be in jeopardy, and the hand of the civilian government would be strengthened. While this would be a good outcome for Pakistan’s people, it would be a blow to an entrenched and corrupt political elite who are essentially rentiers benefitting from hostilities with India.

While India continues its rise, Pakistan continues to stumble from crisis to crisis, whether it is a weakening economy kept alive by injections of foreign money or a dysfunctional political system in which a popularly elected sitting Prime Minister can be ousted by unelected judges at the behest of the military.

The fact that Modi addressed the opening session at the recent World Economic Forum in Davos, Switzerland, suggests how far India has come on the world stage as compared to Pakistan. There is no more potent signal that, despite some recent wobbles, India remains among the fastest growing and most important emerging economies in the world, and the most important democracy in the emerging world. India’s peaceful rise as a liberal democracy, warts and all, is exemplary. By contrast, could you imagine Pakistani Prime Minister Shahid Khaqan Abbasi giving the inaugural address at Davos?

In the end, it is the people of Pakistan who will benefit from normalizing relations with India, and it is they who ultimately will need to see the gains to be reaped. But until that day comes, Prime Minister Modi ought to be much more circumspect about offers of unreciprocated friendship to Pakistan. We’ve seen how those are answered.

Rupa Subramanya is an independent economist and researcher based in Mumbai. Aarti Tikoo Singh is an editor with The Times of India.

A shorter version of this piece appeared in the print edition of The Economic Times on February 26, 2018.