This may be a watershed moment in the post independence history of Pakistan and India. Four features define this moment which if grasped can help build a better future for their peoples: (1) Pakistan is in the process of establishing democracy as India is trying to deepen it. (2) A broad consensus has emerged amongst mainstream political parties and rational elements in civil society in both countries, that peace is a necessary condition for the democratic endeavour as well as for development. (3) A seismic shift is taking place in the centre of gravity of the global economy for the first time in three centuries from the West to the region in which India and Pakistan are located. If these two countries can co operate, they can help create in their region the greatest economic powerhouse in human history: an economically integrated South Asia could become the second largest economy in the world after China over the next three decades. (4) Amidst this great economic opportunity has emerged the grave threat of climate change, which could undermine the ecological life support systems of South Asia, unless mitigation and adaptation measures are urgently undertaken within a framework of co operation.  Let us briefly outline the political economy of this moment.

The recent historic decisions taken by the Pakistan government towards free trade with India in consonance with the earlier SAFTA agreement are: granting in principle, the MFN status to India; converting the earlier positive list which restricted trade to a few specified items, into a negative list which allows trade in all items except those in the negative list, together with a commitment to reduce even this negative list to a minimum by the end of this year; collaboration to reduce non tariff  barriers by both sides within a specified time frame. These major decisions reflect a change in the balance of power in favour of elected civil authority within the informal power structure that underlies the formal institutional structure of democracy in Pakistan and shapes the governmental decision making process. Democratic functioning has also drawn strength from the passage of the eighteenth, nineteenth and twentieth Constitutional amendments, the emergence of an independent Judiciary and a Parliament united in its effort to protect democracy. These developments in the formal institutional structure have made much more difficult, the overthrow of an elected government by a military adventurer.

Sustaining democracy in both Pakistan and India requires giving a stake in citizenship to all of the people rather than only a few in terms of participating in the process of growth as well as governance. This requires institutional changes within the respective countries to make both economic and political processes inclusive. Such inclusiveness in the institutional structures of the economy and polity would sustain and give meaning to the process of economic growth. Vital to such an undertaking is the establishment of intra state peace. However, combating militant extremism which threatens intra state peace in each country requires interstate peace and co operation.   
Co operation has now become a matter of survival, given the threat to the life support systems of the region’s integrated ecology. The latest evidence suggests that three kinds of stresses on the economies and societies are likely to occur as the result of climate change over the next three decades: (1) Water stress. The minimum per person water requirement per year is 1700 cubic meters. As against this the water availability  for Pakistan being 1329 cubic meters per person per year is already  at the water stress level; India is expected to reach water stress levels by the year 2025, with  water availability reaching 1140 cubic meters per person per year. (2) Rising average temperatures are expected to result in a 30 percent decline in yields per acre of food grains in South Asia in the next four decades according to the UN IPCC Report. (3) Rising sea levels will cause salinization of low elevation coastal agriculture zones resulting in loss of livelihoods and displacement of over 125 million people in South Asia. Thus adaptation and mitigation measures through regional co operation are necessary not only to sustain growth but to survive.