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Signs of thaw in bitter South Asian dispute

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In September, Mr. Zardari and Indian Prime Minister Manmohan Singh agreed to open a new trade corridor between Gujarat and Sindh. Previously, only one cross-border trade route existed.

Pakistan is also leading an effort to establish a $7.6 billion natural gas pipeline from Iran through Pakistan to India, a plan which remains in negotiations.

In total, trade between the two countries has increased from $345 million in 2004 to $2.2 billion this year. The numbers might appears small – for India, trade with Pakistan represents less than 1 percent of its total trade.

But the measures are key first steps aimed more at establishing trust than turning South Asia into free-trade bloc, says D. Suba Chandran, an analyst at the Institute of Peace and Conflict Studies in New Delhi.

"Trade is seen as a political confidence-building measure, not an economic confidence-building measure," Mr. Chandran says.

A loosened 'Kashmir knot'?

The nascent cross-border commerce also reflects a growing realization in New Delhi and Islamabad that the two countries must somehow overcome past grievances. "The last four years have been the best in the India-Pakistan relationship," says Raja Mohan, a professor at the S. Rajaratnam School of International Studies in Singapore.

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