ISLAMABAD (Reuters) - Pakistan's cabinet unanimously decided on Wednesday to grant India Most Favored Nation status to liberalize trade between the two South Asian countries, Pakistan's information minister said, a move that could improve ties between the rivals.
Trade has long been tied to political issues between the hostile neighbors, who have fought three wars since independence from Britain in 1947.
There are hopes that progress in trade ties will help bolster a fragile peace process, which the two resumed in February, with political implications likely to outweighing any practical benefits the deal might bring.
"This was a decision taken in the national interest and all stakeholders, including our defense institutions, were on board," Information Minister Firdos Ashiq Awan told reporters.
Pakistan's powerful military, which has ruled Pakistan for more than half of its history, sets security and foreign policy.
India broke off talks after the November 2008 attack on Mumbai by Pakistan-based militants that killed 166 people.
While India granted Pakistan Most Favored Nation status in 1996, Pakistan hesitated.
Pakistani officials want New Delhi to remove non-trade barriers against Pakistan goods.
Pakistan has long complained that Indian quality standards and customs procedures have hindered the flow of Pakistani goods into India.
Of the $1.4 billion in trade recorded in 2009/10, Indian exports to Pakistan stood at $1.2 billion while Pakistan exports to India totaled $268 million, according to official data.
The wider economic disparity is just as stark. Pakistan reported 2.4 percent growth in gross domestic product in the 20100-11 fiscal year while India reported 8.5 percent growth.
Since the 1960s, when Pakistan was an Asian tiger economy and India a basket case, India's economy has swelled to $1.06 trillion, more than eight times the size of Pakistan's $207 billion.
Trade ties were severed after the second war between the two countries in 1965 and have yet to recover fully.
But despite the challenges, the two now appear more keen to remove barriers to trade and the two countries' commerce ministries say trade could easily triple in three years.