• The governments of India and Pakistan have recently indicated a desire to develop warmer relations and to settle the issues that divide them by peaceful means. This endeavor will not succeed, however, unless political violence in Kashmir is substantially reduced.
  • A process of dialogue with Kashmiri separatists launched by the previous Indian government seems very likely to continue under the new government installed after the elections of May 2004. Indeed, the leadership of the new government had opened communication with separatist elements before the recent dialogue began.
  • The United States could play a crucial role as a facilitator—not as a mediator—paving the way toward toward resolution while leaving the principal stakeholders to determine the form of that resolution. Most Kashmiris regard the United States as an honest broker, an opinion rarely held in Muslim countries in the aftermath of 9/11. For its part, the United States is concerned that Kashmir might spark a nuclear confrontation and would like to see an end to the terrorist activity that Kashmir's disputed status inspires.
  • Washington's priority in the region should switch from avoiding nuclear confrontation—an unlikely event—to helping to restore a highly functioning, robust democracy in Kashmir. This would be an effective means of countering terrorism in India; it would also help to undercut the rationale for unrest in Kashmir and thereby help to rid Pakistan—now a major non-NATO U.S. ally—of the incubus of religion-based terrorism that has retarded its evolution into a modern nation-state.
  • The status of Kashmir has been hotly debated since the partition of British India and has prompted several wars between India and Pakistan, the most recent, the Kargil War, occuring in 1999. Kashmir's people have suffered immensely from the ongoing conflict between South Asia's two nuclear powers. Their plight finally garnered international attention in the closing decades of the past century, but only because, faced with a stagnant economy and a corrupt government, they had revolted.
  • Kashmir has rich natural resources and a talented and entrepreneurial people, but its economic development has been hobbled by misguided economic policies, corruption, a lack of cooperation between India and Pakistan, and political turmoil.
  • The political upheaval of recent years has exacted a heavy toll on the state's economy, and the richest source of income has become the threat and use of violence. Mired in poverty, young people are easily recruited into predatory terrorist and paramilitary organizations, some of which are financed and trained by Pakistan's security services, some of which enjoy the protection of Indian authorities.
  • If Kashmiris are to feel less alienated, govern∂ments in the Indian and Pakistani parts of the state of Jammu and Kashmir must grant their people freedom, not merely by granting elections but also by rolling back restrictions on business, terminating governmental monopolies in trade and commerce, and encouraging international investment by bodies such as the World Bank and the Asian Development Bank. Key areas for investment are watershed development, the timber industry, fruit processing, and power generation.
  • The United States can offer various forms of assistance to Kashmir; it could, for instance, supply U.S. expertise and resources to help Kashmiris suffering from posttraumatic stress disorder. U.S. incentives to encourage India and Pakistan to settle their differences peacefully can likewise take various forms, from helping Pakistan modernize its armed forces to securing foreign investment for the economic revitalization of Jammu and Kashmir.

About the Report

Recent efforts to develop warmer relations between South Asia's two nuclear powers, India and Pakistan, will not succeed unless political violence in Kashmir is substantially reduced. One of the key factors sustaining that violence is the dearth of economic opportunities, which ensures a steady supply of disaffected recruits to terrorist and militant groups. This report sketches the turbulent history of Kashmir from its de facto division in 1947 through the revolt of 1989–90 to the present, and then explores the economic dimensions of the conflict and the economic opportunities for peacebuilding. The governments of India and Pakistan, together with political leaders in Kashmir, must take the lead in promoting economic development, but they require the assistance of international financial institutions and of the United States, which is well placed to act not as a mediator but as a facilitator.

Wajahat Habibullah is a senior fellow at the United States Institute of Peace and secretary to the government of India. In a long and distinguished career in the Indian government, he has served at the Embassy of India in Washington, in the Prime Minister’s Office under Indira Gandhi and Rajiv Gandhi, and in numerous capacities in the state of Jammu and Kashmir. He is currently writing a book on conflict resolution in Kashmir.

The views expressed in this report do not necessarily reflect views of the United States Institute of Peace, which does not advocate specific policy positions, nor do they reflect the views of the government of India.

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