WASHINGTON: Heavy military spending in India and Pakistan has been detrimental to the citizens of both countries, a US think-tank said on Thursday while urging the two neighbours to reinvest in trade and confidence building.

The Washington-based Atlantic Council warns that “Kashmir remains a potential global flashpoint that could escalate into a nuclear war very quickly.”

The council’s report ---“India and Pakistan: The Opportunity Cost of Conflict” --- explains how high defence spending and low economic integration into South Asia’s regional economy have come at the expense of those living in poverty.

Although many in the two countries now favour rapprochement, the report argues that “unless both sides begin a dialogue on economic and military relations, these issues will only worsen.”

Authors Suhja Nawaz and Mohan Guruswamy point out that today Pakistan has a population of 200 million and India 1.2 billion. The United Nations Development Programme’s human development indicators show that 21per cent of Pakistan’s population lives on under $1.25 a day. In India’s case, while this has come down from 41.6pc in 2005, but it has now become relatively obdurate at 22.6 pc.

The report notes that this coincides with a period when India’s gross domestic product grew at an average of over 7.4 pc, while Pakistan’s economic condition deteriorated very clearly suggesting the need to maintain high levels of GDP growth to make a dent on poverty.

Yet both countries’ defence spending continued to rise in real terms, especially in the period 1998-2010, with India’s defence expenditures growing in constant dollars from some $20 billion to over $45 billion and Pakistan’s from slightly below $5 billion to slightly more than $5 billion over this period.

The share of this spending in the GDP of both countries has declined over this period, with India’s declining from under 5pc to under 3pc and Pakistan rising initially from below 3pc to over 3 pc in 1999 and 2000 to below 3 pc in 2010.

In a foreword for the report, former US Secretary of State George P Shultz notes that the cost of the military itself is substantial.

“But the cost of arms and armies is only part of the problem. Here we have two countries full of competent people and many complementary capabilities,” he writes. “In this setting, trade should be booming, much to the benefit of people in both countries. Instead, trade is at a mere trickle.”

For confidence building, the report suggests increased people-to-people contacts which, it argues, will eliminate old stereotypes that fuel fears of each other. It also encourages direct communications between the two militaries, through exchange visits and more transparency about their military plans and movements. Open borders for trade and tourism and joint investments in energy, water, and export industries would also help.

Showing the inadequacy of military build-up for strengthening national security; the report points out: “Increased spending has not brought foolproof security to either country. Indeed, their threats have changed much over the decades. Internal militancy and insurgencies continue to bedevil both states.”

It notes that “the production of newer missiles and tactical nuclear weapons adds further volatility and danger to this mix. Unless both sides can begin a dialogue on economic and military relations, they will continue to feed their defence budgets, increasing the opportunity costs of such expenditures.”

It recommends that India and Pakistan should reduce the proximity of their land forces by increasing the distance from borders of their respective forces.

While India and Pakistan may still be far away from evolving open borders to allow people to move freely, they could have open borders for trade. A big bilateral trade then invests in the peace constituencies in both countries. Business relationships make nations more pragmatic and accommodating,” says the report.

“India and Pakistan seriously need to invest efforts in expanding trade and investment to the fullest extent possible. An annual bilateral trade between India and Pakistan may result in a GDP trajectory that could be as much as 1.5 pc more than present,” it adds.

“This will represent a fourfold increase in trade and both sides have much to gain in terms of lower prices and timely supplies,” the Atlantic Council argues.