Prelims level : International Mains level : GS-II Governance, Polity, Social Justice and IR
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why in News:

  • India has suspended cross LoC trade between Jammu & Kashmir and Pakistan-Occupied- Kashmir (PoK) with effect from April 19 on grounds that the trade routes were being misused for funnelling illegal weapons, narcotics and fake currency.


  • LoC trade is meant to facilitate exchange of goods of common use between local populations across the LoC in Jammu & Kashmir and is based on a barter system. It is carried out on a zero-duty basis.

What is LOC:

  • LOC stands for Line of Control. It defines the boundary separating parts of Kashmir controlled by India and Pakistan. LAC stands for Line of Actual Control. It is also a boundary between India and China. LOC is a demarcated border marked by the militaries. On the other hand, LAC is not demarcated and consists of a vast empty space. LOC or Line of Control denotes a kind of boundary separating parts of Kashmir controlled by India and Pakistan. LOC is nearly 435 miles or 700 km long. The part controlled by India is known as Jammu and Kashmir. It is a state which constitutes the southern and eastern parts of the region. It basically covers about 45 percent of Kashmir.
  • Areas controlled by Pakistan comprises of three parts known as Azad Kashmir, Gilgit and Balistan. These regions lie in the northern and western portions of Kashmir. It measures about 35 percent of Kashmir. Rest 20 percent of the area is controlled by China. It is known as Aksai Chin. It lies in the northeastern part of the region.
  • India and Pakistan gained Independence from Britain in 1947, and Kashmir became a part of India. Later in 1949, a mutual agreed ceasefire line was drawn in order to resolve the dispute of India and Pakistan over Kashmir. In 1972, after the Simla Agreement, the two ends agreed for Line of Control. But still, this issue remains a sensitive one and many times have been an issue of war between India and Pakistan. Line of Actual Control is the effective military border which separates Indian controlled areas of Jammu and Kashmir from Aksai Chin. It is the effective border between People’s Republic of china and India. It is nearly 4,057 km long. It touches Jammu and Kashmir, Uttarakhand, Himanchal and Sikkim of Indian states. This border is not a legally recognized international boundary, but rather it is the practical boundary.
  • Indians consider Johnson Line of 1865 as the boundary, whereas PRC government claims Macartney-MacDonald Line of 1899 as the accepted boundary. This term LAC got legally recognized during Sino-Indian agreements which were signed in 1993 and 1996. LAC has been a sensitive issue just like LOC. In 1962, a brief war had killed more than 2000 people. This war has resulted from the Himalayan border dispute.
  • Apart from the geographical differences, LOC is a clearly demarcated line and a lot of activity takes place in this region, which involves firings, face to face confrontation, etc. On the other hand, LAC is not clearly demarcated and nearly 50 to 100 km distance is maintained between the two armies.

Cross Border Trade Between India -Pakistan:

Importance of Cross- LoC trade

  • Jammu and Kashmir serve a bridge between India and Pakistan.
  • Cross-LoC trade continues to be a key confidence building measure between India and Pakistan.
  • Trade has acted as a source of employment for the local traders, for the unemployed and vulnerable youth of the border areas.
  • Cross- LoC trade has also managed to connect the two divided sides of Jammu and Kashmir, thereby creating a constituency of peace in the region.
  • The governments can use this as a means of mitigating the long-drawn-out conflict in the State.
  • With firm political will, there is immense potential to transform this into positive economic gains for the people in the State.

Recent Developments:

  • Over the last year, cross-LoC trade has been affected by a number of allegations. Instances of narcotics and arms smuggling on trade points across LoC
  • The trade is proving to be more harmful for India rather than having any confidence building measures. Pakistan is not obeying the agreement and traders on both sides are assisting the mafia and terrorists in waging a war against India.
  • The National Investigation Agency (NIA) suspects that crores of rupees has moved in the valley from Pakistan using the LoC trade and through Hawala channels.

Steps to better trade:

  • Central and State governments must take the necessary steps towards reforming trade and ensuring capacity building of traders.
  • Install scanners for scrutiny of vehicles carrying commodities across the LoC to contain smuggling. verification of traders on yearly basis
  • Provision of container-based vehicles to traders for exporting goods Provision of a banking system to facilitate trade.
  • Increase the number of vehicles and foster communication amongst people from both sides to give LoC trade a boost. Other Confidence Building Mechanism includes promoting tourism in the state. Bureau of Research on Industry and Economic Fundamentals (BRIEF) conducted research on strengthening cross-LoC trade and proposed number of steps. A joint investigation team from India and Pakistan should be set up to investigate cases of narcotic and arms smuggling across the border. b. Such a team should address the root cause of such instances in a speedy and transparent manner.

Trade Monitoring Cell

  • A monitoring cell of officials from State and Central agencies must be constituted to monitor daily trade practices such as registration of traders, invoicing and exchange of goods, trade balancing, etc. b. Trade data and information for each registered trader should be mandatorily recorded in an electronic format by the trade facilitation officer and shared with the cell.


  • There is a need to institutionalise and formalise trading communities. b. Setting up joint chamber called the Jammu and Kashmir Joint Chambers of Commerce and Industry, which will have traders of both sides


  • Impart training to LoC traders with support from excise and security agencies b. This would help traders and government agencies monitor trade and ensure trader accountability
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