‘Pakistan is not backtracking on MFN’ – Pak Official Source

Speaking on condition of anonymity, the source told Reuters business and political lobbies in Pakistan seemed to have forced the trade move to be put on hold, leaving India to "wait and watch" as to when the process would resume.

"From the initial announcement of an unconditional grant of an MFN, there appears to be a clear backtrack," the source said. However, the statement was dismissed by Islamabad.

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"Pakistan is not backtracking," Foreign Office spokeswoman Tehmina Janjua told Reuters. "Pakistan clearly stated that our cabinet gave approval to move forward on MFN status in principle." Prime Minister Yousuf Raza Gilani has clarified that Pakistan has not granted the MFN status to India but has asked the Commerce Ministry to move forward on the issue in bilateral negotiations. He added that it could be approved or withheld depending on the interest of the nation.

India's Foreign Ministry spokesman could not immediately be reached for comment.

Trade has long been tied to political issues between the neighbors, who have fought three wars since independence from Britain in 1947. Lasting peace between the two countries is seen as key to stability in the South Asian region and to help troubled transition in Afghanistan as NATO-led forces plan their military withdrawal from that country.

INDIA WELCOMED ANNOUNCEMENT

Wednesday's announcement had been cheered by Indian policymakers and commentators. Rajiv Kumar, the director-general of the influential business lobby group FICCI, called it "truly momentous news" in a newspaper column on Friday morning.

But what appeared to be confusing statements from Pakistani officials after Wednesday's cabinet meeting aroused the suspicions of the Indian media, which bristle at any suggestion of duplicity on the part of the country's arch rival.

Although most editorial comment was positive, The Times of India accused the Pakistan government of a "flip flop".

Islamabad is under pressure from domestic business groups such as the pharmaceutical industry over liberalising trade with India, although "political lobbying is the greater concern", the Indian source said.

And in the buildup to the announcement, some Pakistani industries had expressed alarm at the prospect of being flooded with cheap Indian goods.