Now that sadbhavana has acquired the status of a growth industry with international stakeholders, it is only natural that every blip and twitch in Indo-Pakistan relations is being monitored with the zealousness normally reserved for blue-chip corporates. Consequently, Prime Minister Atal Bihari Vajpayee's visionary appeal for a common currency for South Asia at the Hindustan Times symposium in Delhi last week invited a generous bout of over-interpretation. Particularly excited were those who, for some inexplicable reason, believe that Pakistanis are people like us.

There were those who saw in the dream of a localised Euro, which some slavish enthusiasts promptly named Rupa, an expression of innovative thinking and the prime minister's personal commitment to sadbhavana. There were others who, equally innovatively, perceived it as a new approach to the hoary notion of Akhand Bharat. And finally, there were a handful who commented on the awesome significance of the missing T-word from the speech. Is India, they rued, in another fit of misplaced magnanimity, again forgetting that terrorism is the key issue?

Not one to allow Vajpayee to steal all the thunder for thinking out of the box, President Pervez Musharraf hit back with his interview to Reuters last Wednesday. He let it slip casually that Pakistan has 'left aside' its fanatical devotion to the 1948 UN resolution for a plebiscite to determine the future of Jammu and Kashmir.

Predictably, this statement too has created a storm. Hizbul Mujahideen chief Syed Salahuddin protested that by 'sidelining the UN resolutions, Pakistan will cease to be a party to the dispute' in Kashmir. Former foreign secretary Niaz Naik, a back-channel aficionado, told The Telegraph that giving up the plebiscite demand was part of a 'secret' understanding between Nawaz Sharif and Vajpayee in Lahore.

No wonder, even at the grave risk of implying that Musharraf is a loose talker, Prime Minister Mir Zafarullah Jamali clarified that Pakistan still stood by the UN resolution of 1948. Within India, the Cabinet Committee on Security decided that Musharraf's call for 'flexibility' was a ploy to get Kashmir back on the agenda but welcomed it all the same.

Going by the Musharraf prescription of first identifying the completely unacceptable facets of the Indo-Pakistan problem, the past week has seen a step forward. If Musharraf is able to negotiate the domestic storm and institutionalise this important shift in Pakistan's position, it would imply that the redrawing of national boundaries is now a non-issue. It could pave the way for Vajpayee to suggest that India could also seek a review of the 1994 resolution of Parliament that insists that the whole of Jammu and Kashmir, including the so-called Azad Kashmir, is an integral part of India.

In short, Pakistan's change of tack could force both countries to acknowledge that the Line of Control has, whether by accident or design, become the de facto international border. If Musharraf demonstrates his flexibility on a plebiscite he knows is a pipedream, Vajpayee can, without any inhibition and with a great deal of magnanimity, reciprocate by eschewing claims on Pakistan-occupied Kashmir. Apart from a handful of boisterous irredentists who may disrupt cricket matches, it is unlikely the loss of territory which was already lost 55 years ago will generate any popular backlash.

Indian Kashmiri politicians such as Farooq Abdullah have repeatedly indicated that a united Jammu and Kashmir is not a project they endorse. Musharraf, of course, will find his negation of a plebiscite much more difficult to sell domestically. Between the jihadis, the ISI and the army there are powerful interests committed to keeping the conflict in Kashmir alive.

Despite the November cease-fire and the fall in infiltration, there is no evidence as yet of any Pakistani reassessment of its strategic objectives in Kashmir. Like in his UN General Assembly speech last October, Musharraf still boasts of his ability to regulate the temperature of violence in Jammu and Kashmir. And there are other military strategists who openly advocate the creation of a fifth column within India. This is why Washington's instant support for Musharraf's audacious departure is significant.

International pressure will make it that much more challenging for Pakistan to wriggle out of the commitment. Indeed, the priority for Indian diplomacy is to ensure that Islamabad sticks to its president's word. Based on past experience, it would be prudent for India to proceed on the assumption that any show of reasonableness by Pakistan will invariably be accompanied by some act of adventurism.

Kargil, after all, was a direct consequence of Vajpayee's bus ride to Lahore. The personality of Pakistan is centred on a detachment from India and its civilisation. More trade and greater interaction of people can dilute the animosity but it can't change the ideological foundations of hatred. For any peace dividend to accrue, Pakistan has to be first convinced that India will not yield and that it will brook no nonsense.

From this perspective, India has every reason to be delighted with the results of the Bhutanese army's crackdown on ULFA and other secessionist outfits that are using Bhutan as launching pads for a war on India. These groups, after all, were no ordinary insurgents. Financed and equipped by the ISI and encouraged by Islamists in Bangladesh, they were a key element in Pakistan's strategy of bleeding India with a thousand cuts.

The tremors from Bhutan are being felt throughout the SAARC region. It should signal to Pakistan that India is not extending the hand of friendship either from a position of weakness or because it has no stomach to fight. Being essentially a criminal enterprise, Pakistan doesn't know economics beyond aid, a euphemism for international extortion. Otherwise it would have realised that the sadbhavana mania in India is being driven by economic success. India is too busy making money and scripting a success story to want to devote too much attention to a neighbour that is barely able to overcome its medievalism.