A pipe dream?

For now, investors are cautious. But the strongest signs yet of a diplomatic breakthrough between the nuclear rivals have got economists wondering how big a boon peace in South Asia could be.

"I see a tremendous impact on trading activity," said Krishan Kalra, additional secretary general of the Federation of Indian Chambers of Commerce and Industries.

Hindu-majority India and Muslim Pakistan agreed last month on a "basic roadmap" for peace, aimed at putting decades of enmity behind them and boosting trade across their 3,224 km (2,003 miles) border. Train and air links were re-established at the start of the year.

It may be only be a few years away, but Kalra sees bilateral trade ballooning to $10 billion by 2010, five times greater than current trade which is mostly channelled through third countries like Singapore and Hong Kong.

Direct trade is just $200 million, a sliver of India and Pakistan's global trade.

"There are no direct banking and telecoms (cellular roaming) links, shipping, road and railway links are inadequate, getting a visa takes a long time," said Ajay Khanna, deputy director general of the Confederation of Indian Industries. "These are the major irritants to doing business."

But that could change if peace grows, reducing the costs of doing business between the two countries and oiling the trade in pharmaceuticals, steel, auto parts, cotton, tea and other goods.

Senator Ilyas Ahmed Bilour, co-president of the India-Pakistan Chamber of Commerce and Industry, said transportation costs of $2 billion on indirect trade would be cut drastically once direct trade was permitted.

Pakistan could open up to Indian imports, currently restricted to a list of 712 items, mainly raw materials. India has no formal restrictions on Pakistan imports.

India buys pulses, dried fruit, leather, semi-precious and precious stones and cotton from Pakistan, which buys chemicals, engineering goods, tyres and pharmaceuticals from India.

The paradox of India and Pakistan's trade is reflected in the lack of tea moving across the border.

"Pakistan presents a huge opportunity for tea exports, the country's per capita consumption is twice that of India's," said Anil Goel, vice president finance at Tata Tea Ltd, India's biggest tea exporter.