In the days after gunmen killed at least 26 people in the picturesque tourist resort of Pahalgam in India-administered Kashmir last week, India and Pakistan announced a string of diplomatic moves against each other, including shutting down cross-border trade and suspending visas.
New Delhi accused Islamabad of involvement in the April 22 attack, suspended India’s participation in an Indus River water-sharing agreement that ensures Pakistan’s water supply and trimmed down diplomatic missions. Islamabad has denied India’s accusations, called for a neutral investigation into the attack and announced it would suspend all trade with India, including through third countries, among other retaliatory measures. India-Pakistan trade relations have been frozen since 2019.
Both countries have also closed the Wagah-Attari crossing, the main land border between India and Pakistan. But while official figures show minimal trade between the neighbouring countries, experts said billions of dollars of hidden, backdoor trading does continue. Trading volumes grew when New Delhi bestowed Islamabad with the “most favoured nation” (MFN) status in 1996 – a World Trade Organization rule that ensures a country treats all its trading partners equally with respect to tariffs and trade concessions.
But amid broader bilateral tensions between the nuclear armed neighbours, trade never fully took off. At least officially.In the financial year 2017-2018, total trade between India and Pakistan stood at $2.41bn, compared with $2.27bn in 2016-2017. India exported goods worth $1.92bn to Pakistan and imported goods valued at $488.5m. But in 2019, India revoked Pakistan’s MFN status after a suicide bombing in Pulwama in India-administered Kashmir killed at least 40 Indian paramilitary personnel.
From 2018 to 2024, bilateral trade fell from $2.41bn to $1.2bn. Pakistani exports to India plummeted from $547.5m in 2019 to just $480,000 in 2024. India’s exports include pharmaceuticals, petroleum, plastic, rubber, organic chemicals, dyes, vegetables, spices, coffee, tea, dairy products and cereals. Pakistan’s main exports include copper, glassware, organic chemicals, sulphur, fruits and nuts, and certain oilseeds. Shantanu Singh, an international trade lawyer based in India, told Al Jazeera that due to the current trade ban, the immediate impact will be witnessed in Pakistan’s pharma sector: Pharmaceutical products are Islamabad’s main imports from India.
He also noted that the closure of the Wagah-Attari Integrated Check Post (ICP), which was the only land port through which trade was permitted between India and Pakistan, will increase the cost of trade. “So typically, land ports allow for a lower cost and ease of transport, and with the closure of this land port, you would see a rise in costs of any kind of trade. It will also particularly hurt trade from Afghanistan since imports from Afghanistan utilised this land route. The local economy built around the ICP is also likely to be affected,” Singh added. While official figures have pegged Indian exports to Pakistan at $447.65m, the real trade volume is thought to be much higher as traders route goods via third countries to bypass restrictions, avoid scrutiny and command higher prices upon relabelling.
Unofficial Indian exports to Pakistan are in fact believed to stand at $10bn a year, according to the India-based think tank Global Trade Research Initiative (GTRI). Yes. Foreign trade experts said rerouting goods by taking them to facilities where they are transferred to other ships to avoid international trade restrictions is a common practice. India, for instance, has been a location for such practices since Russia’s invasion of Ukraine, said Jayati Ghosh, economics professor at the University of Massachusetts Amherst. They reroute fuel from Russia to European countries, such as Germany, to skirt sanctions, Ghosh said.
Source: Here