Pakistan ceases all trade with India

Pakistan has suspended all trade with India and closed its airspace and land border. The measures follow the imposition of sanctions imposed by India after an attack in Indian-administered Kashmir that killed 26 people on Tuesday.

The last six months saw 520 port calls of vessels between Pakistan and India, according to data from maritime analytics firm Windward.

The two neighbours do not have a huge trading relationship. In the last full financial year, Pakistan imported Indian goods worth $1.2bn, while India imported goods worth only $3m from Pakistan.

From Grok on X

• 2023 Trade Figures:
  • Total Bilateral Trade: Approximately $781.42 million.
  • India’s Exports to Pakistan: $523.22 million, primarily sugar, pharmaceuticals, textiles, machinery, and chemicals.
  • Pakistan’s Exports to India: $258.2 million, including cement, fruits, cotton, leather products, and chemicals.
  • Source: United Nations COMTRADE database, as reported by Trading Economics.
• 2024 Trade Trends:
  • Posts on X and media reports suggest a significant increase in trade in 2024, with total merchandise trade reaching $1,206.76 million, a 127.21% jump from 2023. India’s exports to Pakistan were reported at $447.65 million, while Pakistan’s exports to India were minimal at $0.42 million.
  • However, some sources indicate India’s imports from Pakistan dropped to nearly zero in the first five months of the 2024–2025 financial year, with India exporting $235 million worth of goods, mainly sugar and pharmaceuticals.
  • These figures are inconsistent across sources, reflecting the volatile nature of trade data and possible informal trade routes.
• April 2025 Developments:
  • Following geopolitical tensions, including a deadly attack in Jammu and Kashmir in April 2025, Pakistan suspended all trade with India. India also closed its main border crossing, further reducing trade to potentially zero.
  • Prior to the suspension, India’s exports to Pakistan in January 2024 were reported at 59.48 INR billion (approximately $710 million), a sharp increase from 2.97 INR billion in December 2023, indicating sporadic trade spikes.

• Peak Trade: Bilateral trade was higher in the early 2000s, reaching around $2.4–$2.5 billion annually in 2017–2018, but it has since declined due to political events.
• 2019 Decline: Trade plummeted after the Pulwama attack in February 2019, when India withdrew Most Favoured Nation (MFN) status from Pakistan, imposed 200% import duties, and suspended cross-Line of Control (LoC) trade. Pakistan retaliated by suspending bilateral trade and closing airspace, reducing trade to $230.6 million in Q1 2019, a 51% drop from $467.4 million in Q1 2018.
• Post-2019: Trade remained low, with informal trade via third countries like Dubai accounting for a significant portion. Estimates suggest informal trade was around $4.71 billion, with India’s exports at $3.99 billion and Pakistan’s at $0.72 billion.

• India’s Exports to Pakistan: Cotton, organic chemicals, pharmaceuticals, edible vegetables, plastics, dyes, tea, spices, and machinery.
• Pakistan’s Exports to India: Cement, fruits (e.g., dates), cotton, leather, salt, sulphur, mineral fuels, copper, and glassware.
• Trade Routes: Direct trade is limited due to restrictions at the Wagah-Attari border. Most trade is routed through Dubai, increasing costs and reducing efficiency.

• Potential: The World Bank estimates that India-Pakistan trade could reach $37 billion annually if barriers like tariffs, non-tariff measures, and trust deficits are addressed. Current trade is only about 5–10% of this potential.
• Barriers:
  • Political Tensions: Issues like the Kashmir dispute and cross-border terrorism (e.g., Pulwama 2019, Pahalgam 2025) lead to trade suspensions.
  • Trade Restrictions: Pakistan maintains a negative list of 1,209 items banned from import from India, and India imposes high tariffs (e.g., 200% post-Pulwama).
  • Infrastructure: Limited connectivity (e.g., only six weekly flights) and restricted land routes like Wagah-Attari hinder trade.
  • Non-Tariff Barriers: Complex customs procedures and security concerns discourage trade.

• India: The trade suspension has minimal impact on India, as Pakistan accounts for only 0.31% of India’s global trade. India’s economy, the sixth largest globally, can redirect exports elsewhere.
• Pakistan: Pakistan is more affected, as India is a key market for its goods (e.g., cement, fruits). The trade deficit favors India, and Pakistan’s economy, reliant on imports, faces challenges with limited trade routes.
• Regional Implications: Reduced trade stifles economic integration in South Asia, where India and Pakistan represent 88% of the region’s GDP. The South Asian Free Trade Agreement (SAFTA) has been ineffective due to these tensions.

• India’s trade with smaller neighbors like Bhutan ($1.05 billion in 2016) often exceeds its trade with Pakistan, highlighting the underutilized potential.
• Pakistan’s trade with other countries, like China (25% of its imports), far outweighs its trade with India, showing Pakistan’s reliance on alternative markets.