India and Pakistan announced a series of diplomatic actions, including closing cross-border trade and hanging visas, after gunmen killed at least 26 people in a picturesque tourist destination in Pahalgam, which manages Kashmir in the picturesque India, India, last week.
New Delhi accused Islamabad of participating in the April 22 attack, suspending India's participation in the Indus River Water Sharing Agreement, which ensures water supply to Pakistan and cuts diplomatic missions.
Islamabad denied India's allegations, demanded a neutral investigation into the attack and announced it would suspend all trade with India, including through third countries and other retaliatory measures. Since 2019, India-Pakistan trade relations have been frozen.
The two countries also closed the Waga-Tari border crossing on the main land border between India and Pakistan.
But while official figures show that trade between neighboring countries is small, experts say billions of dollars of hidden trade does continue.
So, what is the scale of trade between these masters? Are trade still going on between the two countries and the suspension of land borders and the closing of land borders really affecting trade?
Yes. Trade between India and Pakistan began with two countries created by partitions from British India in 1947.
Trade volumes continued to grow when New Delhi awarded Islamabad the “Most Favorite Country” (MFN) status in 1996 - a World Trade Organization rule ensured that a country treats all its trading partners equally in terms of tariffs and trade concessions.
But trade has never fully taken off due to wider bilateral tensions between nuclear-weapon neighbours. At least formal.
In the fiscal year 2017-2018, the total trade between India and Pakistan was US$2.41 billion, compared with US$22.7 billion in 2016-2017. India exports to Pakistan worth US$1.92 billion and imports worth US$488.5 million.
But in 2019, the Pulwama suicide bomb in Kashmir, India, which was managed in India, revoked Pakistan's MFN identity, killing at least 40 Indian paramilitary personnel.
From 2018 to 2024, bilateral trade fell from US$2.41 billion to US$1.2 billion. Pakistan's exports to India fell from US$547.5 million in 2019 to US$480,000 in 2024.
According to the Ministry of Commerce of India, the country's exports to Pakistan from April 2024 to January 2025 were US$447.7 million. During the same period, Pakistan's exports to India were only US$420,000.
India's exports include medicines, petroleum, plastics, rubber, organic chemicals, dyes, vegetables, spices, coffee, tea, tea, dairy products and grains.
Pakistan's main exports include copper, glassware, organic chemistry, sulfur, fruits and nuts, and certain oil seeds.
Shantanu Singh, an international trade lawyer based in India, told AL Al Jazeera that due to the current trade ban, the direct impact will be witnessed in Pakistan's pharmaceutical sector: pharmaceutical products are the main imports of Islamabad from India.
He also noted that the closure of the Waga-Tari Comprehensive Check Position (ICP) is the only land port that can increase trade between India and Pakistan, which will increase trade costs.
“So, usually, a land port allows for lower costs and easy transportation, and as the land port is closed you will see any type of trade cost increase. It will also particularly harm Afghan trade as this land route is imported from Afghanistan. It may also affect the local economy that the ICP has established around the ICP,” Singh added. ”
Although official figures have exported India to Pakistan at $447.6 million, the actual volume of trade is considered much higher as traders pass through third countries to bypass restrictions, avoid scrutiny and raise prices after remarks.
In fact, informal India’s exports to Pakistan are $1 billion a year, according to the Global Trade Research Program (GTRI), an Indian think tank.
GTRI said this was done by finding alternative routes at the port of AAB Emirates in Dubai. Colombo, Sri Lanka; and Singapore.
GTRI founder Ajay Srivastava explains how the system works in LinkedIn posts, Indian goods were sent to Dubai, Singapore and Colombo. The goods are then stored in a bond warehouse in the transportation center. Although in storage - although it is unresponsible documents and tags, these documents and tags have been changed.
Srivastava added that while this trade is not always illegal, “this grey regional strategy emphasizes how trade adapts faster than policy.”
He added that this trade, bypassing formal trade restrictions, “even after re-export markings and maintaining reasonable deniality, can achieve better prices – there is no “official” trade, but commerce continues.”
Yes. Foreign trade experts say it is a common practice to resettle goods by bringing them to facilities that transfer them to other vessels to avoid international trade restrictions.
For example, India has been the site of this practice since Russia’s invasion of Ukraine, said Jayati Ghosh, a professor of economics at Amherst University in Massachusetts. Gosh said they converted Russian fuel from Russia to European countries such as Germany, plus sanctions for skirts.
Since the Ukrainian invasion, India has become one of the largest buyers of Russian crude oil, with an average daily import of 1.75 million barrels per day in 2023, an increase of 140% from 2022. Russian oil accounts for about 40% of India's total crude oil imports in 2024 and 2% in 2021.
Trade economist Biswajit Dhar said China has been doing the same thing as India, saying that it is routing goods to India through the Association of Southeast Asian Nations, including Singapore, Indonesia, Thailand, Thailand, Vietnam, Cambodia, Laos, Brian, Malaysia, Malaysia, the Philippines, the Philippines and Myanmar.
"If China exports directly to India, they will attract higher tariffs. With ASEAN, India has a retail agreement," Dahl said. "Businesses will do everything possible to meet the needs that exist in any country."
Government officials in India have been collated about indirect exports to Pakistan since the Kashmir attack, reportedly lobbying to curb the practice. Pakistan's latest trade ban on India includes trade through third countries, meaning that Pakistani authorities are also aware of this informal trade.
According to Singh, preventing it can be tricky, however, as re-routes and re-marking merchandise conducted by private entities including importers, exporters and merchants are conducted by private entities rather than through official government channels.
"In fact, Pakistan's customs agencies determine whether Pakistan's relevant non-requalitative rules, if any, are met," Singh said.
"This is usually done with some kind of evidence that the importer of the product must provide to meet the requirements that may exist in Pakistan's law. So this is a problem with the Pakistani authorities that the benefits that the Pakistani authorities are actually originating from third countries, or actually appear from India."
Singh said the challenge now is Pakistan’s customs authorities to determine how to resolve the provision through a third country.
“This requires them to increase their scrutiny of Pakistan’s goods to some extent.”
Ultimately, it is difficult to prevent such transactions because of the need to be met. "This trade must happen because (India and Pakistan) share a common culture. In Pakistan, there is a great demand for Indian products." "This need has to be met from somewhere."
Traders are unlikely to give up offering businesses with higher profit margins than official trade.
"This strategy (prohibiting trade through third countries) is in our opinion that traders will act honestly and that Indian businessmen will understand the message the Indian government is trying to convey through these measures," Singh said.
"But if traders don't want to do that, if they want to be immoral, then there's nothing to stop," Dahl said.
Yes.
The 1965 India-Pakistan war severely undermined trade and led to economic ties, but the 1966 Tashkent agreement restored diplomatic and economic relations, thus gradually resuming trade.
The 1971 war led to the establishment of further tensions in Bangladesh during the conflict and the cessation of trade. The 1972 SIMLA Agreement emphasizes peaceful settlement of disputes and indirectly supports trade normalization. But, for decades, the trade bond has been ongoing on the telescope.
Suicide bombs in Pulwama in 2019 further strained bilateral trade. After the attack, India photographed a 200% import tax on all Pakistan’s goods, including fresh fruit, cement and mineral ore.
Six months later, in August 2019, India unilaterally revoked the semi-autonomous status of the Kashmir section and reorganized the former state into the territory of two federal governments.
Pakistan, which never gave India MFN status, further lowered diplomatic relations with India and stopped trade after Kashmir moves in New Delhi. Since then, negotiations on the resumption of trade with India have not been underway.