Indian exports have little to lose from Pakistan's decision to snap trade ties, say experts

Trade between India and Pakistan was almost negligible since 2019 with most of the exchange of goods occurring via third countries, experts said.

India has little to lose from Pakistan’s decision to suspend trade, including through a third country, though an estimated $10 billion worth of commerce that survives via re-exports through the UAE or Singapore could see some impact, experts have said.

Pakistan on April 24 suspended trade with India, including indirect exchange of goods via third countries, in retaliation of a string of measures, including putting the Indus Waters Treaty in abeyance, announced by New Delhi following the Pahalgam terror strike that left atleast 26 people dead.

“We have minuscule trade with Pakistan, which is constantly declining. During April-January 2025, the same was not even $500 million as against the overall trade of over $800 billion in the same period, which makes it to 0.06 percent of India’s international trade,” Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), said.

Trade has been negligible since 2019, with most of the exchange of goods happening through third countries, experts said.

While India’s export to Pakistan are much higher than imports, given the volume of the trade, there will be little to no impact owing to the suspension, experts said.

An estimated $10 billion trade survives via re-exports through the UAE or Singapore, Ajay Srivastava, founder, Global Trade Research Initiatives (GTRI), said.

Citing “informal sources”, he said Pakistan imports several Indian products, including chemicals, pharmaceuticals, cotton and yarn, tea, coffee, dyes, onions and tomatoes, through this route. It also buys Indian iron, steel, auto parts, sugar, and salt.

“On the other hand, India may receive Himalayan pink salt and dry fruits such as dates, apricots, and almonds from Pakistan, also routed through third countries,” Srivastava said.

While India’s export to Pakistan are much higher than imports, given the volume of the trade, there will be little to no impact owing to the suspension, experts said.

The decision though would impact the supply of some key products to Pakistan, hitting its economy further, Sahai said.

EEPC India chairman Pankaj Chadha echoed the sentiment, adding since 2019 there have been no engineering exports or imports to Pakistan.

Trade play

After the Pulwama attack left 40 CRPF men in 2019, India raised the customs duty to 200 percent on Pakistani goods, including fresh fruits, cement, petroleum products and mineral ore, and also withdrew the most favoured nation (MFN) status.

Later in the year, Pakistan suspend trade with India after the abrogation of Article 370 that gave special status to Jammu and Kashmir but promptly withdrew the decision for select items over inflationary concerns.

Despite the suspension of trade even through third countries, border closure would halt formal trade but not demand. Islamabad would continue sourcing Indian goods, just at a higher cost and through other nations, Srivastava said.

India’s merchandise exports to Pakistan reached a five-year high of $1.21 billion in 2024 despite tense ties between the two neighbours, as reported by Moneycontrol.

The last time Indian exports to Pakistan were higher was in 2018 at $2.35 billion, according to UN Trade and Development (UNCTAD) and UN COMTRADE data.

Total merchandise trade between the two nations jumped 127.21 percent to $1.21 billion in 2024 from $530.91 million in 2023.

India’s top exports to Pakistan include organic chemicals, pharmaceutical products, sugar and confectionery. Islamabad ships apparel, salt, sulphur, lime and cement to India.