Pahalgam fallout: Govt bans backdoor imports, shuts doors on Pakistan-origin goods

“Direct or indirect import or transit of all goods originating in or exported from Pakistan, whether or not freely importable or otherwise permitted, shall be prohibited with immediate effect, until further orders. This restriction is imposed in the interest of national security and public policy. Any exception to this prohibition shall require prior approval of the Government of India,” the Directorate General of Foreign Trade (DGFT), under the Commerce Ministry, said.

Trade think-tank Global Trade Research Initiative (GTRI) said trade with Pakistan remained possible after the Attari border closure through transhipment hubs such as the UAE, Singapore and Colombo.

Pakistani dates, for instance, still arrive at Indian ports through transhipment hubs—particularly via the UAE, which has a free trade agreement with India. Notably, bilateral trade between India and the UAE reached $100 billion in the last financial year.

According to official data, India primarily exported items such as soya bean, poultry feed, vegetables, red chillies, plastic granules and plastic yarn, while importing dry fruits, dates, gypsum, cement, glass, rock salt and herbs from Pakistan.

Former trade officer and GTRI head Ajay Srivastava said: “India doesn’t depend on Pakistani goods, so the economic impact is minimal. However, Pakistan still needs Indian products and may continue accessing them through third countries, via recorded and unrecorded routes.”

The GTRI estimated that about $10 billion worth of Indian goods reach Pakistan via the transhipment hub routes.

Tensions between the two countries—particularly after the 2019 Pulwama attack—reduced trade from ?4,370.78 crore in 2018–19 to ?2,257.55 crore in 2022–23. However, trade rebounded to ?3,886.53 crore in 2023–24, the highest in the past five years. Notably, total cargo movement also dropped from 49,102 consignments in 2018–19 to just 3,827 in 2022–23, the data shows.

In dollar terms, total India–Pakistan trade has shrunk to about $2 billion annually over the past five years, a small fraction of the $37 billion trade potential estimated by the World Bank. India’s overall goods trade stands at $430 billion, while Pakistan’s is approximately $100 billion.

The curbing of trade marks a significant shift from the late 1990s, when India took the initiative to boost bilateral trade by extending Most Favoured Nation (MFN) status to Pakistan in 1996, leading to a surge in trading volumes. However, Pakistan never reciprocated by granting the same status to India.

In 2019, India revoked Pakistan’s MFN status following the Pulwama terrorist attack.

In trade parlance, MFN status refers to a commitment by a country to extend equal trading advantages to all its partners—meaning it cannot discriminate between them. This ensures that no country is treated less favourably than the most favoured trading partner.

On Friday, The Indian Express reported that the government is also working to bring Pakistan back onto the ‘grey list’ of the Financial Action Task Force (FATF), the global watchdog on money laundering and terror financing.

India has further expressed its intent to engage with all multilateral development banks (MDBs) to push back against the provision of funds and loans to Pakistan, a senior government official said on Friday.

This move to directly approach MDBs—including the World Bank, the IMF, and the Asian Development Bank—is part of the government’s broader efforts to curb financial flows that could be used to fund terror activities.

Two days after the Pahalgam terror attack, the government had approved a series of directives impacting diplomatic ties with Pakistan—the most significant of which was the suspension of the Indus Waters Treaty.