Tensions have risen again between India and Pakistan after suspected militants killed 26 people in Kashmir. This has led both countries to take actions that further damage trade ties. Trade, already reduced since 2018, may now face more restrictions.
Trade Has Fallen Since 2018
In 2019, India launched a military strike in Pakistan after a suicide bombing killed 40 Indian paramilitary personnel in Kashmir. As a result, both countries suspended diplomatic relations and trade declined.
Trade dropped from $3 billion in 2018 to $1.2 billion in 2024. From April 2024 to January 2025, India exported $500 million worth of goods to Pakistan, including:
- Pharmaceuticals
- Chemicals
- Sugar
- Auto parts
Pakistan’s imports to India stood at only $0.42 million during the same period.
Border and Airspace Closures Add New Pressure
India recently closed the Attari check post, a major land trade route. In response, Pakistan:
- Suspended all trade with India
- Closed its airspace to Indian airlines
- Blocked goods transit through third countries
Pakistan’s pharmaceutical sector may face major issues due to reduced supplies from India, according to Ehsan Malik, CEO of the Pakistan Business Council.
Third-Country Trade at Risk
After India canceled Pakistan’s Most Favoured Nation (MFN) status in 2019, much of the trade shifted through countries like the UAE and Singapore.
If these routes are also affected, prices of medicines, tea, and fertilizers may rise sharply.
Flight Routes Disrupted
Indian airlines Air India and IndiGo have stated that closing Pakistani airspace will:
- Affect routes to the US and Europe
- Increase fuel costs
- Extend flight durations
Impact on Trade With Afghanistan
India imports $640 million worth of agricultural goods from Afghanistan each year. These goods usually move through Pakistan, so this trade may slow down.
However, India’s exports to Afghanistan usually go by sea routes, which remain unaffected.
Ajay Sahai, Director General of FIEO, said, “This ban might hurt a few exporters. But trading with a hostile nation isn’t wise under current conditions.”
Conclusion
India-Pakistan trade has been declining for years, and the latest border and airspace closures will likely make things worse. The fallout will impact goods, services, and travel in both countries and beyond.
