In response to recent geopolitical tensions and a renewed focus on national security, Indian authorities have intensified efforts to block the indirect entry of Pakistani goods into the domestic market.
The Customs Department has been placed on high alert, amid intelligence inputs that suggest Pakistan is attempting to reroute its merchandise through intermediary countries such as the United Arab Emirates (UAE), Singapore, Indonesia, and Sri Lanka to bypass the trade ban.
According to officials familiar with the matter, although direct trade between India and Pakistan has diminished to a negligible volume in recent years, a significant quantity—estimated at over $500 million annually—of Pakistani-origin goods continues to reach Indian shores after being repackaged and rebranded in third-party countries. These goods include textiles, dry dates, fruits, soda ash, leather items, and rock salt, among others.
To plug this indirect route, the Government of India on May 2, 2025, issued a comprehensive ban on both direct and indirect imports from Pakistan.
This move follows a series of policy decisions aimed at economically isolating Islamabad, particularly in light of its alleged support for cross-border terrorism.
“The intent is clear—to economically squeeze Pakistan, which is already grappling with a deteriorating financial crisis, soaring inflation, and a heavy dependence on foreign aid, especially from the International Monetary Fund (IMF),” a senior government official said on the condition of anonymity.
This is not the first economic measure taken against Pakistan. In February 2019, following the Pulwama terror attack that claimed the lives of dozens of Indian paramilitary personnel, India revoked Pakistan’s Most Favoured Nation (MFN) status.
The Centre simultaneously imposed a 200% customs duty on all imports from Pakistan, rendering the trade route commercially unviable and causing a drastic drop in bilateral trade.
According to government records, Pakistan’s exports to India fell by over 90% within a year, severely impacting sectors like horticulture, cement, cotton yarn, and salt. For instance, imports from Pakistan, which stood at $2.39 million in FY 2020-21, dropped to a mere $0.42 million during the first ten months of FY 2024-25.
In the wake of the recent terrorist attack in Pahalgam on April 22, which killed 26 Indian tourists, the government has further tightened its stance.
The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, issued an official notification banning all Pakistani imports, regardless of their route of entry. Customs authorities have been instructed to exercise heightened vigilance to detect and block any attempts to import Pakistani goods camouflaged under third-country labels.
“This restriction has been enforced in the interest of national security and public policy,” the DGFT notification stated, further emphasizing that any exceptions would require explicit prior approval from the Government of India.
Despite the near-zero official trade with Pakistan, Indian markets are still exposed to Pakistani goods via informal and re-routed channels, especially through the UAE and Singapore. These items include medicines, sugar, food products, and chemicals, which Pakistani buyers prefer due to their quality and affordability.
Trade data reveals a significant decline in Indo-Pak bilateral merchandise trade since 2018-19. At that time, Indian exports to Pakistan stood at $2.07 billion, while imports from Pakistan were valued at $495 million. In the subsequent fiscal year, India’s exports dropped by over 60% to $817 million, and imports from Pakistan plunged by 97% to just $14 million.
By FY 2023-24, Indian imports from Pakistan had shrunk to around $3 million, primarily in agricultural commodities. In stark contrast, India exported goods worth $1.2 billion to Pakistan in the same financial year.
Between April and January of FY25, Pakistan imported $448 million worth of goods from India, which included pharmaceuticals, auto components, petroleum products, chemicals, and essential medicines.
While official trade routes are being closed, Indian authorities are now moving decisively to halt the backdoor entry of Pakistani merchandise through friendly nations. This strategic move is expected to deepen the economic impact on Pakistan while reinforcing India’s zero-tolerance policy toward cross-border terrorism.