Real economic blow to Pakistan! India chokes $500 million Pakistani goods entering it via third countries

India’s import ban on Pakistan: In a major economic retaliation following the Pahalgam attack, the Narendra Modi government has implemented sweeping restrictions, prohibiting all imports from Pakistan, whether direct or through intermediary nations, along with postal services and parcel deliveries from the neighbouring country.

The administration also restricted Pakistan-registered vessels from entering Indian ports and banned Indian ships from accessing Pakistani harbours, indicating a tougher position amidst worsening diplomatic relations.

“This comprehensive ban, including indirect imports, will enable custom authorities to prevent Pakistani goods from entering India through circumvention,” an official told TOI. This action represents the second substantial non-military measure, following the earlier implementation of visa limitations.

What’s changed?

The Directorate General of Foreign Trade (DGFT) has issued a notification on May 2 announcing a new provision in Foreign Trade Policy (FTP) 2023 that completely halts imports from Pakistan. The provision states “to prohibit direct or indirect import or transit of all goods originating in or exported from Pakistan with immediate effect until further orders”.

The notification emphasises that this restriction has been implemented due to concerns regarding “national security and public policy”. The Indian government’s explicit approval would be necessary for any exemptions to this prohibition.

The newly incorporated provision under “Prohibition on Import from Pakistan” in the FTP explicitly states: “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”.

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Declining Trade

• During April 2024-January 2025, India’s imports from Pakistan amounted to just $0.42 million, primarily consisting of plants, seeds, dates, figs and map extracts. This is a significant decrease from $20.21 million in FY23.
• The trade relationship between the two countries deteriorated after India implemented a 200% duty on Pakistani products in 2019, following the Pulwama terror incident.
• Subsequently, the then Imran Khan administration in Islamabad halted trade relations after India abolished Jammu and Kashmir’s special status in August that year.
• The bilateral trade volume reduced from $2.5 billion in FY19 to approximately $1.2 billion in FY24.
• The substantial tariff increase and MFN status withdrawal post-Pulwama incident has led to a dramatic decline in direct imports from Pakistan, falling from nearly $500 million in 2018-19 to $480,000 in 2023-24.
• Sources informed TOI that products most impacted included horticultural goods, cement, salt and cotton yarn, with trade now routing through other countries.

What will be the direct impact now?

According to think tank GTRI, India’s economy remains largely unaffected by the reduced Pakistani imports.

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