Thu May 01 14:27:53 UTC 2025: ## India-Pakistan Trade: Official Freeze, Unofficial Flow Continues Despite Latest Hostilities

**ISLAMABAD/NEW DELHI** – Following a recent terrorist attack in Kashmir, India and Pakistan have escalated their diplomatic conflict, suspending all bilateral trade, including routes through third countries, and closing the Wagah-Attari border crossing. While official trade figures are minimal, experts estimate billions of dollars in informal trade continues through countries like the UAE, Sri Lanka, and Singapore.

The official trade relationship, while initially promising after India granted Pakistan “most favoured nation” status in 1996, has been fraught with tension. The revocation of this status in 2019, following a Pulwama attack, significantly reduced official trade. Current official figures show India’s exports to Pakistan at a mere $447.7 million from April 2024 to January 2025, a fraction of the estimated $10 billion in unofficial trade, according to the Global Trade Research Initiative (GTRI).

This informal trade operates by rerouting goods through transit hubs, changing labels and documentation to disguise their Indian origin. This practice, while not always illegal, circumvents trade restrictions and allows for higher profit margins. Experts note this is a common practice globally, used by other nations to circumvent sanctions or tariffs.

The impact of the latest trade suspension is expected to be felt acutely in Pakistan’s pharmaceutical sector, heavily reliant on Indian imports. The closure of the Wagah-Attari Integrated Check Post will also increase trade costs and affect imports from Afghanistan.

While both governments are aware of the informal trade and are reportedly trying to curb it, preventing it entirely will be challenging. The informal trade network is decentralized, operated by private entities, making it difficult to control. Experts suggest that the enduring cultural ties and significant demand for Indian products in Pakistan make complete eradication highly unlikely. Ultimately, the demand, and the higher profit margins for traders, suggest that the informal trade will persist, regardless of official sanctions. The situation mirrors the cyclical nature of Indo-Pakistani trade relations, which have repeatedly been interrupted by conflict and yet have found ways to continue, albeit unofficially, in various forms throughout history.

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