India-Pakistan Trade Freeze: Borders Closed but Demand Persists

India has halted trade with Pakistan following a terror attack, intensifying tensions. Formal trade is affected, but demand persists as Pakistan seeks Indian goods through third countries. GTRI reveals informal routes remain, causing increased costs and complex supply chains.

In the wake of a recent terrorist attack in Pahalgam, India has officially ceased all trade relations with Pakistan, heightening the long-standing tensions between the two nations. Analysts from the Global Trade Research Initiative (GTRI) assert that while formal trade ceases, the underlying demand persists unaffected.

According to GTRI, Pakistan is expected to continue sourcing Indian goods through indirect means, albeit at a higher cost and complexity. This comes as formal trade, notably strained since the Pulwama attack in 2019, has been further complicated by India's revocation of Pakistan's Most Favoured Nation status and imposition of steep import duties.

Despite the freeze, official data indicates India exported goods worth USD 447.7 million to Pakistan within the current fiscal year. Pakistan continues to rely on re-export networks via nations like the UAE and Singapore, importing Indian products such as pharmaceuticals and auto parts, while Pakistan exports niche items through similar routes.