India-Pakistan Trade Mystery: $10B in Goods Flow Despite Ban, Via Dubai, Singapore!

Following the terror attack in Pahalgam that killed Indian tourists, the Indian government on Friday ended all remaining formal trade ties with Pakistan. This has further deepened geopolitical tensions between the two countries. However, according to a report by the Global Trade Research Initiative (GTRI), even though official trade has stopped, Pakistan's demand for Indian goods has not ended. Pakistan will now buy these goods at higher prices through third countries.

Demand for Indian goods continues at higher prices
"In short, border closures halt formal trade but do not eliminate demand. Pakistan will still supply Indian goods, but it will buy them at higher prices and through third countries," GTRI said in its report.

Trade relations between India and Pakistan have been steadily declining since the 2019 Pulwama terrorist attack, when India revoked Most Favoured Nation (MFN) status to Pakistan and imposed 200 per cent duties on goods imported from Pakistan. Pakistan subsequently halted all bilateral trade in August 2019. Trade has since been limited, mainly for humanitarian purposes, such as the import of medicines.

India's exports to Pakistan
According to official data, from April 2024 to January 2025, India exported a total of US$447.7 million worth of goods to Pakistan, which majorly included the following goods:

Pharmaceuticals: USD 110.1 million
Active pharmaceutical ingredients (APIs): USD 129.6 million
Chinese: USD 85.2 million
Auto parts: USD 12.8 million
Manure: USD 6 million
At the same time, India's imports from Pakistan were very low, consisting of agricultural products such as figs, basil and rosemary worth only USD 0.42 million.

Informal trade continues to generate $10 billion worth of trade
GTRI estimates that USD 10 billion worth of trade is still happening through informal re-export routes, mainly involving countries such as the UAE and Singapore. Major goods exported by India to Pakistan include pharmaceuticals, chemicals, tea and coffee, cotton and dyes and auto parts. Goods coming from Pakistan to India include Himalayan pink salt, dry fruits such as dates, almonds and apricots.

Pressure on supply in Pakistan due to trade closure
A trade shutdown between India and Pakistan could put pressure on Pakistan's supply chain and result in a rise in the prices of goods in Pakistan. Pakistan is already facing economic pressure, as noted by institutions such as the IMF, World Bank, and Fitch Ratings.