India bans all imports from Pakistan over security, public policy concerns

This is the latest in the series of measures taken by India against Pakistan following the Pahalgam terror attack

India has banned direct, indirect or in-transit of inbound shipment of all goods from Pakistan in the interest of “national security and public policy”,  amid heightened tensions between the two neighbouring countries after terrorists opened fire on a group of tourists in Pahalgam, killing at least 26 people.

 

“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,” according to a commerce department notification issued on May 2. 

 

“This restriction is imposed in the interest of national security and public policy. Any exception to this prohibition shall require prior approval of the government of India,” the notification said. The foreign trade policy, 2023 has been amended accordingly.

 

Apart from banning imports from Pakistan, days after the attack, India suspended the Indus Water Treaty – a key river water sharing pact. In retaliation, Pakistan suspended the Simla agreement. The neighbouring countries have also restricted their airspace for each others’ airlines. 

India-Pakistan Trade

Over the last decade, the size of trade between India and Pakistan has been small. The total merchandise trade peaked at $2.6 billion in FY16.

 

However, amid tensions between India and Pakistan in the last few years, India’s exports to the neighbouring country witnessed a sharp contraction since FY20. This came against the backdrop of Pakistan suspending bilateral trade with India in August, 2019, in response to India’s decision to revoke the special status granted to Jammu and Kashmir under Article 370.

 

As far as imports are concerned, the contraction has been sharper, especially post the Pulwama attack in February 2019. India also withdrew the most favoured nation status to Pakistan and imposed a customs duty of 200 per cent on all imports from the neighbouring country. Key imports include copper, nuts, cotton, plastics, wool. During the first 10 months of FY25, imports from Pakistan were negligible at 0.4 million. 

 

Ajay Srivastava, a former trade ministry official and founder of Delhi-based think-tank Global Trade Research Initiative (GTRI) said that India doesn’t depend on Pakistani goods, so the economic impact is minimal. However, Pakistan still needs Indian products and may continue accessing them through third countries through recorded and unrecorded routes, he said.

 

During the first 10 months of the financial year, total merchandise trade between both countries stood at $448 million. Exports to Pakistan stood at $447.65 million, while imports were $0.42 million, according to official data.