In the days after gunmen killed at least 26 people in the picturesque tourist resort of Pahalgam in India-administered Kashmir last week, India and Pakistan announced a string of diplomatic moves against each other, including shutting down cross-border trade and suspending visas.New Delhi accused Islamabad of involvement in the April 22 attack, suspended India’s participation in an Indus River water-sharing agreement that ensures Pakistan’s water supply and trimmed down diplomatic missions.
Islamabad has denied India’s accusations, called for a neutral investigation into the attack and announced it would suspend all trade with India, including through third countries, among other retaliatory measures. India-Pakistan trade relations have been frozen since 2019.
Both countries have also closed the Wagah-Attari crossing, the main land border between India and Pakistan.
But while official figures show minimal trade between the neighbouring countries, experts said billions of dollars of hidden, backdoor trading does continue. Advertisement
So what is the real scale of trade between these archrivals? And will the suspension of trade and closure of the land border truly impact trading still taking place between the two countries?
Have India and Pakistan traded freely in the past?
Yes. Trade between India and Pakistan began after the two countries were created out of British India in 1947 through partition.
Trading volumes grew when New Delhi bestowed Islamabad with the “most favoured nation” (MFN) status in 1996 – a World Trade Organization rule that ensures a country treats all its trading partners equally with respect to tariffs and trade concessions.
But amid broader bilateral tensions between the nuclear armed neighbours, trade never fully took off. At least officially.
In the financial year 2017-2018, total trade between India and Pakistan stood at $2.41bn, compared with $2.27bn in 2016-2017. India exported goods worth $1 …