Why India Bans All Imports from Pakistan?

Why in News?

In a decisive move following the April 22 Pahalgam terror attack, the Government of India has banned all imports and transit of goods originating in or exported from Pakistan, even through third countries. This sharp escalation comes amid worsening Indo-Pak diplomatic ties, heightened border security, and a push to choke financial support for cross-border terrorism.

Immediate Trade Ban Announced

On May 2, 2025, the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, issued an official notification prohibiting the direct and indirect import or transit of all Pakistani goods. The DGFT clarified that this prohibition includes goods entering India via transhipment hubs such as the UAE, Singapore, and Colombo, which were being used to bypass direct trade restrictions.

This measure is justified as being in the interest of national security and public policy, and any exception will require prior government approval.

Backdoor Trade Channels Plugged

Even after the closure of the Attari Integrated Check Post (ICP) last month, Pakistani goods continued to reach Indian markets through third-country transhipments. A key concern was the import of Pakistani dates, dry fruits, and other commodities via the UAE, which has a free trade agreement (FTA) with India.

According to the Global Trade Research Initiative (GTRI), approximately $10 billion worth of Indian goods are routed to Pakistan through these alternate trade corridors. The new directive shuts these loopholes entirely.

Trade Figures and Economic Impact

The economic relationship between India and Pakistan has declined steadily since the Pulwama terror attack in 2019, with bilateral trade falling from Rs 4,370.78 crore in 2018–19 to Rs 2,257.55 crore in 2022–23. However, it showed a brief revival, rising to Rs 3,886.53 crore in 2023–24, the highest in five years.

Key exports from India to Pakistan have included:

• Soya bean
• Poultry feed
• Red chillies
• Vegetables
• Plastic granules and yarn

Imports from Pakistan have typically included:

• Dry fruits and dates
• Cement and gypsum
• Glass, herbs, rock salt

Trade officer and GTRI head Ajay Srivastava noted, “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, via recorded and unrecorded routes.”

Long-Term Trade Potential Lost

Despite the ongoing tensions, the World Bank had estimated a trade potential of $37 billion between India and Pakistan. However, in reality, annual trade has hovered around $2 billion, a mere fraction of this projection.

India’s total goods trade is currently valued at $430 billion, while Pakistan’s is approximately $100 billion. The drastic fall in bilateral cargo movement—from 49,102 consignments in 2018–19 to just 3,827 in 2022–23—reflects the depth of disruption.

Policy Measures Beyond Trade: MDB Outreach

In an expanded effort to curb funding sources for terrorism, India has declared its intention to engage multilateral development banks (MDBs)—including the World Bank, International Monetary Fund (IMF), and Asian Development Bank (ADB)—to push back against loans and aid to Pakistan.

This diplomatic pressure is seen as part of a broader strategy to cut off financial lifelines that may indirectly support terrorism. According to a senior government official, these moves are aligned with India’s national security doctrine post-Pahalgam.

Cascading Measures Since the Attack

This ban on imports is just one in a series of measures India has taken in response to the Pahalgam terror attack, which left 26 civilians dead. The attack has led to:

• Suspension of the Indus Waters Treaty, a long-standing bilateral agreement on shared rivers
• Closure of the Attari-Wagah border, halting direct trade
• Downgrading of diplomatic ties with Pakistan
• Security upgrades along borders and at sensitive installations