India slaps total ban on Pakistani imports amid escalating tensions after Pahalgam terror attack

In a major step to further stretch diplomatic relations with Pakistan, India has banned the import of all goods coming from or passing through Pakistan. The order, effective immediately, follows a gruesome terror attack at Pahalgam in the Kashmir state of India on April 22. The Directorate General of Foreign Trade (DGFT) released a May 2 notice, inserting a new paragraph to the Foreign Trade Policy 2023, headed "Prohibition on Import from Pakistan."

The scope of the ban

The ban will apply to all goods, whether or not authorized to import, and will hold good until further orders. Any relaxation of this prohibition will need prior sanction from the Government of India. The step is likely to hit Pakistan's struggling export industry, which depends on cross-border trade in products like cement, apparel, and fruit.

Impact on Pakistan's economy

The ban on trade is likely to worsen economic pressures in Pakistan, which is already facing numerous economic issues. The action could also hurt unofficial trade channels, which have been a major avenue for trade between the two countries. India's bilateral trade with Pakistan is negligible, amounting to only 0.06% of India's total trade, according to experts. But the ban is likely to affect Pakistan's economy more.

Historical context

India-Pakistan trade has been declining since the 2019 Pulwama terrorist attack. India then raised the import duty on all Pakistani goods to 200% and revoked Pakistan's "most favoured nation" trading privileges. Trade between the two countries has fallen sharply since then, with India's imports from Pakistan declining from $2.86 million in the last year to $420,000 in April 2024 to January 2025.

Indirect trade through Dubai

As strained as trade between the two nations has become, indirect trade through Dubai remains uninterrupted. Trade between India and Pakistan has an important hub in Dubai, and key exports from it include textiles, gold jewelry, machinery, and appliances. 

Pakistani imports is a major step up in the diplomatic dispute

The ban on Pakistani imports is a major step up in the diplomatic dispute between Pakistan and India. The action is likely to have profound effects on the economy and trade relations of Pakistan. As the situation continues to evolve, it is still unclear how the two countries will manage their complicated and oftentimes contentious relationship.