Political stranglehold: India-Pakistan trade stagnates amid persistent tensions

Despite their shared border, trade between India and Pakistan remains negligible as political tensions continue to strain economic ties.

Following a terrorist attack in Pulwama, in 2019, Pakistan severed trade relations, accusing India of supporting and funding terrorism within its borders. India, in turn, has long blamed Pakistan for fostering unrest, particularly in Indian-administered Kashmir, leading to reciprocal trade restrictions.

Recent trade data highlights the subdued economic relationship. In the fiscal year 2023 (FY23), Pakistan’s exports to India totaled just $329,000, while in FY24, exports increased to $3.4 million. Imports from India stood at $190 million in FY23 and rose slightly to $207 million in FY24.

Despite ongoing diplomatic tensions and periodic retaliatory trade restrictions, economic analysts say the impact on both countries remains minimal. Trade between India and Pakistan has historically been limited due to political discord and regulatory barriers.

A look at the last period of relatively normalized trade, from 2014 to 2018, underscores this trend. In 2018, India imported $549.3 million worth of goods from Pakistan, while its exports to Pakistan stood at $2.35 billion—figures that remain far below potential given the proximity and size of both economies.

With no signs of political reconciliation, experts predict that trade between the two nations will continue to be constrained, with little economic fallout for either side.