Following the deadly Pahalgam terror attack on April 22, 2025, India has imposed its most stringent economic measures against Pakistan to date, including a total ban on all imports and maritime access. 

This dramatic escalation in diplomatic tensions represents a significant shift in India's approach to cross-border terrorism, with far-reaching economic and humanitarian implications for Pakistan. The ban has triggered concerns about essential supplies in Pakistan, particularly pharmaceuticals, while highlighting the complex geopolitical relationship between the two nuclear-armed neighbours.

Scale and Scope of The Trade Restrictions

The trade restrictions imposed by India are remarkably comprehensive in scope. The ban prohibits not only direct imports from Pakistan but also indirect imports through third countries and the transit of all goods originating in or exported from Pakistan, regardless of whether those goods were previously permitted. This total prohibition represents a significant escalation from the 200% import duty imposed after the Pulwama attack in 2019, which had already substantially reduced direct trade between the two countries. The new measures ensure that Pakistani goods cannot enter India through any alternate routes or third-party nations that previously facilitated trade despite existing restrictions.

Beyond Import Restrictions: Additional Retaliatory Measures

India's punitive response extends well beyond the import ban. The government has implemented a series of complementary restrictions designed to further isolate Pakistan economically and diplomatically. The Department of Posts has suspended the exchange of all categories of mail and parcels with Pakistan via both air and land routes. A government official linked this suspension to "cross-border linkages" identified in the Pahalgam strike. Additionally, the Directorate General of Shipping has issued a notification prohibiting any Pakistan-flagged vessels from docking at Indian ports, and similarly barring Indian ships from visiting Pakistani ports. These shipping restrictions were explicitly implemented to "ensure safety of Indian assets, cargo and connected infrastructure, in public interest and for the interest of Indian shipping".

Economic Impact Assessment

While the symbolic significance of these trade restrictions is substantial, their practical economic impact on India appears limited. Before these new restrictions, bilateral trade was already minimal, with India's exports to Pakistan during April-January 2024-25 standing at $447.65 million, while imports were a meager $0.42 million. Indian imports from Pakistan had primarily consisted of specialty items like figs ($78,000), basil and rosemary herbs ($18,856), certain chemicals, and Himalayan pink salt. This represents a dramatic decline from pre-2019 levels when India's exports to Pakistan stood at $2.06 billion and imports from Pakistan were $494.8 million.

Pakistan's Vulnerability And Response

Pakistan appears significantly more vulnerable to these trade disruptions than India. Even before India's announcements, Pakistan had suspended all imports from India in late April 2025 following escalating tensions related to the Indus Water Treaty. In response to India's comprehensive ban, Pakistan has implemented several retaliatory measures, including closing its airspace to Indian flights and expelling Indian diplomats. Most notably, Pakistan has conducted a training launch of a surface-to-surface ballistic missile, which Pakistani military sources described as having a range of 450 kilometers. This military demonstration, coupled with Pakistan's claim of possessing "credible intelligence" that India may be contemplating military action, suggests the potential for further escalation beyond economic measures.

Pharmaceutical Supply Crisis

The most immediate humanitarian concern stemming from these trade restrictions involves Pakistan's pharmaceutical sector. According to reports, Pakistan relies on India for 30-40% of its pharmaceutical raw materials, including Active Pharmaceutical Ingredients (APIs) and various advanced therapeutic products. The Drug Regulatory Authority of Pakistan (DRAP) has initiated "emergency preparedness" measures to secure alternative pharmaceutical supplies. While DRAP officials noted that contingency planning had begun following the 2019 crisis, industry insiders and health experts have warned of significant challenges if immediate action is not taken to manage the supply disruption. Pakistan is reportedly seeking alternative sources from China, Russia, and European countries to maintain supplies of essential medicines, including anti-rabies vaccines, anti-snake venom, cancer therapies, and other critical biological products.

Historical Context And Indirect Trade Routes

This is not the first time trade has been restricted between the two nations, but the current measures appear to be the most comprehensive to date. Previous restrictions, particularly those implemented after the Pulwama attack in 2019, had already severely limited direct trade. However, despite formal restrictions, informal trade has continued through third countries. According to the Global Trade Research Initiative (GTRI), approximately $10 billion worth of Indian goods reach Pakistan annually through indirect channels. These goods are typically routed through ports in Dubai, Singapore, and Colombo, where they are relabeled to show different countries of origin before being shipped to Pakistan. The current restrictions specifically target these indirect routes, potentially disrupting this substantial shadow trade network.

Comparison With Previous Economic Measures

The current set of restrictions represents a significant escalation compared to previous economic measures imposed by India. Following the Pulwama terror attack in 2019, India imposed a 200% customs duty on Pakistani imports, which effectively halted most direct trade. However, those measures did not explicitly target indirect imports or postal and shipping links. The comprehensive nature of the current restrictions, which target all possible trade routes and communication channels, represents India's most extensive economic action against Pakistan to date. Trade expert Ajay Srivastava noted that while the import ban is "mostly symbolic" given India's minimal dependence on Pakistani goods, the comprehensive nature of the restrictions could significantly impact Pakistan's economy, which still requires access to Indian products.

Regional And International Implications

The escalating tensions between these two nuclear-armed neighbours have significant regional implications. Both nations have reportedly engaged in cross-border gunfire for nine consecutive nights along the heavily fortified Line of Control, which serves as the de facto border. Pakistan has warned that any efforts to obstruct the flow of river water, as stipulated in the long-standing Indus Water Treaty, would be viewed as an act of war. This statement highlights the potential for the current trade dispute to expand into broader conflicts over shared resources. The international community will likely monitor these developments closely, given the historical volatility of India-Pakistan relations and their nuclear capabilities.

Assessment of India's Approach

The comprehensive trade ban and additional restrictions imposed by India represent its most stringent economic response to cross-border terrorism to date. While the direct economic impact on India appears minimal due to already limited bilateral trade, the symbolic significance is substantial. For Pakistan, the implications are more severe, particularly regarding pharmaceutical supplies and the potential disruption of the $10 billion informal trade network.

The measures reflect India's increasingly assertive stance on national security issues and willingness to use economic leverage as a retaliatory tool. Whether these restrictions will achieve their intended security objectives or lead to further regional destabilization remains to be seen. What is clear is that India-Pakistan relations have reached another significant low point, with economic ties now almost completely severed and humanitarian concerns emerging as a potential flashpoint for international attention.

Agencies