Indian goods worth over $10 billion are reaching Pakistan every year indirectly through ports such as Dubai, Singapore, and Colombo, bypassing trade restrictions, according to estimates of economic think tank Global Trade Research Initiative (GTRI).
Explaining the system, GTRI said that Indian firms send goods to these ports, where an independent company offloads the consignment and keeps the products in bonded warehouses, where goods can be stored without paying duties while in transit.
“In the bonded warehouse, the labels and documents are modified to show a different country of origin. For example, Indian-made goods may be relabelled as ‘Made in UAE’. After this change, they are shipped to countries like Pakistan, where direct trade with India is not allowed,” GTRI Founder Ajay Srivastava said.
This method, he said, helps firms to bypass India-Pakistan trade restrictions; sell goods at higher prices, using the third country route; and avoid scrutiny, since the trade appears to come from other countries.
The higher price covers storage, paperwork, and access to a closed market.
“While this transshipment model isn’t always illegal, it sits in a grey zone. It shows how businesses find creative ways to keep trade going — often faster than governments can react. GTRI estimates Indian goods worth over $10 billion reach Pakistan via this route annually,” Srivastava said.
The trade between India and Pakistan may come to a complete halt after New Delhi’s move to close the Attari Integrated Check Post in the wake of the Pahalgam terror attack, which was followed by Islamabad’s decision to suspend all trade ties, exporters have said.
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The two-way trade between the countries was already miniscule following steps taken by both the sides after the Pulwama terror attack in 2019.
India’s exports to Pakistan in April-January 2024-25 stood at $447.65 million, while imports were meagre $0.42 million. Exports and imports in 2023-24 were $1.18 billion and $2.88 million, respectively.
In 2022-23 and 2021-22, India exported goods worth $627.1 million and $513.82 million, and imported products worth $20.11 million and $2.54 million, respectively.
In April-January 2024-25, exports of organic chemicals and pharmaceutical products accounted for about 60 per cent of the country’s total outbound shipments to Pakistan. It was $129.55 million and $110.06 million, respectively.
The other items include sugar and sugar confectionary ($85.16 million), certain vegetables ($3.77 million), coffee, tea and spices ($1.66 million), cereals ($1.39 million), petroleum products ($11.63 million), fertiliser ($6 million), plastics ($4.16 million), rubber ($1.88 million), and auto components ($28.57 million).
The main imports include fruits and nuts ($0.08 million), certain oil seeds and medicinal plants ($0.26 million), organic chemicals, and project goods.
The India-Pakistan trade relations soured after the Pulwama terror attack.
Following that, India raised the import duty to 200% on all goods imported from the neighbouring country, including fresh fruits, cement, petroleum products and mineral ore.
In 2017-18, Pakistan’s exports to India was $488.5 million. India also withdrew MFN (most favoured nation) status to Pakistan.
That time the two main items imported from Pakistan were fruits and cement. Slapping an import duty of 200% effectively means almost banning imports.
The country invoked a security exception clause of the World Trade Organization (WTO) to withdraw the MFN status. Both countries are members of this organisation. India had granted the MFN status to Pakistan way back in 1996, but the neighbouring country had not reciprocated.
Under the MFN pact, a WTO member country is obliged to treat the other trading nation in a non-discriminatory manner, especially with regard to customs duty and other levies.
In 2012, Pakistan had committed to giving the MFN status to India but retracted later due to domestic opposition. Instead of MFN, Pakistan said it was working on granting Non-Discriminatory Market Access (NDMA) status to India but that also was not announced.
Pakistan too in August 2019 suspended trade ties in almost all sectors (barring few like pharma) with New Delhi following imposition of the heavy import duty by India on imports from Pakistan.
Both countries have a long history of strained relations, primarily due to the Kashmir issue as well as the cross-border terrorism emanating from Pakistan.
Total India-Pakistan trade in 2017-18 was $2.41 billion as against $2.27 billion in 2016-17. India imported goods worth $488.5 million in 2017-18 and exported goods worth $1.92 billion.
Published – April 27, 2025 12:32 pm IST
