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India’s import ban on Pakistan: In a major economic retaliation following the Pahalgam attack, the Narendra Modi government has implemented sweeping restrictions, prohibiting all imports from Pakistan, whether direct or through intermediary nations, along with postal services and parcel deliveries from the neighbouring country.
The administration also restricted Pakistan-registered vessels from entering Indian ports and banned Indian ships from accessing Pakistani harbours, indicating a tougher position amidst worsening diplomatic relations.
“This comprehensive ban, including indirect imports, will enable custom authorities to prevent Pakistani goods from entering India through circumvention,” an official told TOI. This action represents the second substantial non-military measure, following the earlier implementation of visa limitations.
What’s changed?
The Directorate General of Foreign Trade (DGFT) has issued a notification on May 2 announcing a new provision in Foreign Trade Policy (FTP) 2023 that completely halts imports from Pakistan. The provision states “to prohibit direct or indirect import or transit of all goods originating in or exported from Pakistan with immediate effect until further orders”.
The notification emphasises that this restriction has been implemented due to concerns regarding “national security and public policy”. The Indian government’s explicit approval would be necessary for any exemptions to this prohibition.
The newly incorporated provision under “Prohibition on Import from Pakistan” in the FTP explicitly states: “Direct or indirect import or transit of all goods originating in or exported from Pakistan, whether or not freely importable or otherwise permitted, shall be prohibited with immediate effect, until further orders”.
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Declining Trade
- During April 2024-January 2025, India’s imports from Pakistan amounted to just $0.42 million, primarily consisting of plants, seeds, dates, figs and map extracts. This is a significant decrease from $20.21 million in FY23.
- The trade relationship between the two countries deteriorated after India implemented a 200% duty on Pakistani products in 2019, following the Pulwama terror incident.
- Subsequently, the then Imran Khan administration in Islamabad halted trade relations after India abolished Jammu and Kashmir’s special status in August that year.
- The bilateral trade volume reduced from $2.5 billion in FY19 to approximately $1.2 billion in FY24.
- The substantial tariff increase and MFN status withdrawal post-Pulwama incident has led to a dramatic decline in direct imports from Pakistan, falling from nearly $500 million in 2018-19 to $480,000 in 2023-24.
- Sources informed TOI that products most impacted included horticultural goods, cement, salt and cotton yarn, with trade now routing through other countries.
What will be the direct impact now?
According to think tank GTRI, India’s economy remains largely unaffected by the reduced Pakistani imports.
“However, Pakistan still needs Indian products and may continue accessing them through third countries through recorded and unrecorded routes. India’s already minuscule imports from Pakistan will now drop to zero. No one in India will miss anything except perhaps Himalayan pink salt (sendha Namak), extracted from salt deposits of Pakistan,” said GTRI Founder Ajay Srivastava.
Indian exports to Pakistan, though historically substantial, have recently shown a declining trend.
“The existing state of formal trade between India and Pakistan, minimises the impact of the present trade ban. The main impact will be on the border economy,” Agneshwar Sen, Trade Policy leader at EY India told TOI.
The Real Blow To Pakistan: Rerouting Choked
The actual economic blow to Pakistan may come in the form of ‘indirect’ imports
. While trade volumes between India and Pakistan remain modest in direct exchanges, indirect commerce through intermediary countries are substantially more!
Products including dry fruits and chemicals valued at $500 million are reportedly entering India via intermediary nations. According to an official, a considerable portion of $500 million exports previously sent directly from Pakistan to India are now being diverted through alternative countries.
Even before 2019, significant quantities of merchandise entered India via third nations. Subsequently, these movements intensified, notably through the UAE and Sri Lanka, potentially exploiting trade agreements, whilst Indian officials demonstrated inadequate oversight.
Also Read | With Indus Waters Treaty suspended, Modi government looks to expedite five major J&K hydroelectric power projects
Pakistani commodities, including fruits, dry dates, leather and textiles undergo repackaging in the UAE, whilst chemicals and speciality items transit through Singapore. Indonesian routes facilitate the movement of cement, soda ash and textile raw materials.
Additionally, dry fruits, salt and leather products are processed and distributed via Sri Lanka, utilising SAFTA advantages.
Whilst strict enforcement of restrictions could curtail these channels, the government’s strategy remains uncertain.
Given the likelihood that some of these $500 million exports are now reaching India through alternative routes, a government official has emphasised the necessity to implement a comprehensive prohibition on Pakistani exports to India, whether direct or indirect.
Additionally, there is a need to monitor and identify goods that might be entering through misrepresentation of country-of-origin.
“This comprehensive ban imposed by India including a ban on indirect exports would enable the customs authorities to prevent Pakistan exports from entering India through circumvention,” the official added.
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