India-Pakistan Trade Remains Active Despite Rising Tensions
Even with heightened political strain and a temporary border closure following the tragic Pahalgam terror attack in April, trade between India and Pakistan persisted during May 2025, largely routed through indirect channels.
Impact of the Pahalgam Attack and Border Closure
The brutal attack on April 22, which claimed 26 lives, prompted swift measures by India, including shutting down operations at the Attari land transit post—one of the few land routes facilitating limited cross-border trade. In reaction, Pakistan announced a full stop to trade with India, including any transactions routed via third countries.
Trade Flow Analysis: May 2025 Snapshot
Despite the tense atmosphere and even a brief four-day military conflict early in May, official data reveals that imports from India to Pakistan actually increased. During the first 11 months of fiscal year 2025 (FY25), Pakistan imported goods worth $211.5 million, exceeding the total imports in FY24 and FY23, which stood at $207 million and $190 million respectively.
Specifically, in May alone, Pakistan's imports from India reached approximately $15 million. Although this is slightly less than the $17 million imported in May 2024, it underscores continued commerce even amid conflict.
Highly One-Sided Trade and Minimal Pakistani Exports
Exports from Pakistan to India remain negligible. Pakistani exports in May 2025 amounted to a mere $1,000, contributing to a total of just $0.5 million for the July-May period of FY25. This continues a trend of lopsided trade relations where exports have been minimal, with only $3.44 million in FY24 and $0.33 million in FY23.
Unofficial Trade Channels: A Hidden Economic Lifeline?
While official statistics indicate limited trade, some analysts suggest the real volume might be substantially higher, primarily through unofficial routes. It is estimated that India’s unrecorded exports to Pakistan could reach $10 billion annually, passing through hubs like Dubai, Colombo, and Singapore.
Experts highlight Pakistan’s high production costs and industrial reliance on imported inputs as drivers maintaining this clandestine flow. One exporter noted, "Smuggling cannot be ignored, given that the cost of production in Pakistan is the highest in the region, allowing goods from India, China, and Bangladesh to fill the gap.”
Looking Ahead
The ongoing fragile trade relationship between these neighbors remains an intricate dance of official restrictions and unofficial trade, shaped by political conflicts and economic necessities. Despite setbacks and border closures, cross-border commerce continues, reflecting intertwined economic realities amid profound diplomatic challenges.
