India tightens trade noose: Extends ban on Pakistan-origin goods via third countries after Pahalgam attack

In a decisive crackdown following the recent Pahalgam terror attack, India has extended its import ban on Pakistan-origin goods to include consignments transiting through third countries, effectively sealing off one of the last operational trade routes between the two neighbors.

The Directorate of Revenue Intelligence (DRI), acting under the Finance Ministry, has begun halting shipments suspected of Pakistani origin — even those disguised under third-country exports, such as those routed through the United Arab Emirates (UAE), a senior government official was quoted as saying by The Indian Express.

"Customs are acting promptly whenever there is suspicion. For instance, a Pakistani-flagged vessel was denied docking access," the official revealed. "Though traders are citing losses, the strict notification was essential to tighten scrutiny."

The Ministry of Commerce and Industry’s May 2 notification explicitly bans all imports and transits of Pakistani goods, regardless of intermediary countries. Traditionally, goods already at sea are exempted, but this time, the official clarified, "even in-transit consignments fall under the ban’s ambit."

Officials say determining the true origin of goods shipped via third countries is often complicated by misleading rules-of-origin certificates. However, Customs officers are now deploying additional verification methods, such as label analysis, to trace products back to Pakistan.

Pakistani-origin dates and dry fruits, allegedly entering India under UAE exports, have come under special scrutiny. “We've raised the issue with UAE authorities. While they claim domestic production of these goods, the enforcement of strict rules has proven to be a strong deterrent," the official added.

The crackdown follows India's earlier move to shut down the Integrated Check Post (ICP) at Attari on April 24, just days before the formal notification. That closure brought an abrupt halt to the remaining direct trade — worth ₹3,886 crore — between the two countries.

Data from the Global Trade Research Initiative (GTRI) estimates that up to $10 billion worth of Indian goods reach Pakistan annually via trans-shipment hubs, despite the fraying of direct economic ties.

Bilateral trade between India and Pakistan has been in freefall since the 2019 Pulwama attack. Trade volumes plunged from ₹4,370 crore in 2018–19 to ₹2,257 crore in 2022–23, before partially rebounding in 2023–24. However, total cargo movements also dropped drastically — from over 49,000 consignments in 2018–19 to just under 4,000 by 2022–23.

In real terms, India–Pakistan trade now hovers around $2 billion annually, a mere shadow of the $37 billion potential projected by the World Bank. For context, India’s total global goods trade stands at $430 billion, while Pakistan’s is roughly $100 billion.

This sharp reversal marks a dramatic shift from the late 1990s, when India extended Most Favoured Nation (MFN) status to Pakistan in 1996 to boost bilateral trade. Pakistan, however, never reciprocated. Following the Pulwama terror attack, India revoked Pakistan’s MFN status in 2019, setting the stage for the current standoff.

Now, with all direct and indirect trade under unprecedented scrutiny, India is signaling a new era of zero tolerance toward economic links seen as vulnerable to geopolitical and security threats.