India weighs complete trade halt with Pakistan as tensions escalate

New Delhi: India is exploring the possibility of completely halting trade with Pakistan following the terror attacks in Pahalgam, which would mark a significant escalation in the ongoing tensions between the two nations. 

Such a suspension would severely disrupt Pakistan’s economy, which depends heavily on imports of vital goods such as fruits, vegetables, pharmaceuticals, organic chemicals and sugar from India, two people involved in the process told Mint on Thursday.

As the economic fallout unfolds, India is also exploring alternative channels and seeking third-country assistance to further curb trade operations and intensify the impact, they said.

Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), said the halt would not only affect Pakistan’s trade but could also reshape regional economic dynamics.

“We have minuscule trade with Pakistan, which is constantly declining. During April-January 2025, it was less than $500 million, compared to overall trade of over $800 billion in the same period, making it just 0.06% of India’s international trade. This trade will now come to a complete standstill, affecting the supply of some key products to Pakistan and hitting their economy even further,” said Sahai.

“Though we have very little trade with Pakistan as restrictions are already in place, the trade of some essential items such as drugs and pharmaceuticals, fruits and vegetables, sugar, etc., is still happening through different routes. It is being considered to stop it further to make them realise that what they are doing (sponsoring terrorism) is against the interests of peace and stability,” said the first person cited above.

According to a Moneycontrol report, India’s exports to Pakistan surged by 127% to $1.21 billion in 2024 from $530.91 million in 2023. This marks a more than 300% increase from 2020. The last time exports were higher was in 2018, when they totaled $2.35 billion, the report said, citing data from UNCTAD and UN COMTRADE.

Pakistan’s reaction

Meanwhile, Pakistan on Thursday suspended all bilateral agreements and trade activities, while also closing its airspace to Indian aircraft in response to India’s decision to suspend the Indus Water Treaty and downgrade diplomatic ties following the Pahalgam terror attack. India imports apparel, salt, sulphur, and cement from Pakistan.

Pakistan imports Indian goods via the UAE, and New Delhi could leverage its strong trade ties with the that country to halt the facilitation of trade for Pakistan, said the second person cited above.

After the 2019 Pulwama attack, India revoked Pakistan’s most favoured nation (MFN) status and imposed a 200% duty on its imports, slashing Pakistani exports to India from $547.47 million in 2019 to just $0.48 million in 2024.

Though Pakistan suspended trade with India after Article 370 was revoked in 2019, it later resumed select imports to manage domestic inflation.

Pharma exports

India’s pharmaceutical exports to Pakistan stood at about $208 million in FY25 (as of March). These include items such as APIs, drug formulations, biologicals, bulk drugs and intermediates, with vaccines also comprising a large chunk of exports. Pharma industry experts said tensions in the wake of the Pahalgam terror attack would not affect the pharma trade as it was already very low. Pakistan ranks 38th on the list of the countries to which India exports pharmaceuticals.

But the development is significant given the crisis in Pakistan’s pharmaceutical sector, which is highly dependent on inputs from India. Last year, India’s pharmaceuticals exports to Pakistan were about $174 million.

“Pharmaceutical items are essential goods, and even in the worst-case scenario, we do not impose an embargo on such products. This year, pharmaceutical exports to Pakistan amounted to about $208 million till March (FY25). It is a positive trend compared to the previous year,” said a senior official from the Pharmaceutical Export Promotion Council, who did not wish to be named.

Meanwhile, a spokesperson for Lilavati Hospital in Mumbai said the hospital was offering free treatment to those injured in the Pahalgam terror attack, and to those who had lost a family member. It has set up a dedicated helpline at +91 84228 91032 to ensure timely medical assistance for those affected.

Exit deadline leaves patients in the lurch

Meanwhile, Pakistani nationals undergoing medical treatment in India have been in a quandary since New Delhi said all Pakistani nationals currently in India under an SVES visa had 48 hours to leave the country.

Two minor patients – a 10-year-old boy and a 7-year-old girl – from Pakistan are undergoing heart surgery at Asian Hospital, Faridabad. According to the doctors, both are being treated for a hole in the heart. They have been advised to the leave India by 1 May.

Dr Anupam Pandey, director of Asian Hospital, Faridabad, said, “We have been informed about the recent directives regarding Pakistani patients. Currently, we have few critically ill children undergoing cardiac surgery. We have proactively approached the local Foreigners Regional Registration Office (FRRO) and advised the parents to do the same, submitting the necessary documents.”

“As per FRRO’s advice, the 48-hour timeline doesn’t apply to these patients, who have until 1 May to complete their treatment. If needed, they’ll return to Pakistan via Dubai to accommodate any potential delays in approval,” he added.

India is a medical tourism hub owing to its affordable and quality healthcare. Every year, thousands of foreign patients come to the country for low-cost medical services.

Dr Aashish Chaudhry, managing director, Aakash Healthcare, said, “There are already stringent restrictions on Pakistani patients travelling to India for medical treatment, with exceptions for critical cases such as children with life-threatening liver diseases or cancers. The recent developments will likely exacerbate the situation, potentially denying visas even to these needy patients.”