New Delhi, May 3: India has imposed an immediate ban on all direct and indirect imports from Pakistan, marking a significant shift in trade relations between the two nations. The decision, driven by national security and public policy concerns, follows the April 22 terrorist attack in Pahalgam, which claimed 26 lives. India holds Pakistan responsible for the attack, a claim Pakistan denies. This move could severely impact Pakistan’s economy, but what exactly is indirect trade, and how does it function?

Indirect trade refers to commerce where goods are exchanged between two countries through a third nation, bypassing direct transactions. For instance, Pakistan exports goods like rock salt, dry fruits, textiles, steel, and footwear to India via intermediaries in Dubai, Singapore, or Sri Lanka. These goods are often relabeled—marked as “Made in UAE,” for example—before entering India. According to the Global Trade Research Initiative (GTRI), this indirect trade channels approximately $10 billion worth of Indian goods to Pakistan annually. However, the process increases costs by 15-25% due to shipping, customs duties, and middlemen fees, ultimately raising prices for consumers.

On May 2, India’s Ministry of Commerce issued a notification stating, “All goods originating in or exported from Pakistan, directly or indirectly, are prohibited from import or transit until further notice.” This ban, a response to heightened tensions post-Pahalgam, is expected to hit Pakistan’s pharmaceutical, chemical, and food sectors, which rely heavily on Indian raw materials. GTRI founder Ajay Srivastava notes, “While formal trade will cease, demand persists. Pakistan may attempt to source Indian goods through third countries at higher costs.” The decision disrupts a key trade route for Pakistan, which has long depended on India as a major market.

Pakistan has condemned the ban, calling it unilateral and detrimental to already strained bilateral ties. Analysts predict a greater economic toll on Pakistan, particularly its small businesses and exporters. As tensions escalate, the future of India-Pakistan trade hinges on diplomatic efforts and economic strategies, with both nations navigating a complex path ahead.