Indian goods worth over $10 bn find their way to Pakistan, sidestepping trade barriers: Report

By Admin

28 Apr, 2025

Trade between India and Pakistan has been heavily restricted for years, especially after the Pulwama terror attack in 2019. However, a new report by the economic think tank Global Trade Research Initiative (GTRI) reveals a surprising development — despite official trade barriers, Indian goods worth over $10 billion are reaching Pakistan each year through indirect routes.

Goods Flow Through Third-Party Ports

According to GTRI, Indian firms are exporting goods to international ports such as Dubai, Singapore, and Colombo. Here, an independent company takes charge of the consignments, offloading them and storing them in bonded warehouses. These bonded warehouses allow goods to be kept without paying duties while they are in transit, making them ideal for reprocessing shipments without attracting regulatory attention.

Changing the Labels to Bypass Restrictions

Once in bonded warehouses, the consignment undergoes a critical transformation — labels and documents are altered to show a different country of origin. For instance, Indian-made products are rebranded as ‘Made in UAE’. After this relabelling, the goods are shipped to Pakistan, thus bypassing the direct trade restrictions between India and Pakistan.

This indirect method benefits firms in multiple ways:

• It allows them to bypass official trade bans.
  
  

• It enables selling goods at higher margins, thanks to the complex third-country logistics.
  
  

• It reduces scrutiny, since imports appear to come from neutral third countries.
  
  

Impact on Pakistan’s Pharmaceutical Sector

In a related development, reports suggest that Pakistan's pharmaceutical industry has been gearing up for emergencies due to its reliance on Indian raw materials. Pakistan sources 30 to 40 percent of its pharmaceutical ingredients — including Active Pharmaceutical Ingredients (APIs) and advanced therapeutic products — from India.

Amid ongoing tensions and trade suspensions, Pakistan’s Drug Regulatory Authority (DRAP) has reportedly initiated "emergency preparedness" measures. Although there has been no formal notification about the immediate impact of the trade ban on pharmaceuticals, DRAP officials confirm that contingency plans are already in place. A senior DRAP official noted, “Following the 2019 crisis, we had started preparing for such contingencies. We are now actively looking at alternative avenues to meet our pharmaceutical needs.”

Current Status of India-Pakistan Trade

After the 2019 escalation, formal trade between India and Pakistan had already dwindled to minimal levels. In April-January 2024-25, India’s exports to Pakistan stood at just $447.65 million, while imports were as low as $0.42 million. For the entire 2023-24 financial year, exports were $1.18 billion and imports were only $2.88 million.

These figures highlight that while official trade has nearly collapsed, unofficial channels have allowed Indian goods — particularly essential products — to continue reaching Pakistani markets.