Reports in the foreign media, surprisingly ignored by most Indian news outlets, about a recent surge in the flow of Indian goods to Pakistan have come as a surprise in domestic trade circles. While direct trade between India and Pakistan has remained suspended since the 2025 Pahalgam terror attack, the latest figures suggest Indian goods continue to be in great demand in Islamabad. Pakistan imported Indian goods worth $61.74 million (R5,876 crore) in the first quarter of 2026-27 – up 69 per cent from $36.55 million (R3,478 crore) in the corresponding period of the previous year. However, Pakistan recorded no exports to India during the same period. The Pakistani daily Dawn broke the story last fortnight, citing data compiled by the State Bank of Pakistan. It, however, forgot to add that the striking surge is due to the routing of these goods via third countries such as the UAE, Sri Lanka and Singapore.
While third-country trade between India and Pakistan is not new, the sheer volume of made-in-India goods reaching Pakistan has made experts sit up and take notice. This implies that there is a voracious appetite for Indian goods among Pakistanis. Though it raises questions about how the country of source and origin in these is being recorded, the very fact that the demand is so significant should prompt both countries to rethink the rupture in normal trade relations. In any case, India will have to soon engage Pakistan at the multilateral level, such as the upcoming SCO meet in New Delhi.
The goods are being routed via third countries to bypass restrictions and avoid scrutiny. These products are then re-labelled, commanding higher prices. This mark-up in prices can easily go to Indian exporters if normalcy is restored. Interestingly, the Bank of Pakistan figures being bandied around do not represent the whole picture. According to the think tank, Global Trade Research Initiative, unofficial Indian exports to Pakistan are likely to be $10 billion a year. Trade experts call it the ‘grey-zone strategy’, whereby goods are rerouted by taking them to facilities, where they are transferred to other ships to avoid international trade curbs. Indian goods are sent to Dubai, Singapore and Colombo. The goods are then stored in bonded warehouses in transit hubs. While in storage, still duty-free, the documents and labels are changed. The products are re-exported to Pakistan under a new ‘country of origin’ – say, the UAE, instead of India.
For trade to normalise, India would like Pakistan to take credible action on terrorism and the alleged use of Pakistani soil by terrorist groups, which will vindicate its position that ‘terror and trade cannot go together’. And, Pakistan would like India to make some placatory noises on Kashmir and restore the ‘Most-Favoured Nation’ (MFN) status to it. Though Pakistan does not say it, it wants India to slash duties on its goods being sent to India.
Pharmaceutical products are Pakistan’s key imports from India. Until March 2025, India’s pharma exports to Pakistan amounted to $208 million, says a Reuters report. Other key goods include plastic, petroleum, dyes, organic chemicals, rubber, coffee, tea, vegetables, spices, dairy products and cereals.
Since the Pahalgam incident, which sparked a three-day conflict, India has banned the direct or indirect import or transit of goods originating in or exported from Pakistan. Pakistan has also suspended all trade with India, including via third countries (though it does not mind importing via third countries).
That, despite the ban, Indian goods found a way across the border is evident from the fact that between July and September 2025, weeks after Operation Sindoor, Pakistan received Indian goods worth $36.6 million from India, according to a report in Arab News, which again cited State Bank of Pakistan data. The imports were almost entirely pharmaceutical raw materials.
Trade ties between India and Pakistan have been in free fall since 2019. In 1996, India bestowed Pakistan with the MFN status. That status was revoked in 2019, following the Pulwama attack, where a suicide bombing killed 40 soldiers.
From 2018 to 2024, India-Pakistan bilateral trade fell from $2.41 billion to $1.2 billion. Exports of Pakistani goods to India also nosedived from $547.5 million in 2019 to just $480,000 in 2024. Key Pakistani exports included glassware, copper, sulphur, fruits and nuts. From April 2024 to January 2025, the last full pre-ban period, India exported $447.65 million, while Pakistan’s exports stood at just $0.42 million. However, as the latest figures show, despite the ban, Indian goods continue to be in great demand in Pakistan. This once again reinforces the case for normalising trade relations – as also the larger bilateral ties – between India and Pakistan. But is anybody listening?