As diplomatic tensions between India and Pakistan flare once again following a deadly attack in Indian-administered Kashmir, a striking reality lies beneath the surface: informal trade between the two nations remains robust — and vastly underreported.
While official figures suggest bilateral trade is nearly nonexistent, investigations by Al Jazeera reveal that backdoor commerce between the two rivals could be worth as much as $10 billion annually, dwarfing the modest $448 million in official Indian exports to Pakistan recorded between April 2024 and January 2025.
According to reporting by Al Jazeera, which cited data from the India-based think tank Global Trade Research Initiative (GTRI), Indian goods are regularly routed through third countries such as the United Arab Emirates, Sri Lanka, and Singapore. In these transit hubs, goods are placed in bonded warehouses, documentation is altered, and they are re-exported to Pakistan under a different “country of origin” — often labelled as UAE or Singapore.
“This grey-zone strategy highlights how trade adapts faster than policy,” GTRI founder Ajay Srivastava told Al Jazeera. The rerouted trade, while not always illegal, operates in a legal twilight zone that provides plausible deniability for traders on both sides. Despite political rhetoric, demand for Indian goods — especially pharmaceuticals — in Pakistan remains high, incentivizing traders to find ways around the ban.
Historically, India and Pakistan have had a volatile trade relationship, with wars in 1965 and 1971 halting commerce, only for trade to resume after peace accords like the Tashkent and Simla Agreements. More recently, India revoked Pakistan’s “most favoured nation” status following the 2019 Pulwama attack, while Pakistan formally downgraded diplomatic ties and ceased trade in retaliation for India’s changes to Kashmir’s status.
But as Al Jazeera reports, the demand for cross-border goods has proven stronger than political obstacles. Trade lawyer Shantanu Singh told the outlet that informal trade is driven by economics more than diplomacy. “The closure of the Wagah-Attari Integrated Check Post increases the cost of doing business, but it doesn’t stop it,” Singh said. “Goods will still move — they’ll just take a longer, more expensive path.”
Pakistan has recently expanded its trade restrictions to explicitly ban goods routed through third countries. However, enforcing these measures remains a challenge. Customs authorities must determine the true origin of goods — a task made difficult by the re-labelling practices in international trade hubs.
