One year after Operation Sindoor—India’s cross‑border military and economic response to the April 22, 2025 Pahalgam terror attack that killed 26 civilians—bilateral trade between India and Pakistan has effectively frozen, slipping from around $1.2 billion in 2024 to near zero in 2026. The combination of closed land routes, airspace shut to Indian carriers, the suspension of the Indus Waters Treaty, and a near‑total import ban has turned India‑Pakistan commerce into a diplomatic‑and‑economic casualty rather than a working channel of exchange.
Trade measures that remain in place
Following the Pahalgam attack, India shut the Attari‑Wagah Integrated Check Post, the only functioning land trade route between the two countries, and on May 2, 2025, the Directorate General of Foreign Trade (DGFT) issued a blanket prohibition on “direct or indirect” imports or transit of goods originating in or exported from Pakistan. The notification left no room for exceptions, stating that the restriction would continue “until further orders.” Pakistan retaliated on May 4, 2025, by suspending all trade with India, including trade routed via third countries, effectively severing the last formal channels.
As of May 2026, these measures remain in force: the Attari‑Wagah border stays shut, Pakistani airspace is closed to Indian carriers, and the official bilateral trade numbers hover around zero, with only a handful of humanitarian‑exemption flows slipping through.
Trade trajectory: 2018 to 2026
The collapse did not happen overnight. Bilateral trade, which had already fallen from $2.41 billion in 2018 to $1.2 billion by 2024, was already in a steep slide long before Operation Sindoor. Pakistani exports to India had shrunk from $547.5 million in 2019 to just $480,000 in 2024, while India continued to export roughly $447.65 million worth of goods to Pakistan between April 2024 and January 2025, mainly pharmaceuticals, chemicals, sugar and auto parts.
After the ban, even those modest flows disappeared from the official books. Some informal trade continues via third‑country corridors such as the UAE and Singapore, with estimates of unilateral‑India‑origin commerce in the $10 billion range, but enforcement from both sides is tightening that grey‑zone space.
Indus Waters, airspace, and regional fallout
Beyond trade, the Operation‑Sindoor fallout includes the ongoing suspension of the Indus Waters Treaty, which once governed water allocation for roughly 80 per cent of Pakistan’s population. Indian officials have publicly ruled out restoring the pact, while Pakistan insists it remains valid, leaving the legal‑and‑technical mechanism in limbo and blocking any quick‑recovery‑favourable‑talks.
The closure of Pakistani airspace to Indian airlines has added a sharp commercial cost: Air India alone has estimated losses of about ₹4,000 crore per year, with industry‑wide estimates running close to ₹7,000 crore (about $800 million) annually. North‑bound transcontinental flights via the Indian subcontinent face detours that can add up to 1.5 hours per sector, increasing fuel‑burn, emissions, and ticket prices.
Who is hit harder: India or Pakistan?
On paper, India‑Pakistan trade always represented a tiny slice of India’s global commerce—roughly 0.06 per cent of total trade—so the formal freeze has limited direct impact on Indian GDP or major export sectors. The bigger blow lands on Pakistan, where Indian imports form a critical input for the pharmaceuticals, chemicals, and agro‑industrial chains.
Pharmaceutical products were Pakistan’s primary import from India, with Indian exports to Pakistan valued at around $208 million before the ban. The shut‑off has forced Pakistan’s drug‑makers to source active pharmaceutical ingredients and finished formulations from more expensive markets, raising production costs and pushing up medicine prices domestically. Some essential pharma raw‑material imports have dribbled through under humanitarian‑exemption cover, but these are a fraction of the pre‑ban levels.
What lies ahead?
Chatham House and other foreign‑policy analysts note that the May 10, 2025 ceasefire ended open military hostilities but did not tackle the underlying disputes over Kashmir, terrorism, or water‑sharing. One year on, there is no sign that India or Pakistan is preparing to roll back the economic freeze, and the political signalling—from India’s “the Indus‑Treaty will never be restored” stance to Pakistan’s insistence that it remains operational—suggests a protracted economic cold‑war overlay on an already tense bilateral relationship.
Unless one side perceives a strong security or geopolitical incentive to ease the measures, or global economic pressure (such as IMF‑mandated reforms) nudges Pakistan to seek a formal‑trade‑resumption formula, India‑Pakistan trade is likely to stay near zero well beyond 2026.
