In the wake of the devastating Pahalgam attack on April 22, 2025, which claimed 26 lives, diplomatic relations between India and Pakistan have further deteriorated, casting a shadow over their already strained trade ties. The attack, attributed to the Pakistan-based militant group Lashkar-e-Taiba, has prompted a series of retaliatory measures from both nations, significantly impacting bilateral trade.

Historically, India and Pakistan have maintained a complex trade relationship, with bilateral trade peaking at nearly $3 billion in 2018. However, following the suspension of diplomatic ties in 2019 after India's military response to a suicide bombing in Kashmir, trade volumes have steadily declined, reaching $1.2 billion in 2024.

In the aftermath of the recent attack, India closed the Attari trade checkpoint, a crucial trade route between the two countries. In response, Pakistan suspended all trade ties with India, including routes through third countries and transit of goods to other nations, and closed its airspace to Indian airlines. These measures are expected to have significant economic repercussions, particularly for Pakistan's pharmaceutical sector, which relies heavily on imports from India.

The disruption of trade via third countries, such as the UAE and Singapore, further exacerbates the situation. Analysts warn that this could lead to increased prices for essential goods, including medicines, tea, and fertilizers, affecting consumers in both nations. 

The trade disruptions are part of a broader diplomatic crisis between India and Pakistan. India has suspended the Indus Waters Treaty, expelled Pakistani diplomats, and revoked visas for Pakistani nationals. In retaliation, Pakistan has suspended the Simla Agreement, expelled Indian diplomats, and closed its airspace to Indian aircraft. These actions mark an unprecedented breakdown in the post-1971 framework governing India-Pakistan relations.

The escalating tensions have also led to border skirmishes, with both nations exchanging gunfire along the Line of Control. The international community has expressed concern over the situation, urging both countries to exercise restraint and engage in dialogue to resolve their differences.

Source: News Agencies