The headlines say India and Pakistan barely trade anymore. The facts tell a different story.
According to estimates by the Global Trade Research Initiative (GTRI), over $10 billion worth of Indian goods flow into Pakistan every year. Not through formal trade routes — those have been crippled for years — but through clever detours via countries like Dubai, Singapore, and Colombo.
This is not some underground, smuggler’s market story. This is an open secret, carried out through legitimate ports, organized supply chains, and well-oiled logistics systems. Indian firms ship their goods to third-country hubs. There, labels are switched, papers are adjusted, and the cargo quietly makes its way into Pakistan’s markets. Officially, it’s Emirati, Singaporean, or Sri Lankan goods arriving. Unofficially, everybody knows it’s made in India.
India revoked Pakistan’s Most Favoured Nation (MFN) trade status in 2019 after the Pulwama terror attack. Tariffs on Pakistani imports were raised to 200%, and Pakistan responded by banning Indian goods altogether. Formal trade collapsed.
But demand didn’t.
Pakistan’s market has long been addicted to Indian pharmaceuticals, textiles, chemicals, tea, and machinery. Shoppers didn’t suddenly change their tastes because of diplomatic decisions. And Pakistani manufacturers, retailers, and consumers found workarounds — with some help from middlemen in Dubai, Singapore, and Colombo.
Instead of buying directly from India, Pakistani importers now buy from a trader in Dubai, who sources from India. Everyone involved pockets a margin, the supply chain gets longer and costlier, but the goods get through. It’s an economic reality: demand creates its own channels.
Here’s how it works.
Indian companies legally export to third countries — especially Dubai, because of its proximity and massive transshipment infrastructure. Once the goods land, traders repackage them, change documentation, and re-export them to Pakistan.
For example, an Indian textile shipment moves to Dubai, gets relabeled, and is sold to a Pakistani importer as “UAE-origin” goods. Dubai collects customs duties and service charges, Pakistani authorities treat it as a third-country import, and everyone moves on.
Singapore and Colombo also play critical roles, especially for electronics, chemicals, and machinery. The Sri Lankan port of Colombo acts as a transshipment hub, while Singapore’s traders facilitate complex financial transactions that blur the trail even further.
For India, it’s a win, quietly. Indian manufacturers get to maintain their market share without any political overhead. No direct business with Pakistan means no diplomatic fallout, but the economic benefits stay intact.
For Pakistan, it’s a bitter necessity. Indian goods — particularly medicines, agricultural inputs, and textiles — are simply better in price and quality compared to alternatives. Blocking Indian imports formally hurts Pakistani consumers and businesses more than it damages India.
The traders in the middle? They’re laughing all the way to the bank.
GTRI’s estimate of over $10 billion is conservative when you factor in the many informal routes still in play. In contrast, formal India-Pakistan trade before 2019 hovered around $2 billion annually. Which means the indirect trade today is five times higher than what the official trade used to be.
This is a critical point. Far from killing trade, political hostilities have only made it more complicated, costlier, and opaque. The money flows. Only the middlemen’s cut has gotten bigger.
This shadow trade isn’t free of consequences.
For Pakistan, it means higher costs for consumers and businesses. Goods that could have come directly at lower prices are now burdened with extra handling, repackaging, and re-export fees. It’s inflation built into the system.
For India, it’s a missed opportunity to use trade as a lever of diplomacy and engagement. The government can claim a tough stance, but the market reality is harder to control.
And for both countries, it represents a bizarre situation where politics says one thing, and economics does another. It undermines formal trade systems, encourages opacity, and feeds informal networks that often overlap with illicit trades.
It’s unlikely that India-Pakistan formal trade will normalize anytime soon. Political relations remain tense. Both governments have domestic compulsions that reward hardline posturing rather than pragmatic engagement.
But the $10 billion reality shows that on the ground, markets find a way. Business interests override political theatrics when livelihoods, industries, and everyday needs are at stake.
In the end, whether governments admit it or not, India and Pakistan are economically linked — not through official channels, but through the grit and grind of traders who understand one simple truth: where there’s demand, supply will follow.
And no border, no ban, no political statement can stop that.
