India’s $500 Million Strike: Ban on Pakistani goods Imports Tightens Noose After Pahalgam Terror Attack

India Strikes Back: $500 Million Import Ban Targets Pakistani Goods Backdoor Trade After Pahalgam Terror Attack

New Delhi, May 4, 2025 — In a sweeping and symbolic escalation of its response to the April 22 Pahalgam terror attack, India has imposed a total ban on all imports—both direct and indirect—of Pakistani goods. The Ministry of Commerce and Industry’s order, effective immediately, aims to sever a hidden trade route worth an estimated $500 million annually that has long funnelled Pakistani goods into Indian markets through third countries such as the UAE, Singapore, and Sri Lanka.

The move comes just days after India sealed the Wagah-Attari border—the only direct land trade link with Pakistan—following the deadly attack that killed 26 people, mostly tourists, in the picturesque valley of Pahalgam in Jammu and Kashmir. The act, blamed on Pakistan-backed militants, has sparked outrage across India and galvanised a series of economic and diplomatic reprisals.

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An Economic Retaliation with Teeth

Described by officials as a “surgical economic strike,” the latest trade ban reflects New Delhi’s intensified stance against what it calls “terrorism-sponsored commerce.” A May 2 notification from the Directorate General of Foreign Trade (DGFT) underscored the government’s firm resolve:

“Direct or indirect import or transit of all goods originating in or exported from Pakistan, whether or not freely importable, shall be prohibited with immediate effect until further orders,” citing national security and public policy imperatives.

Behind the scenes, the ban zeroes in on a complex network of trade diversion. According to the Global Trade Research Initiative (GTRI), Pakistan has been exporting items like textiles, dry fruits, spices, and leather goods through intermediaries, cleverly bypassing prior sanctions, including the 200% import duty levied after the 2019 Pulwama attack. While official imports from Pakistan stood at a paltry $0.42 million this fiscal year (April 2024–January 2025), largely limited to figs, herbs, chemicals, and pink salt, analysts say that repackaged Pakistani goods worth up to $500 million are reaching Indian consumers under veiled labels.

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Severe Blow to Pakistan’s Economy

The Pakistani goods ban’s implications are profound. Textiles—one of Pakistan’s biggest exports—will bear the brunt, with cotton fabrics and garments commonly routed through Dubai or Colombo now facing harsh scrutiny or outright rejection at Indian ports. Niche items like Himalayan pink salt and fine leather goods, long favoured by Indian consumers, are expected to vanish from shelves.

Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), called the measure a decisive strike:

“This is a surgical strike on Pakistan’s backdoor trade. India is making it clear that economic ties will not remain untouched in the face of terrorism.”
He added that enforcement cooperation is underway with customs authorities in intermediary nations, although challenges persist in identifying goods with falsified origins.

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Countermoves and Collateral Damage

In a retaliatory move, Pakistan’s Ministry of Maritime Affairs declared on May 4 that Indian-flagged ships would no longer be permitted to dock at its ports, intensifying the tit-for-tat escalation. Bilateral trade has now reached a near-total standstill, with wider regional reverberations.

One of the most immediate victims of the fallout is Afghanistan. With its vital exports of dry fruits and herbs typically transiting through Pakistan en route to India, the sudden closure of the Wagah-Attari corridor has stranded over 150 Afghan trucks. Traders now fear massive spoilage.

“Ninety percent of India’s Afghan trade flows through Attari,” said Mukesh Sidhwani, a dry fruit importer. “Rerouting through Iran’s Chabahar port will spike costs by up to 20%.”

Consumers in India are already feeling the pinch post-Pakistani goods ban. Wholesalers report looming shortages and price hikes of 20% for dry fruits like pistachios, raisins, and figs. Markets reliant on Afghan saffron and asafoetida are similarly bracing for disruptions.

The economic strain post-Pakistani goods ban has also hit local livelihoods hard in Amritsar. Porters, roadside vendors, taxi drivers, and hoteliers—many dependent on cross-border trade and tourism—are reporting revenue drops between 30% and 60%.

“The border feels deserted. The spectators are scared, and the dhabas are empty,” said Gola Shah, a local eatery owner near the Wagah gate.

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Widening the Diplomatic Rift with the ban on Pakistani goods

India’s import ban is part of a broader campaign to isolate Pakistan and Pakistani goods on the global stage. Following the Pahalgam attack, New Delhi has suspended the Indus Waters Treaty, downgraded diplomatic ties, expelled military advisors, and is lobbying financial institutions like the IMF and World Bank to restrict funding to Pakistan.

Prime Minister Narendra Modi, in a press conference with Angola’s President João Lourenço on May 3, condemned the attack and reaffirmed India’s global counterterrorism stance:

“We will not hesitate to take decisive action against terrorists and those who sponsor them. The world must stand united.”

Pakistan, meanwhile, has called India’s actions an “act of war,” and on May 3, test-fired a ballistic missile in a show of defiance. Tensions have surged at the Line of Control, where cross-border firing has continued for nine straight nights. In response, the European Union and Russia have urged both nations to show restraint and return to dialogue under the 1972 Simla Agreement and the 1999 Lahore Declaration.

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A Trade War with Human Costs

As India clamps down on the shadow trade funnelling Pakistani goods into its markets, the path forward will depend on enforcement and international cooperation. Experts warn that illicit channels—mislabeling, smuggling, or proxy exporters—could remain active unless vigilantly policed.

For now, however, the once-hidden $500 million trade pipeline is under siege. The fallout is not just economic—it’s deeply human. From Afghan truckers to Indian porters, from market shelves to border towns, lives are being reshaped by the geopolitical tremors of one violent day in Pahalgam.

As one Amritsar trader summed it up with quiet sorrow:

“When borders close, it’s not just goods that stop moving—it’s livelihoods, memories, and hope.”