India-Pakistan Trade: How Indian Goods Are Reaching Pakistan Despite Political Hostility

The political relationship between India and Pakistan may be frozen, but the movement of goods between the two neighbours has proved harder to stop. Medicines, pharmaceutical ingredients and other products continue to find their way into Pakistan even as both countries maintain restrictions on formal trade. The latest figures from Pakistan's central bank show that the country paid $61.7 million for imports from India between July and September 2026, a 69 per cent increase from the $36.6 million recorded during the corresponding period a year earlier. The numbers point to a striking contradiction: while diplomatic and security ties remain strained, commercial demand has continued to pull the two economies together.

The increase comes against the backdrop of the April 2025 Pahalgam terror attack, which killed 26 people and triggered a fresh round of retaliatory measures. India accused Pakistan of supporting the attack, a charge Islamabad denied. New Delhi put the Indus Waters Treaty in abeyance, while Pakistan closed its airspace to Indian airlines, shut the Wagah border crossing and suspended trade. The two countries subsequently exchanged missile and drone strikes before agreeing to a ceasefire on May 10, 2025. Eighteen months later, the trade figures suggest that political restrictions have not eliminated the economic demand for Indian products.

The Numbers Behind Pakistan's Growing Imports From India

According to the State Bank of Pakistan (SBP), payments for Indian imports fell sharply after the military confrontation in May 2025. Monthly payments dropped from $20 million in April 2025 to $9.2 million in June and $8.2 million in July, before recovering to $19.6 million in September. The latest quarterly figure of $61.7 million represents a substantial year-on-year increase. However, the broader annual picture is more nuanced: Pakistan paid $203.8 million for Indian imports in the 2025-26 financial year, 7.6 per cent less than in the preceding year. Monthly averages have since returned close to their pre-conflict levels.

There is also a difference between the figures recorded by Pakistan's central bank and its government trade data. The SBP's payment records put imports at $61.7 million in July-September 2026, while commodity-based government data value them at $62.6 million. The latter figure was actually lower than the $66.6 million recorded during the corresponding period a year earlier. The distinction matters: payment data track money transferred by Pakistani banks, while customs-based trade statistics classify goods by commodity. Neither figure alone establishes the precise route taken by every shipment.

The composition of the imports, however, offers a clearer explanation for why the trade has continued. Organic chemicals and pharmaceutical products accounted for 96.2 per cent of Pakistan's imports from India in 2025-26, compared with 93 per cent the previous year. Vaccines, blood products and related items formed the largest category, with imports worth $93.6 million, up from $70.3 million. Within this category, vaccines for human use rose from $11.1 million to $32.3 million.

Khaqan Najeeb, a former adviser to Pakistan's Ministry of Finance, told Al Jazeera that India's pharmaceutical industry remained attractive because of competitive prices, product availability and geographical proximity. Indian manufacturers are significant suppliers of active pharmaceutical ingredients (APIs), the raw materials used to manufacture medicines. For Pakistan's pharmaceutical companies, replacing these suppliers is not simply a political decision; it can affect production costs, supply chains and the availability of medicines.

Third-Country Routes Keep Commercial Links Alive

The continued imports raise an obvious question: how are Indian goods reaching Pakistan when direct trade remains suspended? One explanation lies in international supply chains and third-country transit hubs. Pakistan's restrictions on Indian goods date back to August 2019, when Islamabad banned imports originating in India or shipped from the country after New Delhi revoked Jammu and Kashmir's special constitutional status. Pakistan subsequently exempted certain therapeutic products regulated by its Drug Regulatory Authority. Following the Pahalgam attack in April 2025, its National Security Committee announced the suspension of all trade with India, including trade involving third countries.

Muhammad Zubair Motiwala, a former chief executive of Pakistan's Trade Development Authority, told Al Jazeera that some Indian goods continued to enter Pakistan through countries such as the United Arab Emirates and Malaysia. Former finance adviser Najeeb, however, cautioned that the precise routes and volumes were not publicly established. This distinction is important: the latest import figures show that payments for Indian goods have increased, but they do not independently establish that every consignment travelled through Dubai or another transit hub.

The Global Trade Research Initiative (GTRI), an Indian economic think tank, had estimated in April 2025 that Indian goods worth more than $10 billion reached Pakistan annually through third-country routes. Its proposed mechanism involved goods being shipped to transit hubs such as Dubai, Singapore and Colombo, stored in bonded warehouses and subsequently re-exported. In some cases, documentation or labels could be altered to suggest a different country of origin. GTRI described this as a grey-zone trading strategy. The estimate is a think-tank assessment, not an official measure of verified India-Pakistan trade, and should be treated accordingly.

The economic incentive is considerable. Motiwala told Al Jazeera that sourcing some raw materials from alternative markets could raise costs by 40 to 50 per cent for businesses. Najeeb offered a more qualified assessment, saying that the impact would vary according to the product, freight charges, insurance, quality certification, regulatory approvals and delivery reliability. India's share of Pakistan's total import bill remains small — around 0.3 per cent of its $64.5 billion imports in 2025-26 — but its importance in particular pharmaceutical supply chains is considerably greater.

Is There A Thaw In India-Pakistan Relations?

The return of commercial activity has prompted some observers to look for signs of a gradual easing in relations. Motiwala told Al Jazeera that he believed the ice was beginning to melt, pointing to the repatriation of Pakistani fishermen and a recent handshake between Indian and Pakistani footballers. On August 29, India repatriated 25 Pakistani nationals, including fishermen, through the Wagah-Attari border crossing. Indian and Pakistani players also exchanged handshakes before and after their teams' meeting in the SAFF Championship in Dhaka.

Such gestures, however, should not be mistaken for a diplomatic breakthrough. The two countries have yet to restore formal trade, and the security concerns that prompted the restrictions remain unresolved. The political relationship continues to shape what businesses can import, how goods are transported and the costs involved. Najeeb told Al Jazeera that any gradual resumption of trade would have to account for the prevailing political and security environment, even if closer economic ties could benefit both countries.

For now, the figures reveal a relationship in which commercial necessity has outlasted political goodwill. Pakistan's pharmaceutical sector continues to have reasons to source from India, while traders seek routes through which supplies can reach their destinations. The border may remain closed to regular commerce, but the demand on either side has not disappeared. The question is whether the economic logic visible in these import figures can eventually translate into a formal reopening of trade — or whether the two neighbours will continue doing business indirectly while remaining politically estranged.