Abstract
This paper examines the long-standing role of trade between Pakistan and India, as well as the potential that remains unexploited. The paper is conducted based on secondary data as sourced by official organizations or bodies, including the World Bank, WTO, UN Comtrade, and central banks, with support of policy papers, think tanks (PIDE, ICRIER, Brookings), newspaper sources, and expert comments using a qualitative and descriptive research design based on trade statistics.
Policy barriers, the media narrative, and informal trade practices are analyzed using thematic content analysis. In the given work, liberal institutionalism, realism, comparative advantage, and conflict transformation theory are used in order to find an equilibrium analysis of the geopolitical-economic trade interrelationship. The results indicate that Pakistan-India trade is politicized, which is hampered by mistrust, media sensationalism, and poor infrastructural aspects. Nevertheless, it is possible to find possibilities to cooperate because of economic complementarities and institutional structures. Backchannel diplomacy, neutral media reform, and rejuvenation of SAFTA, along with modernization of infrastructure, are suggested in the paper as ways of normalizing trade activities and catalyzing regional peace.
Keywords
India-Pakistan Trade, Comparative Advantage, SAFTA, Conflict Transformation, Trade Barriers, Import, Export
Introduction
India and Pakistan, two neighboring nations with shared cultural and economic roots, were a result of the division of British India in 1947. India and Pakistan maintain historical, cultural, and linguistic connections. Nonetheless, the history of relations between them has been continually darkened by political differences, disagreements over territories, especially in the region of Kashmir, and occasional military confrontations. All these fraught relations have worked immensely to derail the bilateral trade, even though geographical proximity and wide-ranging economic complementarities of both countries form part of the factors. Trade that would have presented a window of opportunity regarding peace and prosperity in South Asia has rather suffered to become one of the numerous victims of political disharmony, as per Ahmed (2010).
Making trade a normal relationship is something that has been attempted at different points in history. Since the creation of the Most Favored Nation (MFN) and the development of confidence-building measures, both nations have tried economic engagement as one of the mechanisms of diplomacy. Yet, any progress has been accompanied by several regressions, occasioned by political or security-related incidents, such as the 2001 Indian Parliament attack, the 2008 Mumbai attacks, and Pulwama, which adversely affected trade and caused dialogue suspension, decreased trust, and so on.
Irrespectively, the case to strengthen trade relationships is economically sound (Bhatnagar, 2019). India and Pakistan have supplementary economic systems: India has superiority in manufacturing and technology, but Pakistan scores well in textiles, agriculture, and some consumer items. The two-way trade would save transportation costs, maximize the availability of products, and promote the economic integration of South Asia. There is already a large implicit demand for cross-border trade because of informal trade that can be channeled via third countries such as the United Arab Emirates (Burki, 2022).
Also, the establishment of better trade relations might become a booster towards developing regional peace and generating interdependence that removes the power of conflict. Such economic cooperation can be the precondition of discussions on other controversial issues, such as water sharing and border management. Nevertheless, to realize this vision, it is necessary to overcome political obstacles, resolve issues with security, improve the trade infrastructure, and oppose negative media coverage of both of these countries (Chatterjee, 2024).
This paper will seek to understand the trend of India-Pakistan trade in history and the barriers that have most affected this trade, as well as the practical recommendations for a more positive economic cooperation. By doing so, it seeks to contribute to the wider debate on how economic diplomacy may be an agent of change in South Asia with its highly vulnerable geopolitical environment.
Historical Background of India & Pakistan Trade
The partition of British India in 1947 not only generated two independent states, India and Pakistan, but also destroyed highly integrated economies and transport and trade systems, which had prospered within a single colonial structure. This historical separation not only changed political borders but also broke commercial connections between the two countries. Ever since, the development of trade relations between Pakistan and India has been significantly impaired by political tensions that are still recurrent in both countries, military conflicts, and issues of security.
Trade has been a bilateral affair, and this has been suspended many times in the years that followed the partition. All of the wars, namely the wars of 1948, 1965, and 1971, saw the complete interruption of trade. According to Dash (2019), the war of 1965 saw 11 years of trade stagnation, which only ended with the signing of the Simla Agreement in 1974.
Despite the fact that the Kargil War of 1999 did not technically lead to a ban on trade, the bilateral trust suffered a heavy toll and rendered many collaborative dialogues on ice. In 1996, India gave Pakistan Most Favored Nation (MFN) status as per the WTO guidelines to promote economic relations. Pakistan, however, never responded, explaining that it had pending political problems, especially the Kashmir conflict.
Nevertheless, trade increased modestly via the Wagah-Attari border and the Karachi-Mumbai maritime route, and by the adoption of the confidence-building measures (CBMs) in the late 2000s (Hussain, 2024). A regional framework was also established in the form of the South Asian Free Trade Agreement (SAFTA), which did not open up the potential of trade, as hostilities still existed. A fresh setback to trade relations was the Pahalgam attack in 2025, which Indian authorities assert had connections with transnational systems (Taneja, 2025). The history of India-Pakistan trade shows a trend in which economic rationales have been constantly blanketed by insecurities and political competition.
Though the two countries share common cultural markets and economic complementarity – India’s economic and manufacturing prowess in general and Pakistan’s textile and agricultural industries in particular – the bilateral trade is very low as compared to its potential. Although informal trade is still conducted through nations such as the UAE, Singapore, and Oman, it is not efficient and is costly, and prone to regulatory blitzes. Failure to develop a long-term trade relationship is a wasted opportunity for regional integration, elimination of poverty, and economic interdependence, which are important ingredients that may act as peace equations in the South Asian region (Khan 2024).
Terrorism-related incidents have been the most persistent disruptors of trade normalization. Key turning points include:
| 2001 | Indian Parliament attack | Led to the suspension of dialogue and diplomatic downgrades. |
| 2008 | Mumbai attacks | Froze composite dialogues; trade declined sharply due to security concerns. |
| 2016 | Uri attack | India revoked MFN status for Pakistan |
| 2019 | Pulwama-Balakot/ Revocation of Article 370 | Resulted in a 200% customs duty on Pakistani goods by India and a complete trade suspension by Pakistan. This also included the closure of LoC trade routes in Kashmir. Revocation of Article 370 led to the formal downgrading of diplomatic relations and a total halt to bilateral trade. |
| 2025 | Pahalgam attack | Trade between the two nations has again stopped for an unknown period of time. |
Research Questions
- What are the major historical and political factors that have shaped the trade relationship between India and Pakistan?
- What structural, regulatory, and security challenges currently hinder bilateral trade between India and Pakistan?
- What are the potential economic benefits for both countries if trade relations are normalized or expanded?
Research Objectives
- To analyze the historical and political developments that have shaped the trajectory of India-Pakistan trade relations since 1947, with a focus on key conflicts, diplomatic events, and policy shifts.
- To identify and evaluate the current structural, regulatory, and security-related barriers that restrict formal trade between India and Pakistan, including tariff regimes, border controls, and non-tariff measures.
- To assess the economic potential and mutual benefits of normalized or expanded trade relations for both countries in terms of GDP growth, employment, and regional connectivity.
- To propose practical policy recommendations and confidence-building measures (CBMs) that can facilitate sustainable bilateral trade, reduce reliance on third-party trade routes, and promote economic diplomacy in South Asia.
Significance of the Study
This is an essential study because it reveals the extent to which political enmity and security concerns still dominate over the huge potential in terms of trade between the two adjacent states. Bilateral trade between Yemen and Saudi Arabia has remained insignificant despite geographical proximity, a complementary market, a similarity between the markets, and a belief that each country is self-sustaining. The study has implications for academic literature and local policy-making since it analyzes how, under conditions of normalization, trade may become a strong confidence-building measure and deliver economic dependence.
It highlights how economic diplomacy, structural reforms, and perception must be handled to ensure that long-term trade barriers are addressed. This can help policymakers, regional entities such as SAARC and SAFTA, and business communities in formulating knowledgeable initiatives that may see trade across borders. By exploring the history of previously failed projects and the recent obstacles bedeviling the effort, we can come up with viable suggestions for a new trade relationship that will transform the lives of millions of people, eliminate dependence on informal trade, and promote peace and prosperity in South Asia.
Literature Review
Trade between India and Pakistan has always been marred by political hostilities, perceptions, and media construction. As some experts have stressed, bilateral trade cannot be supported by great economic potential and geographical proximity because of an age-old suspicion and political instability (Taneja, 2013; Ahmed, 2017). Among the least studied, but most important elements, in this interplay is the role of media coverage in influencing popular attitudes to cross-border trade. Mainstream media in India has been instrumental in the creation of nationhood discourses that usually set Pakistan up as a constant security threat.
According to scholars such as Malik (2014), South Asian media has become a propaganda of nationalism as opposed to a watchdog of democracy as it used to be previously. Indian news media have grown more antagonistic to Pakistan, especially following the Mumbai attacks (2008) and the Pulwama attacks (2019). This has greatly influenced the attitude of people and the policy debate on trade and bilateral relations.
According to recent research on the media’s impact (Sharma 2023), approaches such as sensational reporting have helped to establish a hostile atmosphere, where there is no room left to rationally discuss the benefits of trade. Some of the major Indian news channels, such as Republic TV, Zee News, Aaj Tak, India TV, and Times Now, have shown on multiple occasions programs in which Pakistan has been represented as an enemy. Such stories usually paint the picture of hyper security and a failed state of Pakistan and undermine any efforts at dialogue or trade activity (V. & Ahmed 2020).
Republic TV, which is headed by Arnab Goswami, has been vocal in expressing its anti-Pakistan sentiments. Talk shows such as The Nation Wants to Know habitually discard any peace or trade effort as being an act of appeasement, and Pakistani institutions find themselves in the dock as supporters of terrorism (Sawhney 2020). This not only causes a polarization of opinion but also subjects the political leadership to the pressure of not engaging in any diplomatic activity, including trade.
Programs that consistently run on Zee News include the DNA with Sudhir Chaudhary, where Pakistan is a permanent foe of India. Such programs usually draw on unsubstantiated authors, dramatized images, and overwhelmingly charged words to portray Pakistan in a negative light. The channel leaves little room for a subtle discussion and usually takes a back seat on economic facts, opting more for populist nationalism (Nabi 2024).
Aaj Tak is among the most popular Hindi news channels, with its shows turning the cross-border issues into a spectacle. Usually, their special report on the incidents at the LoC and operations by the army is aired with the backdrop of dramatic music, animated graphics, and a warlike rhetoric speech, which adds to the mass hysteria as opposed to an informed opinion of the people.
India TV is a news broadcaster whose jingoistic and tabloid style interferes greatly with its news reporting, often presenting a lot of conspiracy-filled material. The doubts about cooperation, even in the form of trade, are created in the minds of viewers by the host, Rajat Sharma, on Aap Ki Adalat. The host has raised a doubt about any form of peace talks with Pakistan (Qamar, n.d.).
Times Now, which was once a voice of moderation, is another television channel that, in recent years, has become a more nationalist channel. Everyone knows about anchors such as Navika Kumar and Rahul Shivshankar, who are panel leaders at demonizing Pakistan as a whole and silencing and ridiculing those who oppose their views. Such media depiction is prevalent out there. Hussain (2020) has noted that people in the Indian media have widely criticized any business endeavors or people who promote bilateral trade with Pakistan.
The negative framing done by the media not only affects the population but also distracts policymakers who are afraid of losing the elections by being viewed as weak on Pakistan (Raza 2025). The literature, therefore, shows the existence of a critical media politics nexus in India that grossly compromises rational discourse on trade. To achieve meaningful economic cooperation, efforts must be made to ensure depoliticization and desensitization of media coverage, especially during conflicts (A. Khan 2025).
| News Channel | Media Behavior | Common Narratives Preached | Impact on Trade Relations |
| Republic TV | Hyper-nationalist tone; aggressive prime-time debates | “No trade with terror nation,” “Boycott Pakistani products,” “Pakistan is collapsing.” | Increases public hostility; builds pressure on the government for trade bans |
| Zee News | Sensational headlines; emotional reporting | “Pakistan misuses trade routes for infiltration.” “Every rupee to Pakistan funds terror.” | Fuels support for high tariffs and trade shutdowns |
| Times Now | War-like coverage post-conflict | “India must isolate Pakistan economically. Terror and trade can’t go together.” | Supports diplomatic isolation; limits trade diplomacy |
| India TV | Tabloid-style news with dramatic visuals | “Pakistani imports are a threat to national security,” “China-Pak nexus against India” | Encourages viewers to demand stricter trade restrictions |
| News18 India | Strong studio bias during debates | “Stop all relations with Pakistan,” “Boycott Pakistani artists, goods, culture.” | Promotes economic and cultural decoupling |
Literature Gap
Literature on India-Pakistan trade has been focused more on the historical, political, and diplomatic factors that concern bilateral economic relationships. Several studies have been conducted on the effects of wars, cross-border terrorism, and the conflict of Kashmir, as well as the influence of SAFTA and the WTO structure. Laws and policies of trade, like the Most Favored Nation (MFN) status, tariffs, and trade suspension, have also been examined by scholars.
However, there is a large chasm in how to effectively influence public attitudes toward trade and the policies themselves, especially regarding how media framing and infrastructural bottlenecks can be addressed. Hardly any efforts exist to empirically examine the influence of nationalism and conflict-based media on public opinion, political purpose, and trade statecraft. Although there is evidence in the form of anecdotes, there is still a gap in terms of academic discussions on how media behavior impacts trade disturbance and policy changes.
On the same note, infrastructural inner issues (delays on the border, poor logistics, and a few trade routes mentioned in reports) are rarely treated as changing parameters that affect trade capacity and efficiency over time. In addition, few hypothesis-based, multidisciplinary studies that integrate political economy, media studies, and international trade exist. Currently available literature is mostly based on qualitative historical reviews instead of mixed-method research, which combines case studies, content analysis of media materials, and interviews with stakeholders. This constrains the practicality and overall usefulness of most scholarly works.
This research is expected to fill the above gaps by assuming a multi-dimensional approach to the study, that is, an analysis of the interaction of media narratives and the infrastructural weaknesses with political events to influence the trading relations. An extension of the existing political factors, coupled with the factors underestimated in defining barriers to trade (such as media framing and popular perception), the study at hand offers a more focused insight into the described phenomena. This way, it adds new knowledge on regional trade research and provides policy-recommended evidence.
Methodology
This paper uses a qualitative and descriptive research design and provides quantitative trade statistics as an addition. For the research, the secondary data sources are mainly used along with official sources of the trade data of both countries: the World Bank, WTO, UN Comtrade, and the central banks of the countries. Further, the structure and regulation of the India-Pakistan trade are examined through government publications, trade policy documents, and regional arrangements, including the South Asian Free Trade Area (SAFTA).
Think tanks such as the PIDE (Pakistan Institute of Development Economics), the ICRIER (Indian Council for Research on International Economic Relations), and the Brookings Institution have published reports and policy papers that offer analytical insight into bilateral trade relations. Research papers, the archives of newspapers, and the feedback of the professional community complete the picture of the historical and political frame of the trade relations.
The information presented as primary, depending on the availability, may comprise semi-structured interviews of trade policy experts, economists, or business stakeholders involved in cross-border commerce. Thematic content analysis will be used to analyze the collected data, monitoring the emergence of similar patterns when it comes to policy barriers, informal trade practices, and the opportunities to normalize the process of trade. Comparative tables and charts are also used to demonstrate trade figures to identify any trends and opportunities in a particular industry.
Theoretical Framework
The present study relies on three main theoretical frameworks to explain the intricacies of India-Pakistan trade. Liberal institutionalism is one such source of knowledge that helps us explore the possibility of instituting economic cooperation among the parties by the use of regional and global institutions like the SAARC or the WTO. It gives an insight into how the potentiality of normalization of trade is ventured despite long-standing political animosities.
Second, the paper brings in realist theory, in that states will be concerned with national interests and security at the expense of cooperation. This view will play a major role in examining the reasons why the bilateral trade is usually put on hold or is limited by political or military stances or ideological issues. Thirdly, the economic rationale of the trade between the two countries is reviewed using the law of comparative advantage. This theory highlights the benefits that both India and Pakistan can accrue through the trading of goods and services in which each of the countries is efficient in its production.
These structures, when used together, provide a balanced insight into the opportunities and challenges of bilateral trade. Moreover, there is a reference to the conflict transformation theory, which argues that enhancing economic interdependence could lead to stabilization of the region to the extent that trade can become a confidence-building policy between two neighbors who have fought each other in the past.
Findings
- Strong political enmity is directly proportional to a considerable reduction in bilateral trade levels, which is related primarily to the increasing level of military aggression or diplomatic failure.
- Trade agreements like SAFTA held promise in the enhancement of economic cooperation, but due to a lack of political will, there was poor implementation and suspension of critical terms.
- Media coverage consisting of positive sentiments might temporarily help achieve optimism about trade between the people and businesses; however, this is likely to have a temporary result since backlash in the media is common after political or military events.
- The incitement of distrust regarding Pakistan due to the presence of negative media coverage on Indian news channels is a key factor that reduces the appetite for business cooperation across the boundaries.
- The constant closure of borders and change of policies gives a negative impression on investors and businesses, keeping them away from long-term trade with Pakistan.
- Untapped opportunities can be attributed to a big difference between the actual trade potential, which is more than 20 billion dollars, and the current trade volume, which is less than 2 billion dollars per annum.
- The media accounts are strongly influential on the general opinion in the two countries, thus influencing how trade is perceived.
- The absence of confidence in the mechanisms, institutions, including customs cooperation, and the dispute resolution process, is a deterrent to the effective continuity of operations across borders.
- The facilities in Wagah (Punjab) and Munabao (Rajasthan) ports of entry are not in good shape, as they do not have a modern warehouse, a computerized clearance system, and a well-developed transportation network.
- An example of how political events subordinate economic policy can be seen through India’s withdrawal of the MFN status of Pakistan in 2019.
- Other barriers to trade, rather than tariffs, are non-tariff barriers (NTBs)—which include labeling requirements, security checks, quotas, etc.
- Both sides show strong support for trade normalization among small and medium enterprises (SMEs) due to the similarity of language, culture, and demand for the product (e.g., textiles, pharmaceuticals).
- Smuggling, as well as informal trade, still exists, even against official restrictions; here we can see the interdependence of the economies, even in the hostile political climate.
- The South Asian Association for Regional Cooperation (SAARC) is one of the regional organizations that has tried to host trade, yet this has been unsuccessful because of the Indian-Pakistani rivalry, which has infiltrated the region.
- Grass-roots (people-to-people) as well as track-II initiatives (academic, business, and cultural exchanges) have demonstrated potential for reducing mistrust and facilitating trade dialogue, but they have no institutional support.
Recommendations
The issue of enhancing trade between India and Pakistan has to have a multidimensional approach involving political, structural, and perceptual limitations. The most relevant and initial step should be the commencement of backchannel diplomacy of pure trade and economic interactions. The two states can establish a cooperation avenue premised on their economic interest by isolating trade issues that have been necessitated by warlike conflicts. These unofficial and confidential talks can assist in avoiding open and political pressure and leave a chance to engage in constructive negotiation.
Also, one should acknowledge and control the influence the media has on popular opinion. Nowadays, most Indian news outlets propagate sensationalism in narrating their stories in such a way as to show only one side of Pakistan, i.e., that of conflicts and threats to security. A response to this can come in the form of joint journalist trade, media workshops, and joint reporting projects. This would assist in establishing a well-balanced coverage and encourage stories that emphasize the merits of peaceful trade relationships.
The next priority suggestion is the awakening and reorganization of the SAFTA (South Asian Free Trade Area) agreement. The introduction of clear timelines, measurable goals, and independent monitoring should be put in place to ensure accountability and progress. A revived SAFTA can be used as a framework in encouraging trade in the region, even in cases where bilateral relations are strained. Moreover, the two nations also require investments in the improvement of the infrastructure and border trade. This incorporates contemporary customs, combined checkposts, computerized documentation, and safe storage facilities.
This improved configuration of logistics will enhance formal trade efficiency and lessen reliance on the informal or third-country trade routes, which are more expensive and also less transparent. This can be achieved by adopting the following recommendations, which will help India and Pakistan move away from the sphere of hostilities and suspicions to that of economic cooperation. By so doing, trade may stabilize the region, and this may create peace, prosperity, and integration in South Asia.
Conclusion
Trade between India and Pakistan poses a great challenge and an opportunity. The amount of bilateral trade is constrained heavily, despite geographical proximity, cultural affinity, and economic complementarities between the two countries. However, the historical tensions, historical mistrust of political elites, and political ill effects in the media, as well as undeveloped trade infrastructure, still remain the greatest obstacles. The Pulwama attack and the abolition of Article 370, as well as the latest action on the Pahalgam issue, have worked negatively to affect trade hopes.
Nevertheless, the opportunities for normalized trade are huge. On the one hand, the economic and social benefits of the two countries include a reduction in informal trade via third countries and an enhanced efficiency in supply chains, among others, such as increased economic integration within the region. It needs a visionary, non-partisan approach, one that puts mutual economic interests, restructuring of the public perception, and confidence-building mechanisms as its key elements.
The major solutions to unlocking this potential include reviving such regional agreements as SAFTA, investing in modern border infrastructure, and ensuring responsible journalism. In case trade can be viewed as a bridge and not a battlefield, trade can not only spur economic growth, but can also help in making South Asia peaceful and friendly in the long term. Sustainable trade needs, thus, to be regarded not only as an economic instrument but also as a diplomatic window of opportunity.
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