"Pakistan set to have a tough time": FIEO CEO on trade fallout after Pahalgam terror attack

Ajay Sahai, Director General and CEO of the Federation of Indian Export Organisations (FIEO), on Friday explained the trade implications between India and Pakistan following the April 22 Pahalgam terror attack, saying that Pakistan is likely to face significant challenges due to the resulting disruption. He noted that trade relations between the two nations have historically been strained, and the recent developments could further deteriorate the situation for Pakistan. "India did not have good trade relations with Pakistan in any case. Pakistan denied India India Most Favoured Nation (MFN) status, and we imposed a 200 per cent tariff... So it's not great looking into the numbers in comparison to India's overall export of USD 800 billion," Sahai said. "Pakistan's economy is already not doing well, and it is a challenge they will face... Pakistan is all set to have a tough time," he added. According to the FIEO CEO, the trade disruption would not substantially affect India, but Pakistan would need to revisit its import strategies, especially in the pharmaceutical and organic chemicals sectors -- two major categories previously imported from India due to geographical proximity. "Disruption in trade is not going to have any impact on India... On the contrary, Pakistan may have to look into where they import Pharma and Organic chemicals, which are the two main products which we were exporting to Pakistan because they have that advantage of proximity. Probably that advantage will no longer be with Pakistan," Sahai stated. This comes after India decided to halt trade with Pakistan following the deadly terror attack in Pahalgam, which claimed 26 innocent lives, mostly tourists and left many injured. As per a Global Trade Research Initiative (GTRI) report, trade relations between India and Pakistan had remained strained since the Pulwama attack in February 2019. At the time, India revoked Pakistan's MFN status and imposed a steep 200 per cent duty on its imports. Despite the official trade freeze, India exported goods worth USD 447.7 million to Pakistan during the current fiscal year (April 2024 to January 2025), according to official data. In contrast, India's imports from Pakistan were negligible, amounting to just USD 0.42 million.With formal trade channels now shut, Pakistan is expected to rely more on informal trade routes through third countries. GTRI estimates that nearly USD 10 billion worth of trade still takes place through re-export routes, mainly via the United Arab Emirates (UAE) and Singapore. Pakistan reportedly imports several Indian products through these third countries, including pharmaceuticals, chemicals, cotton, tea, coffee, dyes, onions, tomatoes, iron, steel, sugar, salt, and auto parts. On the other hand, India may import goods such as Himalayan pink salt and dried fruits, including dates, apricots, and almonds, from Pakistan through similar indirect routes. The latest move is expected to increase the cost of such goods in Pakistan and further complicate supply chains.