Indian Goods Worth USD 10 Bn Enter Pakistan Annually Through Indirect Channels: GTRI

New Delhi, Apr 28 (KNN) Despite minimal direct trade between India and Pakistan, Indian products worth approximately USD 10 billion reach Pakistan annually through indirect channels, according to estimates by the Global Trade Research Initiative (GTRI).

The trade restrictions are circumvented by routing goods through ports in Dubai, Singapore, and Colombo. Indian companies send merchandise to these ports where independent firms unload and store them in bonded warehouses, allowing goods to be kept without paying duties while in transit.

In these warehouses, labels and documentation are altered to indicate a different country of origin. For instance, products manufactured in India may be relabelled as ‘Made in UAE’ before being shipped to countries like Pakistan where direct trade with India is restricted.

This method enables businesses to bypass India-Pakistan trade restrictions while selling at premium prices through third-country routes. The transactions escape scrutiny as the goods appear to originate from countries other than India.

The higher prices account for storage costs, documentation expenses, and access to otherwise closed markets. While this transhipment model isn't necessarily illegal, it operates in a regulatory grey area.

"It shows how businesses find creative ways to keep trade going — often faster than governments can react," noted the GTRI.

Last week, Pakistan suspended all trade with India after New Delhi announced a reduction in diplomatic relations with Islamabad and suspension of the Indus Water Treaty.

This represents the second major disruption to bilateral trade and will effectively eliminate what little trade remained since 2019.

Direct trade between the two countries declined dramatically after India withdrew Most Favoured Nation (MFN) status from Pakistan and imposed 200 per cent duties on imports following the Pulwama attack in February 2019. In August 2019, after India revoked Article 370 pertaining to Jammu and Kashmir, Pakistan announced the suspension of all trade with India.

Currently, limited exports, primarily pharmaceuticals and chemicals, still flow from India to Pakistan. India previously imported fruits, nuts, leather, textiles, and some surgical goods from Pakistan. While the product categories remain unchanged, volumes have decreased significantly.

(KNN Bureau)