Trucks carrying Pakistani cement to India wait for clearance at Wagah border, in Feb 2019

Many policy experts argue that under the current circumstances, India should refrain from resuming trade with Pakistan

According to recent media reports, it was state that, Pakistan will “seriously examine” whether to restart trade with India, said its newly appointed Foreign Minister Mohammad Ishaq Dar. Responding to questions during a press meet in London, Dar said he had been approached last year by Pakistani businesspersons over the issue, and said any decision would follow a full discussion with all stakeholders. Meanwhile, visiting Singapore, External Affairs Minister S Jaishankar hit out at Pakistan for its “industry-level” support to terrorism, stressing that any talks with Pakistan would need to “face up to the problem”.

Since the Pulwama attack in February 2019, which resulted in the deaths of 40 Indian soldiers, India has taken a hardline stance against Pakistan, accusing it of supporting terrorism. In response to the attack, India revoked Pakistan's Most Favoured Nation (MFN) status and imposed a 200% customs duty on Pakistani goods. Subsequently, Pakistan suspended all trade with India, marking a significant downturn in bilateral relations.

India's External Affairs Minister, S Jaishankar echoed the same sentiments. He emphasized that any dialogue with Pakistan must confront the persistent issue of terrorism. He described the support for terrorism from Pakistan as "sustained" and "almost at an industry level," indicating that India's patience is running thin regarding cross-border violence. The Indian government remains firm that trade cannot resume without tangible actions from Pakistan to address these security concerns.

While some Pakistani officials advocate for restarting trade, citing economic benefits and the high costs incurred from importing goods through third countries, Indian analysts express scepticism. They argue that India's economy does not significantly depend on trade with Pakistan and that resuming trade could be perceived as condoning Pakistan's support for terrorism. Furthermore, political analysts suggest that India's ruling party is unlikely to engage with Pakistan before addressing security issues.

There are several compelling arguments against restarting trade with Pakistan, particularly in light of the ongoing tensions and security concerns surrounding terrorism and the Kashmir issue

India's primary argument against resuming trade is rooted in national security. The Indian government has consistently accused Pakistan of supporting terrorism, particularly in Kashmir. Jaishankar highlighted that any dialogue with Pakistan must confront the "sustained" support for terrorism emanating from the country, which he described as operating at an "industry level". This sentiment is echoed by various analysts who argue that trade cannot be normalized while Pakistan continues to harbour Islamic jihadist groups that threaten India's security.

There is a significant lack of political consensus in both countries regarding trade normalization. In Pakistan, even discussions about reviving trade often face opposition from hardline factions within the government and military, which demand that India reverse its 2019 decision to revoke the special status of Jammu and Kashmir before any economic engagement can occur . India's position is similarly firm; it has stated that it will not engage in trade without substantial actions from Pakistan to address terrorism.

From an economic perspective, many experts argue that India does not have strong incentives to engage in trade with Pakistan. India's economy is significantly larger, and it does not rely on Pakistani imports. The prevailing view among Indian policymakers is that resuming trade would not yield sufficient benefits to outweigh the risks associated with Pakistan's ongoing support for militant activities. 

The history of conflict and distrust between the two nations complicates any potential for trade normalization. Previous attempts at dialogue have often been derailed by incidents of violence or political maneuvering, leading to a cycle of mistrust that makes both sides hesitant to engage economically . The memory of events such as the Pulwama attack, which led to severe trade restrictions, remains fresh in public consciousness and influences current sentiments against reopening trade ties.

Given the ongoing threat of terrorism emanating from Pakistan and the lack of significant changes in its policies towards India, many believe that India should not revive trade with Pakistan at this juncture. The focus remains on ensuring national security and addressing the root causes of conflict before considering any economic engagement.