Indian goods worth over $10 billion enter Pakistan via third countries: GTRI Report

This method helps firms to bypass India-Pakistan trade restrictions and sell at higher prices using the third-country route and avoid scrutiny since the trade appears to come from other countries.

Indian goods worth over USD 10 billion reach Pakistan via third-country trade routes, according to the estimates of the Global Trade Research Initiative (GTRI). In the wake of trade restrictions arising following the dastardly April 22 terror attacks in Pahalgam, GTRI said in a note that some firms are using ports like Dubai, Singapore, and Colombo to send Indian goods to Pakistan, allowing Indian products to reach Pakistan despite trade restrictions.

"GTRI estimates India's Goods worth over USD 10 billion reach Pakistan via this route, annually," the note added. Explaining the creative ways adopted by the exporters, the GTRI added that Indian firms send goods to these ports, where an independent firm offloads and keeps the products in bonded warehouses at the port--places where goods can be stored without paying duties while in transit.

"In the bonded warehouse, the labels and documents are modified to show a different country of origin. For example, Indian-made goods may be relabelled as "Made in UAE". After this change, they are shipped to countries like Pakistan, where direct trade with India is not allowed," the note added.

This method helps firms to bypass India-Pakistan trade restrictions and sell at higher prices using the third-country route and avoid scrutiny since the trade appears to come from other countries.

For example, a firm exports auto parts from India to Dubai, worth USD 100,000. After relabelling them as UAE products, they are sent to Pakistan at USD 130,000. This higher price covers storage, paperwork, and access to a closed market.

"While this transshipment model isn't always illegal, it sits in a grey zone. It shows how businesses find creative ways to keep trade going--often faster than governments can react," the note added. 

Following the terror attack in Pahalgam that killed 26 people, the Indian government has announced several diplomatic measures, such as closing the Integrated Check Post (ICP) at Attari, suspending the SAARC Visa Exemption Scheme (SVES) for Pakistani nationals, giving them 40 hours to return to their country, and reducing the number of officers in the High Commissions on both sides.

The tension between both countries is likely to have a long-lasting impact on trade activities. India also halted the Indus Waters Treaty signed in 1960 in the wake of the Pahalgam attack.