Pakistan Goods in Transit via Third Country Being Banned: India Tightens Trade Controls After Pahalgam Attack
In the aftermath of the Pahalgam terrorist attack, which left the nation in shock and mourning, the Indian government has swiftly taken decisive steps in the areas of trade and national security. On May 2, 2025, the Ministry of Commerce and Industry issued a notification that imposes a complete ban on the import and transit of goods originating in or exported from Pakistan, even if routed through a third country like the United Arab Emirates (UAE).
This strategic move not only targets direct trade routes but also clamps down on the indirect entry of Pakistani goods via transshipment hubs like Dubai. The Directorate of Revenue Intelligence (DRI), India’s premier anti-smuggling agency under the Ministry of Finance, has already begun enforcing this ban, intercepting suspicious shipments and increasing surveillance on cargo with Pakistani origins.
This blog delves into the background of the ban, why it was implemented, how Pakistan tried to bypass earlier trade restrictions, and what this means for India’s trade policy, national security, and regional diplomacy going forward.
🔴 The Trigger: Pahalgam Terrorist Attack
On April 28, 2025, a terrorist ambush in Pahalgam, Jammu & Kashmir, claimed the lives of multiple Indian security personnel and civilians. The attack was widely condemned across the country and internationally. Preliminary investigations pointed towards elements based in Pakistan as being involved in orchestrating the incident.
This tragic event reignited long-standing concerns about cross-border terrorism and led to demands for stronger punitive action beyond just diplomatic condemnation. The Indian government responded with a multifaceted strategy—military preparedness, diplomatic pressure, and economic countermeasures, including tightening trade restrictions.
What the New Trade Ban Entails
The latest notification from the Ministry of Commerce and Industry, dated May 2, 2025, reads:
“No goods originating in or exported from Pakistan shall be imported into India, whether directly or via a third country.”
This includes:
- Goods manufactured or processed in Pakistan.
- Goods that may have been repackaged or relabeled in UAE, Oman, Singapore, or other transit countries.
- Items shipped under false certificates of origin.
In response, the Directorate of Revenue Intelligence (DRI) has begun actively intercepting and inspecting suspicious shipments at ports and airports. According to an official quoted by The Indian Express, the DRI has blocked multiple consignments traced back to Pakistan but routed through Dubai in an attempt to disguise their origin.
Background: How Pakistan Routed Goods Via Third Countries
India had already revoked Pakistan’s Most Favoured Nation (MFN) status and imposed 100% customs duties on imports from Pakistan following the Pulwama attack in 2019. Official bilateral trade between the two countries had all but come to a halt since then.
However, over the years, indirect trade routes sprang up via:
- Dubai (UAE) – the biggest hub for re-exported goods.
- Singapore and Malaysia – used for electronics, chemicals, and food items.
- Central Asian countries – acting as middlemen for raw materials.
In many of these cases, goods manufactured in Pakistan were repackaged or relabeled in transit countries to remove traceable origins. This allowed some level of unofficial trade to continue, despite the official freeze.
Why India Is Cracking Down Now
The reasons for the crackdown are both strategic and symbolic:
1. National Security First
The Pahalgam attack underlined that economic and security interests are deeply intertwined. Allowing even indirect trade with Pakistan could be seen as enabling a country that is linked to anti-India activities.
2. Cutting Off Economic Benefits
Even small-scale trade benefits Pakistan’s economy through:
- Customs revenue.
- Export growth.
- Job creation in certain manufacturing sectors.
By stopping even transshipment, India ensures Pakistan cannot benefit economically, even indirectly.
3. Tightening the Loopholes
It had become evident that previous bans were being circumvented through third countries. The new rules close those gaps by targeting country of origin, not just point of dispatch.
Role of DRI and Customs
The Directorate of Revenue Intelligence (DRI) plays a central role in enforcing this ban. Key actions include:
- Enhanced scrutiny of cargo entering India via UAE, Singapore, or Malaysia.
- Advanced data analysis using blockchain and shipment tracking to trace goods’ origins.
- Cooperation with Customs to physically inspect and detain shipments.
Goods like textiles, pharmaceuticals, food products, and electronics are under close watch, especially those lacking proper documentation or suspicious labeling.
🌍 Impact on Trade, Business, and Diplomacy
✅ For Indian Importers
Businesses relying on re-exported goods from Dubai may see disruptions, especially in sectors like:
- Spices and dry fruits
- Garments
- Low-cost electronics
Importers will need to review their supply chains and ensure their goods are not inadvertently violating the new ban.
✅ For Indian Exporters
The ban also reinforces the need to diversify export markets and reduce dependence on regional intermediaries that might be engaging with Pakistan.
✅ Diplomatic Signal
By banning even indirect imports, India is sending a clear diplomatic message that it will not tolerate any economic engagement with Pakistan in the wake of terrorism.
📊 Could This Lead to Broader Regional Trade Realignments?
Yes. The ban may accelerate India’s push for alternative trade corridors, including:
- India-Middle East-Europe Economic Corridor (IMEC)
- Stronger BIMSTEC cooperation
- Expansion of trade with ASEAN and Africa
It could also push countries like the UAE to be more vigilant about acting as a channel for Pakistani exports, especially if they want to maintain strong trade ties with India.
A Clear Message in Troubled Times
The Indian government’s decision to ban Pakistan-origin goods via third countries is not merely a bureaucratic update—it is a powerful statement of zero tolerance toward terrorism, even in economic terms. It reflects India’s determination to ensure every aspect of its national strategy, including trade, supports its security goals.
This policy move shows that India is tightening the net, cutting off not just the known sources of hostile engagement but also the backdoors. In doing so, it’s reshaping not only the India-Pakistan trade dynamic but potentially redrawing the region’s trade map.
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