India's Trade with Pakistan 2006-15

With the recent Uri terrorist attack that killed 18 Indian soldiers, tensions between India and Pakistan are running particularly high. The Indian public is seething with rage, demanding reprisal attacks and the media is doing its part in stoking the fire. So far, apart from strongly denouncing Pakistan for sponsoring cross-border terrorism, the Indian government has not provided any substantial response. Which got us thinking, apart from military action could India take any other steps to send a message to Pakistan? Reconsidering the Indus river treaty is being discussed in some circles but could India make any trade-related moves?

Turns out, most likely, it cannot. India's trade with Pakistan is a paltry $2.4 Billion. That is less than 0.5% of India's total trade volume. India's exports to Pakistan amount to ~$2 Billion and most of them are made up of cotton and organic chemicals. An insignificant amount of unimportant commodities.

It is still interesting to look at growth in Imports from and Exports to Pakistan in the last 10 years. Imports and exports from Pakistan have increased at an annual rate of 5%. India's overall imports and exports to the rest of the world have increased at a faster annual rate of 8%. Small and growing steadily, trade between the two countries has surprisingly not dried up regardless of how bad relations have gotten between the neighbors. Even after the 26/11/2008 Mumbai attacks, trade dipped only slightly. Trade, however small, seems too important and mutually beneficial to let go off completely.