In the backdrop of rising tensions between India and Pakistan, a critical question arises: What would happen if India completely stops exporting goods to Pakistan? Given the economic ties between the two neighboring countries, such a move could have significant implications for Pakistan’s already fragile economy. In this blog, we explore the potential economic fallout, sector-wise impact, and how Pakistan’s economy might cope with such a disruption.

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Current Trade Scenario Between India and Pakistan

India and Pakistan have a limited but important trade relationship. According to recent data:

• Bilateral trade between India and Pakistan stands at approximately $2.5 to $3 billion annually.
• India exports pharmaceuticals, chemicals, machinery parts, raw materials, and consumer goods to Pakistan.
• Pakistan’s economy relies on Indian imports for critical inputs in its textile industry, pharmaceutical sector, and agriculture.

Despite political tensions, this trade serves as a vital link in Pakistan’s supply chain.

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Pakistan’s Economy at a Glance (2025)

Before we dive into the impact, here’s a quick snapshot of Pakistan’s current economic condition:

• GDP Growth Rate: ~3.5% (projected for 2025)
• Inflation Rate: Around 15% (high due to supply shocks and fiscal deficits)
• Current Account Deficit: Estimated at 5-6% of GDP
• Foreign Exchange Reserves: Approximately $12 billion (subject to volatility)
• Textile Sector Contribution: Over 60% of Pakistan’s total exports, employing millions

Pakistan is struggling with high inflation, a large trade deficit, and limited foreign reserves, making it vulnerable to any external shocks.

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How Will a Stop on Indian Exports Impact Pakistan?

1. Industrial and Manufacturing Sectors

Key Inputs Disrupted:

• Raw cotton and textile chemicals from India account for a significant share of Pakistan’s inputs.
• Pharmaceutical active ingredients (APIs) are heavily imported from India.

Impact:

• Textile production costs will rise due to the need to source from costlier markets like China or the Middle East.
• Medicine manufacturing may slow down, causing shortages and higher prices for essential drugs.
• According to industry estimates, input costs could increase by 10-15%, pressuring manufacturers.

2. Inflation and Consumer Prices

Pakistan already faces inflation near 15%. A stoppage of Indian exports will:

• Push raw material prices higher.
• Increase manufacturing costs, which will translate to consumer goods inflation.
• Inflation could spike by an additional 3-5 percentage points within months, worsening the purchasing power crisis.

3. Trade Deficit and Foreign Exchange Reserves

Pakistan’s current account deficit is roughly $20 billion annually, driven by import costs exceeding exports. Without Indian imports:

• Pakistan may need to source goods at higher prices, increasing import bills.
• This could worsen the trade deficit by $1-2 billion in the short term.
• The pressure on foreign exchange reserves might cause currency depreciation, further fueling inflation.

4. Agriculture and Machinery

India supplies essential agricultural machinery parts and chemicals.

• Farmers may face delays or increased costs.
• Agricultural productivity could decline, impacting food security and rural incomes.

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Potential Coping Strategies for Pakistan

• Diversification: Pakistan may ramp up imports from China, UAE, and Turkey, but these alternatives are often costlier and slower.
• Local Production: The government may push for import substitution industries to reduce dependency on Indian inputs.
• Informal Trade: Smuggling and unofficial trade across the border could continue but will remain limited by political controls.

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Final Thoughts: Economic Shockwaves Await Pakistan

If India stops exports to Pakistan, the immediate fallout will hit Pakistan’s economy hard. Rising inflation, supply shortages in key industries, and a deteriorating trade balance will deepen existing economic vulnerabilities. While Pakistan may find alternative suppliers over time, the short-to-medium term effects will strain industries, consumers, and the government’s fiscal stability.

Given Pakistan’s current economic indicators — high inflation, a weak currency, and tight foreign reserves — this disruption could amplify economic challenges significantly, pushing Pakistan into a more precarious economic state.

This blog is for informational purposes only and does not constitute financial or investment advice. The analysis is based on publicly available data and current economic trends, which are subject to change. Readers are encouraged to conduct their own research or consult with a professional before making any economic or business decisions related to the topic.