Following recent developments around the Indus Waters Treaty, India is reportedly considering curbs on the export of electronics and e-commerce goods to Pakistan. The move comes amid escalating geopolitical tensions and growing trade concerns between the two nations. Sources indicate that the Indian government is preparing for the possibility of Pakistan shutting down the air cargo corridor. Officials are currently evaluating the potential cost implications this move could have on Indian exporters if airspace restrictions are imposed.
Although direct trade between the two countries is negligible, Indian products—particularly electronics, gold, gems, jewellery and e-commerce goods—continue to reach Pakistan through third-party countries such as the UAE, Sri Lanka and Singapore.
A report by the Global Trade Research Initiative (GTRI) estimates that despite the official halt in bilateral trade, Indian goods worth over $10 billion annually still reach Pakistan via these transshipment hubs. This underscores the continued demand for Indian products in Pakistan, albeit at inflated prices due to complex and costly re-export routes.
The transshipment process works by having Indian companies export goods to ports in third countries, where independent firms store them in bonded warehouses—special facilities that allow goods to be kept without paying customs duties while in transit. At these warehouses, the goods are re-labelled to hide their Indian origin, often stamped as products of the transshipment country, such as “Made in UAE.”
In its press note, the Global Trade Research Initiative (GTRI) offers an example: auto parts worth $100,000 exported from India to Dubai could be re-labelled and then sold to Pakistan for $130,000. The higher price accounts for the cost of storage, documentation, and entry into a restricted market.
