India-Pakistan trade collapses near zero

Trade is usually the first thing governments say they can restore later. But between India and Pakistan, that “later” keeps moving. One year after Operation Sindoor and the May 2025 ceasefire, trade is still near zero, the main land crossing is still shut, and Pakistani airspace is still largely closed to Indian carriers. What changed this week is that the freeze now looks less like a temporary punishment and more like the new baseline. (Moneycontrol, May 7, 2026; ET Now via MSN, May 7, 2026; Dawn, May 7, 2026.) ### Why does the trade number matter? Because the number tells you this rupture is real, not symbolic. Bilateral trade had already been shrinking for years, but the latest reporting pegs it at roughly $1.2 billion before the latest collapse and now near zero. That is tiny by the standards of two neighboring economies this large, but it still mattered for specific goods, specific traders, and the communities built around the border route. (Moneycontrol, May 7, 2026.) ### What actually shut down? The big piece is the Attari-Wagah corridor — basically the main formal land trade artery between the two countries. Once that closes, trade does not just “slow.” It falls apart. Some goods can still move indirectly through third countries, but that is slower, costlier, and harder to scale. So even when governments do not say “nothing can move,” the practical outcome can still be near-zero commerce. (Moneycontrol, May 7, 2026.) ### Why are flights part of the story? Because this is not only about exporters and importers. Pakistani airspace restrictions have forced Indian airlines onto longer routes, and the cost is large enough that Indian media are now putting annual losses in the thousands of crores of rupees. That means higher fuel burn, tougher scheduling, and weaker economics on westbound routes. On Pakistan’s side, the damage shows up differently — more strain on access to some pharmaceuticals and industrial inputs that had been easier to source from India. (ET Now via MSN, May 7, 2026; Moneycontrol, May 7, 2026.) ### So is this mainly Pakistan’s problem? Not really. Pakistan is more economically fragile, so the pain is sharper there. But India is not untouched. Airlines absorb rerouting costs. Border traders lose business. And both sides lose the small but useful stabilizer that commerce can provide during bad political periods. Trade was never going to solve the rivalry, but it did create routines. Those routines are now broken. (ET Now via MSN, May 7, 2026; The Diplomat, May 6, 2026.) ### Why does the rhetoric matter now? Because the economic freeze is happening alongside harder military signaling, not alongside diplomacy. Pakistan’s defence minister Khawaja Asif said this week that any future Indian “miscalculation” would draw a more intense and decisive response. That kind of language matters because it tells businesses, airlines, and border residents not to expect normalization soon. (Dawn, May 7, 2026.) ### What about life near the border? That is the part numbers miss. Families in Jammu and Kashmir are still living with the aftereffects of shelling, displacement, drills, and constant uncertainty. In Punjab, police this week linked low-intensity blasts near security sites to suspected ISI-backed designs, which adds another layer of tension even when casualties are avoided. The catch is that once fear becomes routine, reopening trade gets politically harder, not easier. (CNBC-TV18, May 2026; Indian Express, May 2026; Business Standard, May 6, 2026.) ### Could trade come back quickly? It could, but only if politics changes first. Right now there is no visible dialogue, and the punitive measures have started to harden into structure. That is the real story. A year on, this is not just a post-crisis hangover. It is a new, colder normal — one where the border still exists, but the economic life around it barely does.