India-Pakistan trade collapses to near zero

Trade is the part of India-Pakistan relations that usually tells you whether things are merely tense or genuinely broken. Right now it is telling a very clear story — the relationship is still frozen. One year after Operation Sindoor, the ceasefire is holding, but the economic link has almost vanished. The small bit of movement this week was not commercial at all. It was humanitarian: four Pakistani prisoners were sent home through Wagah. ### What changed this week? The immediate news is twofold. First, fresh reporting out of India says bilateral trade has fallen from roughly $1.2 billion in 2024 to near zero a year after Operation Sindoor, with the Attari-Wagah border shut, Pakistani airspace closed to Indian carriers, and India’s side of the Indus Waters Treaty still in abeyance. Second, Pakistan’s High Commission said four Pakistani prisoners were repatriated from India via the Wagah-Attari crossing on Tuesday, May 5. ### Why does “near zero” matter so much? Because India and Pakistan had already spent years shrinking formal trade, so falling from $1.2 billion to almost nothing means the last official channels have basically been choked off. The land route at Attari-Wagah matters symbolically, but it also mattered practically — it was the one to-state commerce is no longer functioning.” ### What is still blocked? Three things stand out. The border trade route remains closed. Pakistani airspace remains closed to Indian airlines, which adds cost and time to flights. And India has kept the Indus Waters Treaty in suspension from its side. Those are not cosmetic penalties. They hit logistics, planning, and investor confidence — the boring machinery that makes normalization feel real. Without those links reopening, talk of a thaw stays mostly rhetorical. ### Who gets hurt first? Pakistan appears more exposed economically, mainly because some businesses there had relied on Indian inputs, including pharmaceuticals and industrial materials. But India is not untouched. Airlines lose efficient routes, border communities lose business, and both sides lose one of the few stabilizers that can survive political crisis. Trade does not solve security conflict, but it does create habits of contact. Those habits are now missing. ### So why return prisoners now? Because even hostile neighbors keep a few narrow humanitarian mechanisms alive. Pakistan and India still exchange prisoner lists twice a year under a consular arrangement, and this week’s handover fits that pattern. The four returnees do not signal a broader diplomatic reset. If anything, the point is the opposite — even with trade frozen, both governments still find it useful to preserve tiny, controlled channels for prisoners and consular cases. ### Does the ceasefire mean relations improved? Not really. It means the shooting stopped. That is important, obviously, but it is a much lower bar than normalization. A ceasefire can hold while trade stays dead, visas stay restricted, and official contact stays thin. That seems to be the current equilibrium — less immediate military danger than a year ago, but no political appetite to rebuild the relationship. ### Why is reconciliation still off the table? Because each side is reading the aftermath differently. In India, Operation Sindoor is being framed as proof that a harder line worked. In Pakistan, the priority is managing the fallout without appearing to concede. That leaves both governments with very little room to reopen trade quickly. The catch is that trade is often the easiest confidence-building step — and if even that is still near zero, bigger diplomatic moves look remote. ### Bottom line The real story is not that India and Pakistan are still enemies. Everyone knew that. The story is that a year later, even the low-level routines of coexistence have not come back. Four prisoners crossed the border this week. Goods, basically, did not.