Prime Minister Narendra Modi ’s strong address to the nation after the India-Pakistan ceasefire also has a big economic message for Pakistan. “India's stand is very clear... Terror and talks cannot go together... Terror and trade cannot go together…. Water and blood cannot flow together,” PM Modi said. The message is clear - India’s punitive economic actions against the neighbouring country will continue!
In the days following the Pahalgam terror attack , and ahead of Operation Sindoor , India announced several economic and strategic measures against Pakistan with an aim to cripple its already struggling economy.
From the suspension of the Indus Waters Treaty to a complete ban on direct and indirect trade, all these measures are still in place. We take a look how they will hit the Pakistan economy:
Indus Waters Treaty Suspension
The Indus Waters Treaty (IWT), established on September 19, 1960, between India and Pakistan, is a significant international water-sharing agreement.
The World Bank facilitated this agreement through nine years of negotiations, culminating in its signing by then Indian Prime Minister Jawaharlal Nehru and Pakistani President Ayub Khan to oversee shared waterways.
With the Indus Waters Treaty suspended, it will significantly impact Pakistan, as this pact governs the distribution and utilisation of water from the Indus River system and its tributaries, which are fundamental to Pakistan's water needs and agricultural production.
Also Read | Explained: Why India abstained instead of voting no on IMF Pakistan loan
According to the Indian government, Pakistan, as the lower riparian, depends on the Indus system for 80% of its 16 million hectares of farmland and 93% of its total water use—sustaining 237 million people and driving a quarter of its GDP through crops like wheat, rice, and cotton.
“With just 10% live storage capacity (14.4 MAF) at Mangla and Tarbela dams, any disruption in flows threatens catastrophic agricultural losses, food shortages, water rationing in major cities, and rolling blackouts that would cripple industries, including textiles and fertilizers. These shocks could trigger a broader fiscal and foreign exchange crisis in an already fragile economy.”
India has also planned four additional power projects as part of its long-term strategy to effectively utilise water from the western rivers through associated reservoirs. These initiatives will substantially enhance India's hydroelectric generation capacity in Jammu & Kashmir, raising it from approximately 4,000 MW to beyond 10,000 MW. Additionally, these projects will expand the water storage facilities, benefiting both the Union Territory and its adjoining states. The recurring cost to Pakistan will be a big blow.
Direct & Indirect Trade Ban Continues
The DGFT released a notification on May 2 introducing a new provision in FTP 2023 that imposes a complete ban on imports from Pakistan. The directive specifies "to prohibit direct or indirect import or transit of all goods originating in or exported from Pakistan with immediate effect until further orders".
The significant impact on Pakistan is likely to stem from the cessation of 'indirect' imports. Although direct trade between the two nations remains limited, the volume of trade through third countries is considerable.
Reports indicate that goods worth $500 million, including dry fruits and chemicals, are entering India through other countries. Pakistani exports previously sent directly to India, valued at $500 million, are now being routed through alternative nations.
"This comprehensive ban imposed by India including a ban on indirect exports would enable the customs authorities to prevent Pakistan exports from entering India through circumvention," an official told TOI earlier.
Also Read | Indus Waters Treaty suspension: World Bank President Ajay Banga says can’t interfere, only a facilitator
Shipping & Parcel Services Ban Still in Place
The Postal Department had a few days ago halted all mail and parcel exchanges with Pakistan through both aerial and surface routes. That continues.
The government has also implemented restrictions preventing Pakistani-flagged vessels from entering Indian ports. Additionally, ships carrying the Indian flag are forbidden from entering Pakistani harbours. The official notice states: "This order is issued to ensure safety of Indian assets, cargo and connected infrastructure, in public interest and for the interest of Indian shipping."
Also Read | Operation Sindoor: Can Pakistan economically afford a protracted conflict with India as tensions escalate? Here's a reality check
In the days following the Pahalgam terror attack , and ahead of Operation Sindoor , India announced several economic and strategic measures against Pakistan with an aim to cripple its already struggling economy.
From the suspension of the Indus Waters Treaty to a complete ban on direct and indirect trade, all these measures are still in place. We take a look how they will hit the Pakistan economy:
Indus Waters Treaty Suspension
The Indus Waters Treaty (IWT), established on September 19, 1960, between India and Pakistan, is a significant international water-sharing agreement.
The World Bank facilitated this agreement through nine years of negotiations, culminating in its signing by then Indian Prime Minister Jawaharlal Nehru and Pakistani President Ayub Khan to oversee shared waterways.
With the Indus Waters Treaty suspended, it will significantly impact Pakistan, as this pact governs the distribution and utilisation of water from the Indus River system and its tributaries, which are fundamental to Pakistan's water needs and agricultural production.
Also Read | Explained: Why India abstained instead of voting no on IMF Pakistan loan
According to the Indian government, Pakistan, as the lower riparian, depends on the Indus system for 80% of its 16 million hectares of farmland and 93% of its total water use—sustaining 237 million people and driving a quarter of its GDP through crops like wheat, rice, and cotton.
“With just 10% live storage capacity (14.4 MAF) at Mangla and Tarbela dams, any disruption in flows threatens catastrophic agricultural losses, food shortages, water rationing in major cities, and rolling blackouts that would cripple industries, including textiles and fertilizers. These shocks could trigger a broader fiscal and foreign exchange crisis in an already fragile economy.”
India has also planned four additional power projects as part of its long-term strategy to effectively utilise water from the western rivers through associated reservoirs. These initiatives will substantially enhance India's hydroelectric generation capacity in Jammu & Kashmir, raising it from approximately 4,000 MW to beyond 10,000 MW. Additionally, these projects will expand the water storage facilities, benefiting both the Union Territory and its adjoining states. The recurring cost to Pakistan will be a big blow.
Direct & Indirect Trade Ban Continues
The DGFT released a notification on May 2 introducing a new provision in FTP 2023 that imposes a complete ban on imports from Pakistan. The directive specifies "to prohibit direct or indirect import or transit of all goods originating in or exported from Pakistan with immediate effect until further orders".
The significant impact on Pakistan is likely to stem from the cessation of 'indirect' imports. Although direct trade between the two nations remains limited, the volume of trade through third countries is considerable.
Reports indicate that goods worth $500 million, including dry fruits and chemicals, are entering India through other countries. Pakistani exports previously sent directly to India, valued at $500 million, are now being routed through alternative nations.
"This comprehensive ban imposed by India including a ban on indirect exports would enable the customs authorities to prevent Pakistan exports from entering India through circumvention," an official told TOI earlier.
Also Read | Indus Waters Treaty suspension: World Bank President Ajay Banga says can’t interfere, only a facilitator
Shipping & Parcel Services Ban Still in Place
The Postal Department had a few days ago halted all mail and parcel exchanges with Pakistan through both aerial and surface routes. That continues.
The government has also implemented restrictions preventing Pakistani-flagged vessels from entering Indian ports. Additionally, ships carrying the Indian flag are forbidden from entering Pakistani harbours. The official notice states: "This order is issued to ensure safety of Indian assets, cargo and connected infrastructure, in public interest and for the interest of Indian shipping."
Also Read | Operation Sindoor: Can Pakistan economically afford a protracted conflict with India as tensions escalate? Here's a reality check
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