The current breakdown of ties between Afghanistan and Pakistan due to fierce cross-border fighting that has left several dead on both sides, has severely impacted the trading relationship between the two countries. The trade war, which began after the so-called ceasefire was declared in October, has pushed Kabul to look at other partners like India, Iran, the United Arab Emirates (UAE), to diversify its trade and boost its sagging economy. Before the borders were arbitrarily closed by Pakistan the same month, truckloads of goods used to ply the roads with lorries regularly crossing the border checkpoints of Torkham in Khyber Pakhtunkhwa and Chaman in Balochistan. The lorries are now halted, Afghan markets have fallen silent while the lives and livelihoods of Afghan farmers, merchants and traders have been adversely impacted.
Islamabad cited Kabul’s use of heavy weaponry against Pakistan for its decision to close the border points. It didn’t stop Pakistan from doing the same, targeting Afghan border checkpoints when fierce clashes erupted between the two neighbours over the terrorist activities being carried out by Tehreek-e-Taliban Pakistan (TTP), on Pakistani soil. Smaller border crossings of Kharlachi (located in Pakistan’s Kurram District, within the Khyber Pakhtunkhwa province, connecting to Afghanistan’s Paktia province), Angoor Adda (South Waziristan district of Pakistan’s Khyber Pakhtunkhwa province) and Ghulam Khan (North Waziristan District), were also closed in October, due to the intensifying conflict.
Tensions between Pakistan and Afghanistan hit a peak in October when Islamabad conducted airstrikes inside Kabul, marking a significant escalation in military aggression. Pakistan claimed that it was compelled to take this action, accusing the Afghan Taliban of sheltering the Tehrik-i-Taliban Pakistan (TTP) rebels, who killed Pakistani troops in September. Kabul has consistently denied these allegations.
Although a fragile ceasefire was brokered between the two neighboring countries by Türkiye and Qatar, Pakistan chose to once again hit out at Afghanistan at its most vulnerable point: its landlocked geography. Afghanistan shares a nearly 2,640-kilometer border with Pakistan, which makes it nearly impossible for the war-torn country to engage in trade with others, particularly India, without access and approval from Islamabad. Pakistan is Afghanistan’s largest trading partner and its primary export destination, providing a critical portion of Afghanistan’s essential commodities, including 71% its cereal imports and 43% of its cement.
This time, however, Afghanistan, ruled by the Taliban, decided to retaliate in equal measure.
As a result, bilateral trade which used to be $2 billion to $3 billion annually, has fallen by 45%, according to the Afghanistan Chamber of Commerce and Investment (ACCI).
The relationship between Pakistan and Afghanistan has historically been strained by the Durand Line, the 2,640 km border established by the British in 1893, which Afghanistan has never officially recognised. While Pakistan was a key supporter of the Taliban in previous decades, relations soured almost immediately after the group returned to power in Kabul in 2021.
Formal trade between the two is primarily governed by the Afghanistan-Pakistan Transit Trade Agreement (APTTA), brokered by the U.S. and signed in 2010 which gives Kabul duty-free access to Pakistani ports (Karachi and Port Qasim) and land routes (Torkham, Chaman-Spin Boldak and others) for imports, plus exports to India via Wagah, while giving Pakistan access to Central Asia via Afghanistan. However, it left India out of the agreement, and Afghanistan got access to Indian and Chinese markets via Pakistani sea-ports and land crossing points. The goods to India had to be carried by Afghan trucks using Pakistan as the transit hub.[1]
Still, trade between Afghanistan and India has continued. In 2025, it was $1.15 billion, marking a resilient recovery despite the lack of formal diplomatic recognition of the Taliban administration. Relations have significantly thawed, characterised by high-level business summits in New Delhi and a strategic shift toward bypassing Pakistan through Iranian and air routes.
In financial year 2024-2025, imports from Afghanistan were $689.81 million, showing a 7.4% increase over the previous financial year. India’s exports to Afghanistan stood at $318.91 million[2] indicating consistent commercial engagement. Some of the top export items from Afghanistan to India are fresh and dried fruits (figs, raisins, apricots), spices (saffron, cumin, and 90% of India’s hing supply), and insect resins. Indian exports are pharmaceuticals (nearly 30% of the total), textiles, machinery, sugar, tea, and rice.
The Taliban’s outreach to India has intensified as tensions with Pakistan escalated. On November 19-25, 2025, Afghanistan’s Taliban Minister for Commerce and Industry Alhaj Nooruddin Azizi visited to India with a largee trade delegation – the first visit by an Afghan commerce minister since 2021. It followed the elevation of India’s technical mission in Kabul to full embassy status in October 2025.
Minister Azizi met with External Affairs Minister Dr. S. Jaishankar to discuss bilateral ties, connectivity (specifically the Chabahar Port), and people-to-people exchanges. He also held delegation level talks with his Indian counterpart Piyush Goyal.
Both sides announced the initiation of the Air Freight Corridor on the Kabul-Delhi and Kabul-Amritsar sectors to boost perishable goods trade. The ministers agreed to reactivate the Joint Working Group on trade, commerce and investment and institutionalise a Joint Chamber of Commerce and Industry.
Seeking to bypass recent border tensions with Pakistan, the Afghan delegation invited Indian industrialists to explore sectors like mining, agriculture, healthcare, and IT. Specific incentives include free land allocations for industrial projects, five-year tax exemptions for new industries and a reduced 1% tariff on raw materials and machinery. The goal is to double or triple exports to $2 billion to $3 billion.
New Delhi has approached its relationship with the Taliban with caution. Although India has not officially recognized the Taliban regime, bilateral engagement between India and the Taliban has stepped up in recent months. This shift is largely driven by a combination of opportunity and necessity, particularly in light of the deteriorating relations between India and Pakistan. India clearly seeks to counterbalance Pakistan’s influence in the region.
However, the dynamics of this engagement are complicated by potential shifts in Pakistan’s foreign policy.
Should Pakistan decide to lift its blockade and foster a more cooperative relationship with Kabul, it could significantly alter the trade and economic landscape in the region. Indian trade routes to Afghanistan, which have been developed over years, would likely face increased competition from Pakistan, potentially undermining India’s influence in the Afghan trade.
Thus, while India seeks to navigate its relationship with the Taliban to protect its interests, it remains a delicate balancing act, necessitating adaptable strategies with regional dynamics are continuously evolving, and the future of Afghanistan still uncertain.
Nayanima Basu is Adjunct Fellow, and an author.
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References:
[i] Paswan, N.K. India–Nepal Trade and the APTTA: Issues and Prospects. (PDF). Indian Council for Research on International Economic Relations (ICRIER), 2018. https://icrier.org/pdf/nk_paswan.pdf
[ii] Government of India, Department of Commerce. Export Import Data Bank – Country-Wise Trade. https://tradestat.commerce.gov.in/eidb/country_wise_ttrade