India faces economic setback as Pakistan shuts airspace and suspends trade

Pakistan’s decision to close its airspace to Indian aircraft and suspend all trade with India has triggered immediate concern across Indian economic and aviation sectors. The move, a direct response to India’s recent actions surrounding the Pahalgam incident, is expected to inflict significant financial and logistical losses on New Delhi.

Aviation analysts warn that Indian airlines will be among the first to feel the impact. Rerouting flights to avoid Pakistani airspace will not only lead to longer flight times and delays but also a steep rise in operational costs.

During a similar airspace closure in 2019, Indian carriers lost an estimated $80 million in just a few days. This time, the losses could be even greater. Indian passengers, too, will likely face increased fares and fewer options as airlines struggle to manage disrupted routes.

The economic fallout extends well beyond aviation. India’s exports to Pakistan — which had reached $1.21 billion — will now come to a halt. Major export items affected include cotton, organic chemicals, pharmaceuticals, tea, coffee, spices, and dairy products. These restrictions could hit India’s manufacturing and agricultural sectors hard, especially the middle class and small businesses that rely on cross-border trade.

With Pakistan shutting the Wagah border and banning all Indian imports and exports, Indian exporters now face an immediate loss of a key regional market. Moreover, many Indian travelers may now turn to non-Indian carriers for affordable international travel, further denting the revenues of domestic airlines.

Pakistan’s historic move is being seen not just as a diplomatic counter, but as an economic lever — one that could pressure India by disrupting its trade flows and increasing the cost of connectivity in the region.