Following a period of heightened tensions and military confrontation, businesses along the India-Pakistan border are experiencing a renewed sense of optimism as a fragile ceasefire takes hold. The recent escalation, triggered by a terror attack in Pahalgam in Indian-administered Kashmir, had brought the two nuclear-armed neighbors to the brink of all-out war, disrupting trade and economic activity in the region.

The ceasefire, brokered on May 10, 2025, has offered a glimmer of hope for the revival of cross-border commerce and the normalization of relations. However, the situation remains complex, with both sides still engaged in a war of words and key trade and diplomatic measures remaining suspended.

The recent tensions had a significant impact on trade between the two countries. India suspended a key water-sharing treaty, halted most visas, and stopped all trade. Pakistan responded with similar measures, including the suspension of visas for Indians, a trade ban, and the closure of its airspace to Indian flights. The Attari-Wagah border, the only land crossing between the two countries, was also shut down, causing emotional scenes as families were separated.

The suspension of trade has had a greater impact on Pakistan, which is already struggling with high inflation and a weak economy. The closure of borders has also affected Afghanistan, a landlocked nation that relies on trade routes through Pakistan to facilitate its commerce with India.

Despite the ceasefire, many of these measures remain in place. The Indus Waters Treaty, a key water-sharing pact between India and Pakistan, remains suspended. Both countries have also reduced the staff at their respective high commissions and suspended almost all visas given to people from the other country.

The fragile calm has brought a measure of relief to industries in the northern and western parts of India. Industry experts hope that the ceasefire will stabilize labor availability and revive economic activity, despite recent disruptions affecting key manufacturing hubs. Cautious optimism has begun to seep into Indian trade, industry, and economic circles.

However, challenges remain. Both sides are actively trying to shape perceptions of the conflict, and newspapers and television anchors continue to use combative language. Analysts say that how they frame their wins and losses will have a bearing on not only the strength of the ceasefire and future bilateral relations but also the political performance of each leader's party at home.

Moreover, the recent combat has "obliterated old red lines" in the relationship between India and Pakistan. Experts warn that the threshold for the next war has been lowered, with both sides willing to take greater risks and explore the potential for escalation.

Despite these challenges, the ceasefire offers a window of opportunity for both countries to de-escalate tensions and work towards normalizing relations. The revival of cross-border trade and economic activity would not only benefit businesses but also contribute to building trust and promoting peace in the region.