The Pakistan cabinet on Thursday rejected a proposal of the Economic Coordination Committee (ECC) to import cotton yarn and sugar from India, sources said.
The U-turn came less than 24 hours after the EEC met and approved the proposal to restart trade ties with India.
The EEC said on Wednesday that import permits would be approved in a bid to rein in inflation, but the move was met with political criticism. Pakistan Finance Minister Hammad Azhar had said the government made the decision “in the interest of the people”.
But on Thursday Interior Minister Sheikh Rashid Ahmed said the decision had been “deferred” until India restored Kashmir’s special status.
Islamabad suspended trade and diplomatic ties with India in 2019, when Jammu and Kashmir was made into a Union Territory. Both countries withdrew their top diplomats, and consular staff were expelled or withdrawn.
There has been a stand-off since, but signs of rapprochement recently have included Prime Minister Narendra Modi and his Pakistani counterpart Imran Khan exchanging letters, as well as a resumption of talks last week on the use of resources from Indus River.
Pakistan’s economy is in the doldrums, a position made worse by a third wave of the coronavirus pandemic.
The import of half a million tonnes of sugar would likely have slashed prices by up to 20 per cent ahead of Ramzan.