The decision was taken during a meeting of the federal cabinet, chaired by the prime minister, to review Pakistan's relations with India. Foreign Minister Shah Mehmood Qureshi and senior officials of the Foreign Office were also present in the meeting.
"A consensus developed during the meeting on not resuming trade with India," said a source.
The source revealed that the cabinet has decided that Pakistan cannot resume trade with India until it restores the constitutional status of occupied Kashmir.
"It is our principled stance not to resume trade with India until the Kashmir issue is resolved," PM Imran Khan was quoted as saying by a source.
"This [decision to restart trade with India] will give off the wrong impression that Pakistan has neglected the people of Kashmir," he said.
The source revealed that PM Imran Khan has categorically said relations between Pakistan and India cannot return to normal unless Kashmiris are given the right to self-determination by India.
Special Assistant to the Prime Minister on National Security Moeed Yousaf said the Economic Coordination Committee's (ECC) had received the recommendation to import cotton and sugar from India as its prices were quite cheap in the country.
He said the ECC forwards its recommendations to the cabinet for approval, in every decision. "The cabinet is the final forum [for decision-making]," said Yousaf.
The prime minister's aide said the federal cabinet made decisions keeping in mind their political repercussions. He added the prime minister has asked the ECC to postpone this matter and had hold consultative meetings with his advisors over the issue.
"The prime minister said categorically in the meeting that no trade will be and cannot be conducted with India till it does not review its unconstitutional August 5 move," said Yousaf.
He said PM Imran Khan also advised his economic team to provide other alternative solutions to importers so that this move could not impact them.
A day earlier as well, the cabinet had shot down the ECC's proposal to import sugar and cotton from India.
The decision to turn down the proposal was taken in a cabinet meeting chaired by PM Imran Khan in Islamabad, hours after Minister for Human Rights Shireen Mazari had said the cabinet would review the ECC's decisions related to trade with India.
Taking to Twitter, the minister had said it is only after the cabinet's approval that the decision will be considered "approved by the government".
"Just for the record — All ECC decisions have to be approved by cabinet & only then they can be seen as 'approved by govt'! So today in the cabinet there will be a discussion on ECC decisions including trade with India and then the government decision will be taken! The media should be aware of this at least!" Mazari wrote in a tweet.
On Wednesday, Federal Finance Minister Hammad Azhar had announced the government's intention to import sugar and cotton from India.
The decision was seen as an important milestone in the slowly warming ties between the two neighbouring countries.
The minister, in his first press conference since being given the finance portfolio, had spoken about the high prices of sugar in Pakistan, noting that the government had allowed sugar to be imported from other countries, but the price of the commodity in the supplier countries had risen considerably.a
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