India on Friday withdrew the Most Favored Nation trade status it had granted to Pakistan, claiming there was evidence of its involvement in a suicide bombing that killed at least 42 paramilitary policemen in the disputed Kashmir region.
The decision came a day after a militant had rammed an explosive-laden car into a paramilitary convoy in the deadliest terror attack in the three-decade history of the troubled region.
"The most favored nation status which had been granted to Pakistan stands withdrawn. The Ministry of Commerce will issue the necessary communication in this regard," India's Finance Minister Arun Jaitley said after a cabinet meeting.
Revoking the status essentially means withdrawing international trade benefits, including include low tariffs and high import quotas, which India had granted to its arch foe Pakistan - a neighbor it has long accused of sponsoring insurgency in Kashmir - in 1996 under World Trade Organization rules.
Jaitley was speaking to reporters in New Delhi after Prime Minister Narendra Modi chaired a high-level security meeting attended by top ministers of the cabinet.
"The Ministry of External Affairs will initiate all possible steps, and I am referring to all diplomatic steps, which are to be taken to ensure the complete isolation from the international community of Pakistan of which incontrovertible evidence is available of having a direct hand in this gruesome terrorist incident," Jaitley said.
The minister also called on the international community to adopt at the earliest a convention on international terrorism "which has been pending for over three decades before the United Nations, particularly because of the word 'terrorism'."
He said the Indian government would make sure that those who were behind Thursday's attack "are made to pay a heavy cost".
Pakistan strongly denied the allegations by India, rejecting "any insinuation by elements in the Indian government and media circles that seek to link the attack to the state of Pakistan without investigations."
The attack took place on a busy national highway, around 20 km (12 miles) from Srinagar, the regional capital, when a suicide bomber detonated near a convoy of several buses of the Central Reserve Police Force.
The attack was claimed by militant group Jaish-e-Mohammad, whose leader Masood Azhar is believed to be hiding in Pakistan.
The idyllic Kashmir Valley - India's only Muslim majority state - in northern India has been battling three decades of an armed rebellion that has left tens of thousands dead and many more injured.
The region, one of the most militarized territories in the world, is divided into India-administered and Pakistan-administered Kashmir, although both India and Pakistan claim complete sovereignty over the region.
The countries have waged two major wars and several minor conflicts over the territory that is separated by a provisional border, making it one of the most militarized regions in the world.
Violence involving militants and security forces surged in the state in the past couple of years since the Indian government launched a major offensive to hunt down militants.
More than 250 militants were killed in 2018, the highest annual toll in more than a decade.
India blames Pakistan for sponsoring terrorism in Kashmir, an allegation Islamabad has been denying with counter accusations that Indian forces were committing human rights abuses against Kashmiris.