"Trade between India and Pakistan may dip by 20 per cent in 2012-13 due to the current disturbances on the borders and also within Pakistan," the chamber said in a statement.
During the first half of the fiscal year, the two-way trade stood at USD 1.1 billion, it said.
"The on-going atmosphere will have its own repercussions and will be reflected on cross-border trade. Also, Indian businessmen and small merchants who were contemplating trade relations with Pakistan have put their plans on hold," it added. Assocham said that in 2011-12, the bilateral trade stood at USD 1.9 billion.
India's export to Pakistan in the last fiscal declined by 25 per cent to USD 1.5 billion, it said adding, however, imports from Pakistan grew by 48 per cent to USD 400 million.
Sectors which may get affected include food processing, IT, sports goods and textiles, the industry body said.
It also said the ongoing strain in the relations between the two neighbours may impact the entire intra-SAARC trade.
"If things are not handled diplomatically, it may result to serious disruption of trade in Pakistan particularly and SAARC in general and may also accelerate into regional uncertainty," Assocham Secretary General D S Rawat said.
Pakistan mainly export products such as cotton yarn,textiles, leather products, surgical instruments, paper, vegetables and fruits.