In the meantime, during the tense world situation, another conflict emerged: India-Pakistan. The long-standing relationship of foes has again come to a crossroads. Many analysts made some comments on its geopolitical implications; some said that it will lead to great tension in the region, thus threatening the security within both countries and the neighboring countries around them. However, in this article, the angle that will be used is not the geopolitical implications lens, but rather its economic implications, specifically its impact on the global supply chain. As we know, the location of these two countries is strategic, with India also one of the top players in today’s global supply chain network; thus, a rising tension in the region can lead to a greater implication on the global supply chain. Henceforth, this is the issue that will be discussed in this writing.
South Asia’s Role in the Global Supply Chain
But before we jump straight to the main course of the discussion, several acknowledgements toward the position of these countries toward the global supply chain are needed. In short, India and Pakistan are central to several global supply chains. India, on the one hand, is a key player in textiles, pharmaceuticals, agribusiness, and increasingly, in electronics and automotive manufacturing. It is the world’s leading generic medicines producer and a major rice and cotton exporter. Furthermore, its services sector, particularly IT, finance, and logistics, is also globally integrated. Meanwhile, Pakistan is a powerhouse in cotton-based textiles, rice production, and pharmaceuticals, which underlines its great mineral potential.
Furthermore, both countries depend on vital land and sea corridors to access Central Asia, the Middle East, and Europe. India’s seaports and its Chabahar link to Iran and Pakistan’s role in the China–Pakistan Economic Corridor (CPEC) highlight these countries’ strategic position in South Asia. To shorten the point, here is why: both of these countries are important actors in the context of the global supply chain in the South Asia region; their role is not just as a “miniature,” but these countries, especially India, are evolving toward a major global supply hub in the region.
Current Flashpoints and Ongoing Risks
While both countries remain central actors in the context of the global supply chain in South Asia, in recent times, the escalation in India-Pakistan relations that occurred in April 2025, initiated by some groups of militants who made some attacks in Kashmir and killed around 26 tourists, has become one of the main “gasolines” that re-trigger great tension between the two nations. Some sources mention that a Pakistan-linked group claimed the attack as their responsibility, prompting India to suspend the Indus Waters Treaty, revoke visas, expel diplomats, and shut borders. However, the Pakistan representative has actually made an address saying that they are not involved in this attack. However, because of this rising tension, Pakistan retaliated by closing Arispace, tightening trade restrictions, and also threatening to suspend the Simla Agreement. This situation thus led to a worsening relationship between the two countries.
An important thing to note is that this escalating tension has many serious implications for the regional transportation and the trade logistics in the region, which thus also lead to an impact on the global supply chain in the region. Key land routes such as the Attari-Wagah border and strategic air routes such as those near Karachi have been closed or restricted. Some cargos are rerouted through third-party countries such as the UAE, which then leads to a bigger cost, longer time, and higher complexity for the global supply chain. Not only that, this situation also led to a bigger war risk in the region, thus causing great uncertainty for the future condition of the region.
Furthermore, the most significant impact caused by this event is the deterioration of business and trade confidence in the region. Companies and many economies around the world are considering South Asia to be unstable and unreliable. With the increasing cost and unpredictability, many companies would diversify their supply chain by searching for another route and path through regions such as Southeast Asia, Latin America, etc. Hence, this situation will lead to a reconfiguration of the global chain route that crosses the South Asia region.
Global Repercussions
Other important things to highlight are that this escalating conflict could send shockwaves that go far beyond the South Asia region and especially affect global businesses, trade networks, and financial markets. When conflicts escalate, many companies that have their supply route going through this region would need to find an “alternative” for a safer and more convenient route. Hence, costs increase, shipping would be delayed, confidence may drop, and uncertainty rises, which then poses a great vulnerability toward the global supply chain system.
The conflict makes logistics less predictable and significantly more expensive. Border closures and restricted airspace turn strategic land and sea corridors into chokepoints. On the other hand, formal trade between the two nations has been suspended since 2019, and the latest escalation has compounded the disruption. Cargo is now rerouted through third countries, which adds several days or weeks to the delivery times and, of course, raises costs. Shipping insurance premiums, particularly war risk coverage, have surged, rising from 0.05% to as high as 1% of a vessel’s insured value.
Documented cases also highlight these impacts. A global apparel brand, for example, faced rising freight and insurance costs when shipments from Amritsar to London were rerouted via distant ports. Pharmaceutical exports, especially India’s generics, which are vital to many developing countries, are facing delays that triggered supply shortages and price hikes. Food commodities like rice and sugar also experienced price volatility.
Beyond goods, the instability has led multinational firms to diversify supply chains to Southeast Asia, Africa, and Latin America. Foreign direct investment (FDI) in the region has slowed as geopolitical risks rise. Financial markets also reacted sharply: while India’s market showed resilience, Pakistan’s suffered significant losses following the April 2025 crisis.
How Companies and Countries Adapt
While the tension rises, an immediate response is needed to address the situation of this rising geopolitical instability in the South Asia region. To adapt is to survive. Hence, many multinational companies will have to adopt a broader range of strategies in the context of reducing supply chain vulnerability. Furthermore, one of the key approaches can be noted as the geographic and supplier diversification, which involves mapping current networks, identifying exposure points, and expanding sourcing to minimize reliance on any single region. Firms could also use multi-sourcing, production modularity, and flexible logistics systems to maintain operational continuity during disruptions.
Other than that, some technologies also need to be used; technologies such as real-time visibility tools, AI-powered risk analytics, and proactive scenario planning have become vital for anticipating and managing risks during this very uncertain geopolitical landscape. As a result, regions like Southeast Asia with rising stars like Vietnam and also some other countries such as Indonesia and Singapore could thus emerge as favored alternatives. On the other side, Ethiopia in Africa and Mexico in Latin America are also gaining traction as part of broader “China Plus One” strategies.
As we know, India has currently become a major rising star in the region as a manufacturing hub or even an innovation hub. However, the rising tension in the regions poses a great concern over regional instability, which has led many firms to hedge their bets and shift operations to more stable environments. Henceforth, this shift reflects the instability and the uncertainty in the region, which can lead to a negative impact on the economy.
To close this writing, a brief reminder is mentioned, which is that the recurring conflict between India and Pakistan could pose long-term risks to supply chain planning by eroding predictability, raising costs, and undermining regional integration. These tensions drive permanent shifts in sourcing strategies, with companies increasingly diversifying away from South Asia. While past cooperation, such as ceasefire agreements and cross-border trade, has shown potential to reduce disruptions, the unstable nature of the relationship limits sustained progress. As a result, businesses prioritize resilience over cost-efficiency, favoring alternative supply hubs in more stable regions. Without long-term political stability, South Asia risks losing its competitiveness in the evolving global supply chain landscape.
