A War Between India and Pakistan: Does It Affect Thailand?

As diplomatic relations teeter on the precipice between India and Pakistan, the specter of a renewed military conflict between these two nuclear-armed neighbors raises grave concerns far beyond the borders of the subcontinent. While the immediate ramifications would undoubtedly center around South Asia, the economic shockwaves would reverberate across the globe—extending all the way to the heart of Southeast Asia. Thailand, often perceived as a neutral observer in distant geopolitical squabbles, could find itself enmeshed in a crisis not of its own making. But how, precisely, would a conflict between India and Pakistan affect Thailand?

This article delves into the economic ramifications of a war between these two nations, mapping out the probable consequences at the global, regional, and national levels, with a particular emphasis on Thailand’s economic vulnerabilities and strategic posture.

I. The Geopolitical Context: A Powder Keg Reignited

Tensions between India and Pakistan are not new. Since their partition in 1947, the two nations have fought multiple wars, primarily over the contested territory of Kashmir. The possibility of a full-scale war in today’s geopolitical climate—possibly exacerbated by cross-border terrorism, cyber warfare, or escalatory military doctrines—would represent a rupture in South Asian stability.

However, in contrast to past skirmishes, the present-day global economy is vastly more interdependent. India and Pakistan now represent not only geopolitical flashpoints but also integral players in supply chains, energy corridors, and financial markets. Thailand, with its heavily trade-dependent economy, has significant exposure to such external shocks.

II. Global Economic Impact: Disruptions in Trade and Capital Markets

A war between India and Pakistan would instantly jolt global commodity markets. India, the world’s third-largest oil importer, is a pivotal consumer in the global energy demand equation. Any disruption in its consumption due to war would send oil prices fluctuating. Meanwhile, the Strait of Hormuz—a critical artery for global oil shipments—might see increased military activity or insurance premiums, pushing up energy costs globally.

Additionally, South Asia is an important node in global textile, pharmaceutical, and IT service chains. A war would paralyze exports from both India and Pakistan, leading to shortages, contract defaults, and inflationary pressures in partner countries, including members of the ASEAN bloc.

Moreover, capital markets would experience a contagion effect. Foreign investors, wary of regional instability, would pull capital out of emerging markets in favor of safe-haven assets. For Thailand—whose capital markets are deeply enmeshed with global financial systems—this could manifest as a depreciation of the baht, capital flight, and investor hesitancy toward long-term projects.

III. Regional Ramifications: The Southeast Asian Response

The regional impact would be even more profound. ASEAN economies, including Thailand, Malaysia, and Vietnam, are increasingly reliant on smooth trade with South Asia. India, as a key partner in the Indo-Pacific strategy, holds trade pacts and strategic dialogues with ASEAN under frameworks such as the ASEAN-India Free Trade Agreement (AIFTA). A breakdown in Indian logistics and governance capacity due to war would severely constrain regional trade growth.

Furthermore, regional supply chains—particularly in agriculture, electronics, and automotive components—depend on parts and raw materials sourced from South Asia. A war would increase lead times, disrupt just-in-time manufacturing, and force Thai businesses to reorient their sourcing strategies, likely at a costlier margin.

Thailand’s regional security calculus would also be indirectly impacted. As a non-aligned but economically integrated power, Bangkok would face mounting pressure to engage diplomatically, either via ASEAN or broader UN coalitions. Increased defense expenditures may be warranted if the war appears to pull in global actors, compelling Thailand to recalibrate its foreign policy neutrality.

IV. The Thai Economy: Vulnerabilities and Fallout

1. Trade and Investment Exposure

Thailand’s economic growth model is predicated on trade liberalization and investment attractiveness. India is Thailand’s largest trading partner in South Asia, with bilateral trade reaching nearly $15 billion annually. Key sectors include automotive components, rice, electronics, and jewelry. A protracted war would freeze Indian imports, delay payments, and cancel pending tenders—directly affecting Thai exporters.

Moreover, Indian investments in Thailand, especially in the pharmaceutical and software sectors, could be postponed or liquidated. Likewise, Thai companies with operational interests in India (notably CP Group, which has agricultural operations) would suffer immediate operational risks, currency volatility, and potential expropriation under wartime conditions.

2. Tourism and Air Connectivity

Tourism, a cornerstone of Thailand’s service economy, would also suffer. Indian tourists comprise one of Thailand’s fastest-growing markets, contributing significantly to hospitality revenues. War would halt inbound tourism from India and could also disrupt regional air routes, especially if commercial flights are diverted away from South Asian airspace, increasing costs for Thai carriers.

Additionally, heightened global insecurity might deter Western tourists from traveling to Southeast Asia, fearing spillovers. The ripple effect on Thailand’s tourism-dependent provinces such as Phuket, Chiang Mai, and Pattaya could be severe.

3. Energy Prices and Inflation

Thailand is a net energy importer, and any escalation in oil prices due to war-related disruptions in South Asia or the Middle East would strain the Thai economy. Higher fuel costs would inflate transport, manufacturing, and electricity costs, feeding into the broader inflation basket. The Bank of Thailand might face a dilemma between hiking interest rates to tame inflation or maintaining accommodative policies to support faltering growth—each with its respective costs.

V. Strategic Outlook: What Can Thailand Do?

Thailand cannot remain complacent in the face of potential regional upheaval. Policymakers in Bangkok must consider three immediate strategic imperatives:

1. Diversify Trade and Investment Portfolios: Reduce overreliance on India as a South Asian trade partner by exploring deeper ties with Bangladesh, Sri Lanka, and emerging African markets.

2. Enhance ASEAN Coordination: Leverage its leadership within ASEAN to foster a regional diplomatic initiative that calls for de-escalation and mediation, reinforcing Southeast Asia’s role as a peace broker.

3. Strengthen Economic Resilience: Develop strategic fuel reserves, establish inflation buffers, and encourage greater self-reliance in critical supply chains such as pharmaceuticals and energy.

VI. Conclusion: A Conflict Beyond Borders

Though thousands of kilometers away from the Line of Control in Kashmir, Thailand is not insulated from the economic consequences of a war between India and Pakistan. In today’s globalized economy, geopolitical tremors in one region often produce tsunamis in another. As such, Thailand must remain vigilant, adaptable, and proactive in its economic and foreign policy strategies. The cost of inaction is no longer merely theoretical—it may come at the expense of economic growth, social stability, and strategic relevance in a shifting global order.