Published Paper Details:

This article examines the economic ramifications of persistent geopolitical tensions between India and Pakistan, two nuclear-armed neighbours with a complex history of conflict and fragile diplomacy. Despite numerous bilateral and multilateral efforts to improve relations, recurrent episodes of political and military standoffs--ranging from cross-border skirmishes to trade suspensions--have consistently disrupted economic cooperation and regional stability. Using a mixed-methods approach that incorporates macroeconomic indicators, trade data, foreign direct investment (FDI) flows, and geopolitical risk indices from 2000 to 2024, this study assesses how heightened political tensions have influenced each country's economic health. Our analysis reveals that surges in bilateral tensions often coincide with sharp declines in trade volumes, investor confidence, and tourism, particularly impacting sectors reliant on cross-border cooperation. India, with a more diversified and resilient economy, demonstrates greater insulation against short-term geopolitical shocks. In contrast, Pakistan exhibits more acute vulnerability, with marked fluctuations in currency value, stock market performance, and external financing terms during periods of heightened conflict. Furthermore, defence spending spikes during such periods lead to fiscal imbalances, diverting resources from developmental priorities in both nations. The findings highlight a significant economic cost to unresolved political disputes and underscore the need for confidence-building measures, regional trade integration, and sustained diplomatic engagement. Policy recommendations include structured dialogue platforms, economic diplomacy initiatives, and leveraging regional institutions like SAARC for economic cooperation, even amid political strains. The article concludes that while geopolitics may continue to dominate the bilateral narrative, economic pragmatism must guide future engagement to foster stability and growth in South Asia.