India-Pakistan tensions may ripple through Malaysian economy, economist warns
An economist has sounded the alarm on possible economic consequences, even for countries not directly involved.
SHAH ALAM – Although India and Pakistan are not among Malaysia’s largest trading partners, ongoing tensions between the two countries could still send ripples through regional markets and potentially impact Malaysia’s trade and financial stability.
As hostilities escalate, Putra Business School Master of Business Administration programme director and economist Professor Dr Ahmed Razman Abdul Latiff has sounded the alarm on possible economic consequences, even for countries not directly involved.
"India and Pakistan may not be among Malaysia’s primary trading partners, but any conflict between these two nations can still have a ripple effect on Malaysia’s trade activities.
"This is why Malaysia’s approach of entering into multiple unilateral trade agreements is not only strategic but also essential in safeguarding the country from the impact of global uncertainties.
"Prolonged tensions between India and Pakistan have the potential to disrupt not just regional economic activities, but also financial markets across South Asia, including Malaysia," he told Sinar Daily.
To bolster the country’s resilience against external shocks, Razman urged a reform of Malaysia’s monetary system.
He stressed that reducing reliance on debt should be central to this transformation to better protect the economy.
"A key step in this direction would be to gradually shift from a debt-based economic model towards one rooted in equity-sharing.
"Malaysia should also actively explore technological innovations such as the development and implementation of a commodity-backed Central Bank Digital Currency (CBDC).
"By tying our digital currency to tangible assets, we can reduce exposure to market volatility driven by speculation and fluctuating sentiments," he added.
Tensions between India and Pakistan over the disputed region of Kashmir escalated sharply in May 2025 following a deadly militant attack on April 22 near Pahalgam in Indian-administered Kashmir.
The attack, which killed 26 people, including Indian and Nepalese civilians, was worst on civilians in the region since the 2008 Mumbai attacks.
In response, India launched "Operation Sindoor", a large-scale retaliatory airstrike targeting sites in Pakistan and Pakistan-administered Kashmir on May 7.
Indian officials claimed the targeted locations were used by the militants responsible for the Pahalgam attack, allegedly linked to Pakistan, a claim denied by Islamabad. Pakistan reported that the strikes killed at least 21 civilians and declared the move an act of war.
The Kashmir conflict has its roots in the 1947 partition of British India, when the princely state of Jammu and Kashmir acceded to India despite its Muslim-majority population. This sparked the first of several wars between the two countries, with the territory ultimately split between them by a United Nations-negotiated ceasefire line, now known as the Line of Control.
India and Pakistan have fought wars over Kashmir in 1947, 1965 and 1999 and remained locked in a decades-long rivalry over the region, exacerbated by both countries possessing nuclear weapons.
In 2019, Indian Prime Minister Narendra Modi’s government intensified tensions by revoking the special autonomous status of Indian-administered Kashmir and implementing policies that critics said aimed to change the region’s demography.
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