India-Pakistan tensions threaten South Asia’s manufacturing ambitions

 Rising hostilities between India and Pakistan are casting a shadow over South Asia’s economic outlook, whose stability is essential for a region increasingly seen as vital to global manufacturing supply chains. India, which has positioned itself as a key alternative to China for international companies seeking to diversify production, now faces a geopolitical flashpoint that could rattle investor confidence and disrupt its industrial growth narrative.

The latest tensions flared after Indian airstrikes hit targets in Pakistan and the disputed Kashmir region, in retaliation for a deadly April attack that killed 26 civilians in Indian-administered Kashmir, according to multiple news reports.

While the threat of escalation between the two nuclear-armed neighbors looms, both countries are also contending with pressing domestic issues -- India with its push to expand high-tech and industrial exports, and Pakistan with a deepening political and economic crisis.

Although military activity along the border has increased, including cross-border shelling and reported aircraft losses, both countries appear to be treading carefully to avoid triggering a full-scale war. The Indian government described its strikes as limited and tactical, aimed at neutralizing alleged terrorist camps, and emphasized that they were not designed to escalate hostilities.

Pakistan claims the Indian strikes killed 26 civilians and downed five Indian fighter jets. India has not confirmed these claims, and local reports in Kashmir mentioned sightings of crashing aircraft during the night.

In Islamabad, Prime Minister Shehbaz Sharif’s administration denounced India’s air campaign as a blatant breach of international law and authorized its military to respond in kind. Pakistani officials continue to deny any link to the April attack, which India says was carried out by militants affiliated with Lashkar-e-Taiba -- a group with a history of violence against India, including the 2008 Mumbai attacks.

The United States has been urging both nuclear-armed countries to step back from the brink, but its leverage appears limited. While Washington has strengthened ties with India in recent years, its influence in Pakistan has waned, in part due to Islamabad’s growing strategic alignment with Beijing.

Since the April attack in the Pahalgam region, India and Pakistan have exchanged sporadic gunfire across the Line of Control. On Tuesday night, hostilities intensified with shelling and air activity that reportedly resulted in civilian casualties on both sides. Indian officials said 15 of its citizens were killed in the latest cross-border bombardments.

Residents near the de facto border in Kashmir recounted a night of chaos. One village south of Srinagar was rocked by explosions and the sight of a flaming jet crashing from the sky, leaving behind scorched debris and the heavy stench of aviation fuel.

Analysts say both governments appear to be seeking room for maneuver, news reports said. India avoided targeting Pakistani military assets, which some see as a deliberate signal to Islamabad that further escalation can still be avoided. Still, uncertainty remains over how Pakistan might respond, especially as its military seeks to maintain influence amid ongoing domestic turmoil.

The April attack marked India’s deadliest terrorist incident involving civilians since 2008. India’s foreign secretary said on Wednesday that the country’s intelligence services had uncovered signs of additional planned assaults, compelling authorities to act both as a deterrent and a preemptive strike.

Pakistan’s top military officer, General Asim Munir, has recently adopted a hardline tone on India. Just before the Kashmir attack, he delivered a speech portraying the ongoing dispute as rooted in deep ideological conflict, reiterating Pakistan’s claim over the contested territory.

The Kashmir region, a flashpoint for decades, remains at the center of tensions. It was the only Muslim-majority state in India until 2019, when New Delhi revoked its autonomy and reclassified it as a union territory -- a move that further inflamed the long-standing dispute between the two neighbors. Both countries claim the region in full but control different portions of it.

https://www.msn.com/en-us/money/markets/india-pakistan-tensions-threaten-south-asia-s-manufacturing-ambitions/ar-AA1EkHk3