The longstanding conflict between India and Pakistan, rooted in the partition of British India in 1947, has been a persistent source of regional instability. The dispute over Kashmir, coupled with historical grievances, religious nationalism, and geopolitical rivalry, has led to multiple wars and recurring military standoffs.
While Pakistan and India agreed to a ceasefire yesterday (10), pending further discussion, a potential re-escalation into full-scale war between these two nuclear-armed neighbours would have catastrophic consequences not only for the subcontinent but also for neighbouring countries, particularly Sri Lanka.
Given its geographical proximity, economic ties, and strategic position in the Indian Ocean, Sri Lanka would face severe political, economic, and security challenges in the event of such a conflict.
Sri Lanka’s relationship with both India and Pakistan is complex and multifaceted. A war between the two could force Sri Lanka into a delicate balancing act, as taking sides could lead to domestic and international repercussions.
Moreover, Sri Lanka’s economy, already fragile after years of crisis, would suffer due to disrupted trade, rising oil prices, and potential refugee inflows. The Indian Ocean, a vital shipping route for global commerce, could become a conflict zone, jeopardising Sri Lanka’s ports and maritime trade.
Additionally, a war could exacerbate existing security concerns in Sri Lanka, including the risk of extremist spillover or foreign interference. The country’s history of ethnic tensions and past insurgencies makes it vulnerable to external shocks, and a regional conflict could destabilise its internal security dynamics.
Security expert and Nanyang Technology University S. Rajaratnam School of International Studies Professor of Security Studies Rohan Gunaratna weighed in on what an escalation to full-scale war would mean regionally.
“A vicious terrorist attack against tourists in Kashmir in the Himalayas has started to destabilise South Asia. The attack prompted India and Pakistan to engage in a protracted border war. Tit-for-tat reprisals have escalated a proxy conflict to a conventional war. In the next phase, if the very existence of Pakistan is threatened, Islamabad will not hesitate to use nuclear weapons,” he said.
“War has started to impede the rapid growth of an entire region – South Asia. Sri Lanka, Bhutan, Nepal, Bangladesh, and the Maldives too will suffer. From the subcontinent, the threat will cascade to the neighbouring regions, including to the Himalayan region. While Israel and the US will support India, China and Turkey will support Pakistan,” Prof. Gunaratna added.
Regional implications of an Indo-Pak war
MitKat (Mitigating Knowledge Age Threats) Advisory Chairman Lt. Gen. Sudhir Sharma provided critical insights into India’s strategic posture in the event of escalating tensions with Pakistan.
His emphasis on restraint, precision, and deterrence suggests that while India is prepared to respond to direct threats, it is not seeking a full-scale war. However, even a limited conflict would have far-reaching consequences for South Asia, with Sri Lanka, despite its neutral stance, facing significant geopolitical, economic, and security challenges.
Addressing India’s breach of Pakistani territory in retaliation for the attacks in Pahalgam, he spoke of India’s new approach to threats of terror in India.
“The terrorist infrastructure on the front was also targeted. Moving forward, if new terror infrastructure emerges specifically targeting India, and we have credible intelligence about it, I believe we should consider taking action, similar to how other nations respond to such threats. This would signal a potential paradigm shift in how we deal with these issues,” he said.
As Lt. Gen. Sharma notes, smaller South Asian nations, including Sri Lanka, prefer to remain neutral in India-Pakistan disputes. Colombo has historically maintained balanced relations with both countries – India as its closest neighbour and largest trade partner, and Pakistan as a key defence supplier and diplomatic ally. However, neutrality may not shield Sri Lanka from indirect repercussions.
Commenting on the potential for a regional spillover, Lt. Gen. Sharma said: “In general, the smaller neighbouring countries are adopting a wait-and-watch stance. They don’t want to get involved in what they perceive as a conflict between two larger powers.
“However, Bangladesh is an exception. There is a possibility it may align more vocally with Pakistan, as it already appears to be doing. We may need to keep some forces alert along that border to prevent any spillover or unrest. Symbolic political support from Bangladesh for Pakistan may be likely, but beyond that, other neighbours – the Maldives, Sri Lanka, and Bhutan – will likely remain neutral and focused on their own interests.”
Economic disruptions
India is Sri Lanka’s largest trading partner, and a conflict could delay shipments, increase insurance costs, and disrupt supply chains.
Responding to a question on threats to India’s IT and BPO industry from Pakistan, Lt. Gen. Sharma explained: “I don’t want to speculate irresponsibly, but my assessment is that such attacks are unlikely. If there is a response, it will probably be directed at border posts or forward bases, not at civilian infrastructure like power plants or internet nodes.
“Keep in mind that their infrastructure – such as dams and critical installations, many of which are exposed – is equally vulnerable. If they strike ours, we could retaliate in kind. This acts as a deterrent,” he reassured.
Although Lt. Gen. Sharma downplayed potential attacks on economic hubs, any further escalation of the conflict could potentially have a spillover effect, impacting a variety of departments. This prospect carries severe economic implications for Sri Lanka, given the island nation’s deep interdependence with regional trade, investment, and geopolitical stability.
Speaking to The Sunday Morning, former Deputy Governor of the Central Bank of Sri Lanka Dr. W.A. Wijewardena outlined the potential risks and necessary policy responses should tensions escalate into a full-scale war.
He emphasised that Sri Lanka’s economy would inevitably feel the shockwaves of an India-Pakistan conflict due to its close economic ties with India. “India has extended significant credit and investment to Sri Lanka,” he noted. “Any instability in India, whether from military engagement, economic sanctions, or market volatility, would directly impact us.”
India is a critical source of Foreign Direct Investment (FDI) for Sri Lanka, particularly in infrastructure, energy, and technology. A war could disrupt supply chains, delay Indian-funded projects, and strain Colombo’s ability to secure further financial assistance. Additionally, remittances from Sri Lankan workers in the Middle East, another key economic lifeline, could decline if regional instability affects Gulf economies.
Implications for US tariff war and impact on SL
When questioned whether an India-Pakistan conflict could derail India’s economic gains from the ongoing US-China trade tensions, Dr. Wijewardena offered a measured perspective. He noted that the US-China tariff dispute remained fundamentally separate from potential regional hostilities, with no direct connection between the two developments.
“The United States has historically maintained balanced relationships with both India and Pakistan,” he noted, suggesting that Washington would likely adopt a neutral stance similar to Sri Lanka’s position.
Consequently, Dr. Wijewardena argued that a hypothetical South Asian conflict would not substantially reshape the broader global economic landscape, particularly regarding the entrenched US-China trade competition.
This analysis suggests that while regional tensions might create localised disruptions, they would be unlikely to affect India’s strategic positioning in the wider geopolitical economic arena.
The imperative of neutrality
Historically, Sri Lanka has maintained a neutral stance during India-Pakistan conflicts, a strategy Dr. Wijewardena strongly advocated revisiting.
“During the 1971-’72 war, Prime Minister Sirimavo Bandaranaike not only remained neutral but also played a mediating role,” he recalled. “Today, Sri Lanka must similarly avoid taking sides, both to protect its economic interests and to contribute to regional de-escalation.”
Aligning with either side in the conflict could jeopardise vital diplomatic and strategic relationships. Antagonising India risks disrupting trade, investment, and critical lines of credit, while alienating Pakistan may undermine defence cooperation and diplomatic backing in multilateral forums.
When questioned about Sri Lanka’s position, the Ministry of Foreign Affairs offered a measured response. Public Diplomacy Division Director General Niluka Kadurugamuwa firmly stated that Sri Lanka would remain neutral, but refrained from elaborating further.
Meanwhile, Deputy Minister of Foreign Affairs Arun Hemachandra acknowledged the sensitivity of the issue, urging a cautious approach while underscoring that Sri Lanka maintained friendly relations with both India and Pakistan.
Kadurugamuwa reaffirmed that Sri Lanka had enjoyed longstanding and resilient bilateral ties with both nations – relationships that, he emphasised, must not be compromised. This underscores Sri Lanka’s commitment to upholding a neutral stance.
However, when asked whether Sri Lanka could act as a mediator to foster peace between the two countries, Kadurugamuwa declined to comment.
Echoing this stance, Cabinet Spokesperson Dr. Nalinda Jayatissa reinforced Sri Lanka’s commitment to non-alignment, emphasising that the country would not entangle itself in power struggles unfolding in the Indian Ocean region.
Speaking at the weekly Cabinet media briefing, he underscored that while Sri Lanka firmly upheld its sovereignty, it remained resolutely opposed to terrorism in all its forms and stood ready to support any initiative aimed at its prevention.
When questioned about Sri Lanka’s contingency planning in the event of a potential escalation between India and Pakistan, Dr. Jayatissa stated that the Government’s foremost priorities were preserving regional stability and ensuring national security. He noted that the evolving situation was being closely monitored by both the Ministry of Foreign Affairs and the Ministry of Finance, although no definitive policy shifts had been announced yet.
A conflict could strain Sri Lanka’s foreign policy, forcing difficult choices. If Pakistan leans on Colombo for symbolic support, India may view such gestures unfavourably, potentially affecting bilateral ties.
Conversely, overt alignment with India could alienate Pakistan, which has previously extended financial and military assistance to Sri Lanka. The island nation’s diplomatic tightrope walk would become even more precarious in such a high-tension scenario.
Recognising the sensitivity of the matter, especially given the divergent narratives emerging from New Delhi and Islamabad, Dr. Jayatissa acknowledged that Sri Lanka must navigate this landscape with measured diplomacy. He reiterated that both India and Pakistan had historically extended support to Sri Lanka and that maintaining cordial ties with both remained essential.
Importantly, he reaffirmed Sri Lanka’s firm position that its land, airspace, or maritime territory would not be used as a platform for military operations against any state. The country’s role, he emphasised, would be confined to promoting dialogue, de-escalation, and the broader pursuit of peace in the region.
As Sri Lanka’s fragile economy continues its recovery from recent crises, the potential spillover effects of an India-Pakistan conflict present a serious threat that demands proactive mitigation.
The nation’s geographic proximity and economic ties to both countries position it as particularly vulnerable to secondary shocks, from trade disruptions and energy shortages to financial instability and potential refugee flows. These risks necessitate immediate contingency planning by policymakers to safeguard Sri Lanka’s hard-won economic stability.
Strategic measures including trade diversification, essential commodity stockpiling, diplomatic bridge-building, and financial market safeguards can be prioritised to insulate the island nation from worst-case scenarios.