The geopolitical tensions between India and Pakistan have once again flared, with significant implications for the South Asian region. The latest escalation, triggered by a terrorist attack in Indian-administered Kashmir on April 22, 2025, which killed 26 civilians, including a Nepali national, has brought the two nuclear-armed neighbours to the brink of conflict. For Nepal, a landlocked nation heavily dependent on India for its trade, these tensions pose a direct threat to its supply chain for food and essential commodities. This comprehensive analysis explores Nepal's vulnerabilities, the economic and social impacts of potential disruptions and the strategies being pursued to mitigate these risks, drawing on recent data and regional insights.

India-Pakistan conflict has economic ramifications beyond the immediate conflict zone. India's strategic role in global and regional supply chains means that disruptions in its trade networks can ripple across South Asia, impacting neighbours like Nepal. Nepal's open borders with India and its reliance on Indian transit routes make it particularly susceptible to these disruptions.

Nepal's economy is intricately linked to India, which accounts for over 88.60 per cent of its foreign trade. In fiscal 2022-23, bilateral trade reached Rs 1134.53 billion (US$8.36 billion), with Nepal importing goods worth Rs 1027.84 billion and exporting Rs 106.69 billion. In contrast, trade with Pakistan is minimal, with exports of US$2.09 million and imports of US$4.27 million in 2024. Key imports from India include food grains, fuel, medicines and agricultural inputs like fertilisers and seeds, which are critical for Nepal's food security and economic stability.

Nepal's growing dependence on food imports is a significant concern. Between 2015 and 2020, imports of key agricultural products surged by 65 per cent, with the agro-imports bill reaching Rs 220 billion in 2019 and a record Rs 250 billion in 2020. Maize imports alone were worth Rs 71 billion over a decade, highlighting the scale of reliance on external sources. Regional geopolitics, particularly Nepal's economic ties with India, are a key driver of this dependency, making any disruption in trade routes a potential crisis.

Heightened border security or military activity along the India-Pakistan border could lead to delays or restrictions at transit points, affecting the flow of goods into Nepal. The 2015 India-Nepal border blockade, which caused Rs 200 billion in economic losses, serves as a stark reminder of this vulnerability. Nepal's reliance on Indian food grains means that any disruption could lead to shortages of staples like rice and wheat. This would drive up prices, disproportionately affecting low-income households who spend a significant portion of their income on food.

Nepal imports nearly all of its petroleum products from India. Disruptions in fuel supply could paralyse transportation, hindering the distribution of food and commodities within the country and impacting agriculture and industry. Nepal's agricultural sector, which employs a large portion of its population, depends on imported fertilisers and seeds. Delays could disrupt planting and harvesting cycles, threatening rural livelihoods and national food security. Nepal's trade deficit, which reached Rs 861.38 billion in the first seven months of FY 2024/25, could widen further if imports are disrupted. The projected economic growth of 4.4 per cent in 2025 could be at risk if investor confidence falters.

The economic and social consequences of supply chain disruptions are profound. Food insecurity could worsen, particularly for low-income populations, as rising prices make staples unaffordable. The agricultural sector, the backbone of Nepal's economy, faces risks from delayed inputs, potentially reducing yields and increasing reliance on imports. Economically, disruptions could exacerbate Nepal's trade deficit and hinder its progress towards graduating from least developed country (LDC) status by 2026.

Socially, persistent shortages and price hikes could fuel unrest, as seen during the 2015 blockade when public frustration mounted. Nepal's government may face pressure to secure alternative supply routes or subsidies, straining public finances. The loss of a Nepali national in the Kashmir attack has also heightened domestic concerns, with Nepal expressing solidarity with India while calling for de-escalation.

Investments in domestic agriculture can reduce reliance on food imports by enhancing local production, crucial for food security and economic resilience. However, land fragmentation reduces efficiency, with studies showing significant productivity losses. Outdated practices, like manual labour and monocropping, further lower yields and harm the environment. Policies promoting land consolidation and modern, sustainable techniques, such as precision agriculture, are vital. Funding is essential for providing farmers with tools, training and market access. Despite economic, social and environmental complexities, strategic investments and policy support offer a path to sustainable food security.

The India-Pakistan tensions, while not directly involving Nepal, pose significant risks to its supply chain for food and commodities due to its heavy reliance on India. The potential for trade disruptions, coupled with Nepal's growing food import dependency, threatens economic stability and food security. However, through trade diversification, enhanced local production and diplomatic engagement, Nepal can build resilience against such geopolitical shocks. The recent ceasefire offers a reprieve, but the fragility of regional stability underscores the need for proactive measures to safeguard Nepal's economic and social well-being.

Kayastha holds a Ph.D. in Journalism and Mass Communication