India Strategic Review
The ISR features an assessment of key developments, trends, and policies pertaining to India’s immediate and continental neighbourhood and is authored by Lt. Gen. Deependra Singh Hooda (Retd.), Distinguished Fellow for Military Strategy.
The dominant theme of this month's review is the cascading impact of the US-Israel war on Iran on South Asian economies. With Brent crude surging nearly 60 per cent to above $110 per barrel by late March, most countries have been forced to raise fuel prices and bring in rationing. The Centre for Global Development has identified Pakistan, Bangladesh, and Sri Lanka as among the most at-risk countries globally.
India, though better placed because of its strong economy and diversified supply, has also faced rising LPG prices and concerns about shipping through the Hormuz Strait. At the same time, India has stepped in to assist neighbours, supplying 27,000 tonnes of diesel to Bangladesh, delivering 38,000 tonnes of petroleum products to Sri Lanka, and assuring Nepal of uninterrupted fuel supplies.
The Pakistan-Afghanistan conflict escalated sharply in March, with Pakistani airstrikes hitting Kabul, Bagram, Kandahar, and Khost and Taliban retaliatory attacks along the border. The deadliest incident occurred on March 16, when the Omid Addiction Treatment Hospital in Kabul was bombed, killing 408 people. A five-day Eid ceasefire, announced on March 18, collapsed almost immediately after its expiry on March 25. Afghanistan's humanitarian and human rights situation also continued to worsen, with large-scale displacement, rising food prices, and severe shortfalls in international humanitarian funding.
For Pakistan, the Iran war has raised immediate economic costs, generated domestic instability and sharpened external balancing pressures. Higher oil prices threaten to widen the current account deficit, accelerate inflation and strain fiscal resources already constrained by the country’s $7 billion programme with the International Monetary Fund. The killing of Iran's Supreme Leader, Ayatollah Khamenei, generated violent Shia protests across the country, with a mob breaching the US Consulate in Karachi and prompting the US Marine Security Guards to open fire, killing 10 protestors.
On the diplomatic front, Islamabad sought to balance condemnation of the attacks on Iran with outreach to Saudi Arabia and other Gulf states. Pakistan is attempting to mediate between Washington and Tehran by relaying a US 15-point peace proposal to Iran. However, Iran has rejected the US proposal and stated that it does not plan to engage in negotiations.
In Bangladesh, the newly elected BNP government under Prime Minister Tarique Rahman faces major economic and political challenges. GDP growth has declined to 3.49 per cent, inflation remains above 8 per cent, and the Iran war has compounded the energy crisis. The opposition is threatening street protests over the delay in implementing the July Charter, which seeks to introduce sweeping constitutional reforms.
There are tentative signs of a thaw in India-Bangladesh relations, with the chief of the Directorate General of Forces Intelligence visiting New Delhi and Bangladesh's High Commissioner to India meeting External Affairs Minister Dr. S. Jaishankar on March 20. The Indian High Commissioner to Bangladesh, Pranay Kumar Verma, also met with the Bangladesh Commerce and Finance Ministers to discuss expanding economic cooperation.
In Nepal, the March 5 general election produced a landslide victory for the Rastriya Swatantra Party, led by Balendra "Balen" Shah, marking a major generational shift in the country's politics. Balendra Shah was sworn in as Prime Minister on March 27 and moved quickly to implement the report on the 2025 Gen Z uprising, leading to the arrest of former Prime Minister KP Sharma Oli.
In Sri Lanka, the Iran war is severely testing the country's fragile economic recovery, with fuel queues and rationing raising fears of a repeat of the 2022 economic collapse. Sri Lanka was also drawn directly into the conflict’s maritime spillover after the sinking of the Iranian frigate IRIS Dena off its coast. President Anura Kumara Dissanayake subsequently made clear that Sri Lanka would remain neutral and would not permit its territory to be used by either side in the conflict.
To read this issue please click India Strategic Review, Vol. VII, Issue 3.
