As the US-brokered cease-fire deal between Pakistan and India is holding for now, beneath the barrage of drones, hashtags, and hacked perceptions lies the real war—the economy. The frontline is South Asia, but the battleground spans stock markets, trade corridors, energy alliances, and strategic technologies. For India, riding on Ajit Doval’s “Offensive-Defence-Doctrine”, it’s about regional supremacy and for Pakistan, it’s all about survival. But for their global backers, China (against the wishes of the US, Israel, Europe, and Russia), it’s about recalibrating the architecture of power and wealth in a world fast transitioning from unipolar to a multipolar frame. A new world order where many multi-national institutions might become mere bystanders.
With a $3.7 trillion economy, India is not only the world’s most populous nation but also the fastest-growing major economy. According to IMF data, India is projected to grow at 6.8% in 2025, bolstered by robust defence spending, infrastructure expansion, and digital innovation.
Behind that growth is a swelling Western alliance. The US and EU investments in Indian tech and energy sectors reached $87 billion in cumulative FDI since 2022. India’s semiconductor ambitions, once aspirational, are now strategically vital. The Western bloc sees India as a non-autocratic tech alternative to China. In recent years, there has been a notable shift of manufacturing and assembly facilities from China to India, driven by geopolitical considerations, Trumpetized-trade-wars and the desire for supply chain diversification. For instance, US-based Micron Technology has invested $2.75 billion in a semiconductor manufacturing plant in Gujarat, while Tata Group is establishing a $3.6 billion semiconductor assembly and test facility in Assam.
India has become a pivotal player in global healthcare, particularly in vaccine production. The country is the world’s largest vaccine supplier by volume, accounting for over 60% of global vaccine production. The United States and India have also launched the Initiative on Critical and Emerging Technology (iCET) to enhance cooperation in developing fields such as artificial intelligence, quantum computing, semiconductors, and wireless telecommunication.
Israel’s role is especially significant. Tel Aviv’s cutting-edge cybersecurity firms—like NSO Group and Cellebrite—have quietly collaborated with Indian intelligence and defence to fortify against Chinese digital intrusions. Since 2023, joint military-industrial ventures have developed AI-powered loitering munitions and drone swarm technologies, used in recent operations near the Line of Control. Tel Aviv also benefits: India is now Israel’s second-largest arms customer, surpassing $3 billion in annual defence trade.
Pakistan’s economy, by contrast, is brittle. Foreign reserves hover near $6.3 billion as of April 2025, barely enough for six weeks of imports. Inflation touches 33%, and debt servicing to China alone crosses $23 billion under CPEC (China-Pakistan Economic Corridor). Yet Pakistan’s value lies in its geography and access. If Afghanistan is dubbed the graveyard of empires, then the Pakistani establishment, with proven credentials, strongly believes the country to be the breeding ground for superpowers.
The Gwadar Port, upgraded with Chinese dual-use capabilities, offers Beijing a gateway to the Indian Ocean, bypassing the US-patrolled South China Sea chokepoints. Economic stakes for China are enormous: over $62 billion has been funnelled into Pakistan’s infrastructure, energy, and military installations—effectively turning the corridor into a “Belt and Road fortress.”
If Pakistan collapses economically or politically, China risks both a sunk investment and the loss of a critical node in its 5GW architecture. Hence, Beijing’s injection of a $1.8 billion emergency line of credit to Islamabad in March 2025 wasn’t just bailout diplomacy—it was strategic insurance.
China’s Stakes: Redefining Economic Gravity
China’s ambitions are not merely regional. With the yuan now accounting for 11% of global reserves—up from 3% in 2020—Beijing is pushing to dethrone the US dollar and dominate next-gen technologies like 6G, quantum encryption, and AI warfare systems.
China’s 5GW playbook involves controlling both infrastructure and influence. The stakes? Trillions in future trade routes, control over global digital norms, and a new international financial order that doesn’t begin in Washington. The Digital Cold War is a firewall against decoupling, and Beijing is betting that by testing its model in Pakistan, it can scale globally.
China’s multifaceted approach, encompassing financial innovation, technological advancement, and strategic infrastructure development, reflects its ambition to play a central role in shaping the future global order. These efforts are part of a broader strategy to establish a new international financial and technological landscape that offers alternatives to existing Western-dominated systems.
The U.S. and Europe: Economic Containment and Alliance Engineering
For Washington and Brussels, backing India is not just about defence, it’s about economic continuity and ideological alignment. With China’s dominance over rare earths and critical digital infrastructure, the West views India as a counterweight for supply chain resilience.
Europe’s economic exposure to China, now seen as a strategic vulnerability, has prompted pivots. Germany’s Siemens and SAP, and France’s Dassault, are quietly expanding in India while scaling down in Chinese territories. EU-India trade volume crossed $130 billion in 2024, a 20% increase year-on-year, and a proposed FTA (Free Trade Agreement) now hinges on strategic tech safeguards.
Russia: The Silent Equilibrist
Caught in the middle, Russia walks a tightrope. Officially neutral, Moscow leans toward Beijing geopolitically—but economically, it flirts with India. Since the Ukraine war, India has become the largest buyer of Russian oil, circumventing Western sanctions through rupee-ruble settlements and yuan-based trade.
At the same time, Moscow has enhanced military ties with Pakistan—quietly supplying helicopter parts, tank upgrades, and surveillance tech. This dual strategy is intended to secure Russian influence across the region without choosing a side.
A leaked GRU assessment shared with this reporter describes the South Asia theatre as “a controlled burn zone” where Russia gains by playing broker, not belligerent. “Russia wants to avoid overcommitment. It will support whichever side gives it more breathing room from NATO encirclement,” said a former Russian diplomat now in exile.
What’s Truly at Stake: A Reordering of Global Economic Power
If this Digital Cold War persists or escalates, then a global trade realignment is inevitable. Supply chains will bifurcate between Chinese and Western systems. Since India stands to gain, therefore, it has more at stake than Pakistan by persisting with the “Offensive-defence doctrine” of India’s national security advisor, Ajit Doval. Pakistan could lose out on this trade realignment unless underwritten by China.
Secondly, this cold war will intensify currency wars. The dollar-yuan tug-of-war will determine if future global trade is denominated in Bretton Woods or Beijing-backed systems. As of now over 80% of the world trade is underwritten by the US Dollar and Yuan is yet to gain a position to challenge but with crypto currencies gaining momentum, dollar dominance might end.
Energy Corridors Will Shift. With China securing routes via Pakistan and Russia redirecting flows to India, Middle Eastern powers may reconfigure their alliances, perhaps even normalizing with Israel faster. The Tech Divide Will Deepen as well. Western AI, chips, and cloud infrastructure will become more exclusionary. The China-led Digital Silk Road may become an alternative internet entirely.
For sure, this is not a war of fire, but of erosion—of norms, partnerships, currencies, and trust. What began as a border skirmish in Kashmir now has global economic implications, with each side wielding banks, bots, and broadband more effectively than bombs.
Pakistan and India are the proxies, but the real struggle is between two global visions: the Western-led liberal economic order, and a Beijing-Moscow backed alternative system, tested in Pakistan and amplified through digital warfare. Nevertheless, the Cold War is back—but it’s smarter, faster, and far more expensive.
Note: Recent escalation in a never-ending India-Pakistan conflict has re-emerged not merely as a border or water dispute, but as the symbolic front line of a larger, more insidious global contest where data, myth, deafening social buzzing, and AI-driven digital firepower increasingly govern the world. This investigative series by seasoned and decorated Journalist and Researcher Saeed Minhas peels back the layers of rising hostilities between the two nuclear neighbours, exposing how geopolitical ambitions, religious prophecies, cyber warfare, and economic stakes intersect in what Saeed analyses as the first full-spectrum Digital Cold War between China and its allied rivals (US and the Europeans).
This article is compiled from economic intelligence briefs, defense analytics, and diplomatic cables accessed through verified channels.
