The intensifying tensions between India and Pakistan over Kashmir two weeks ago has led to the airspace closure in northern Pakistan and parts of India, being the key air route between Europe and Thailand. In the past, conflicts of any magnitude between the two countries were seen to affect only areas where the disputes took place and have limited impact on their economies as the two sides could eventually resolve the issues. Claims over Kashmir, however, are complex, meaning that India and Pakistan may lock in a dispute again.
KResearch views that the ongoing dispute between India and Pakistan will likely ease ahead or not escalate further. Thai exports to India and Pakistan will also be spared from the Kashmir conflict in 2019 because our cargos are largely sent to Pakistan's southern port city of Karachi and India's port cities of Mumbai and Chennai. In addition, there is relatively strong demand for Thai products in India.
Their tensions will not affect the number of Indian tourist arrivals to Thailand either because most of prospective Indian holidaymakers do not come from affected areas surrounding Kashmir. Therefore, the airspace closure in northern Pakistan and parts of India, which has forced many airlines to change their air routes, may not hurt Thai tourism overall, though this issue warrants close monitoring ahead.
Given this, KResearch expects that Thai exports to India will continue to grow 3.3-3.5 percent, valued at approximately USD7.9-8.0 billion in 2019, while the number of Indian tourist arrivals to Thailand may reach around 1.70-1.74 million, increasing 6.7-8.7 percent, with spending of THB76.7-78.1 billion, rising 7.2-9.2 percent.
India remains Thailand's promising trade and inbound tourism markets in 2019. Its dispute with Pakistan will likely be short term. Although, geopolitical tensions between India and Pakistan are fragile, the two sides have been able to cope with them well. Close attention, however, must be paid the efforts by the two countries to find joint solutions. For India in particular, if such solutions do not facilitate economic stability and investment, its efforts to reform the country and attract FDI may not bode well. As a result, its economic growth target will be jeopardized, thus indirectly affecting its trade with Thailand and spending by Indian tourists in Thailand.
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