India’s Indus Water Threat: A Catalyst for Economic Chaos in Pakistan

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India’s recent suspension of the Indus Waters Treaty (IWT) has rattled Pakistan’s economy, heightening fears of instability across its agricultural and energy sectors. The symbolic action has already had a destabilizing psychological and geopolitical impact, even if India's current infrastructure prevents any immediate disruption in water flows.

Pakistan's economy depends on the Indus River system. Nearly 80% of the nation's irrigated area depends on its flow, and it provides about 93% of the water utilized for hydropower and irrigation. Pakistan's agriculture sector, which employs more than one-third of the country's workforce and accounts for 24% of its GDP, is especially susceptible. Water flow disruption, particularly during planting seasons, may reduce the yields of important crops including cotton, rice, and wheat. 60% of the nation's exports are based solely on cotton.

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Another crucial area of concern is energy. Nearly 30% of Pakistan's electricity comes from hydropower plants like Tarbela and Mangla, which depend on steady river flows. Any cuts could worsen Pakistan's current energy crisis, increase expenses, and worsen power shortages.The economic ripple effects are severe. Increased reliance on imports, weakened exports, and growing food shortages pose a threat to Pakistan's already crippling trade deficit and mounting debt. Furthermore, Pakistan’s limited water storage—only 10% of its annual needs—leaves it highly vulnerable to seasonal fluctuations and upstream interventions.

While India’s actions are constrained by infrastructure and international norms, the threat alone has disrupted planning, discouraged investment, and triggered diplomatic tensions. By leveraging water as a geopolitical tool, India has introduced a volatile variable into Pakistan’s fragile economic landscape—one that could foster prolonged economic, social, and political unrest.