Collateral Collapse: How Another War Could Cripple India’s Economic Ascent

Dr Sarah Fatima

If the recent Pahalgam conflict taught the subcontinent anything, it is that in modern warfare, economics is the true battlefield. Despite India’s massive $4 trillion economy and its ambitions of regional dominance, the economic costs of conflict have proven to be dangerously high. If India were to embark on another military misadventure such as a hypothetical “Operation Sandoor,” the consequences could be far more severe. Pakistan’s retaliatory capabilities, combined with India’s economic vulnerabilities, create a perfect storm that could critically undermine New Delhi’s growth story.

India’s high-value economic assets lie dangerously close to Pakistan, exposing them to direct missile threats.

A closer look at India’s economic geography reveals a dangerous concentration of high-value infrastructure and industrial hubs located perilously close to Pakistan. Cities like Jamnagar, Vadinar, Ahmedabad, Jaipur, Ludhiana, Jalandhar, Gurugram, Amritsar, and Godpur, many within a 35 to 350 km radius of the Indo-Pak border, are not just population centers. They are economic lifelines, responsible for powering India’s export, defense, energy, pharmaceutical, and service sectors. These are well within the range of Pakistani missile strikes in any sustained military exchange.

At the heart of India’s energy infrastructure lies the Jamnagar Refinery Complex, the world’s largest oil refining facility operated by Reliance Industries. Adjacent to it is Vadinar, home to another large-scale refinery operated by Nayara Energy. Together, these two hubs process more than 1.2 million barrels of crude oil daily, supplying fuel and petrochemicals across India and beyond.

A successful strike on these complexes would not only cripple India’s energy security but would send global oil markets into a spiral. Their destruction would impact domestic transportation, aviation, manufacturing, and even defense operations, all of which are critically dependent on fuel. The cascading economic effect would be catastrophic.

Northern India hosts a range of ordnance factories and defense production facilities crucial for India’s military logistics. Punjab and Rajasthan, in particular, house significant parts of India’s defense supply chain. A calculated strike on these facilities could disrupt India’s ability to sustain long-term military operations, forcing a reliance on costly emergency imports.

Moreover, these assets are heavily invested in by the public sector, meaning that damage to them would further pressure India’s strained fiscal environment, already bearing the weight of a massive US$ 86.1 billion annual defense budget.

A single conflict could trigger $16 billion daily economic losses, widespread capital flight, and long-term GDP contraction.

Ahmedabad and surrounding regions serve as a hub for India’s thriving pharmaceutical and chemical industries, which contribute billions to exports and serve as a vital pillar in India’s reputation as the “pharmacy of the world.” A conflict-induced halt in operations here would disrupt global medicine supplies, damage trade relationships, and severely affect revenue inflows. From life-saving generics to complex chemicals used in manufacturing, the disruption would extend beyond India’s borders, tarnishing its credibility as a reliable global supplier and increasing domestic shortages.

India’s textile belt, spanning Ludhiana, Jalandhar, and parts of Jaipur, forms the backbone of its garment exports, employing millions. These cities are within a short missile flight from the Pakistani border. In the event of a conflict, even limited strikes on textile hubs would paralyze production, disrupt supply chains, and cause mass layoffs. The social consequences, particularly in labor-intensive industries, would be enormous.

Tourism is not merely a soft power asset; it is a vital revenue generator. Post-Pahalgam, India’s tourism sector already suffered significant losses. In a full-scale operation like “Sandoor”, Amritsar, Jaipur, and Kashmir, all major tourist magnets would become conflict zones, wiping out seasonal revenues and further devastating local economies reliant on travel and hospitality.

Just miles from the Pakistani strike radius lies Gurugram, India’s premier hub for IT services, finance, and corporate headquarters. Home to Fortune 500 companies, tech startups, and financial institutions, Gurugram is emblematic of India’s globalized economy. Even a perceived threat to Gurugram would likely cause capital flight, stock market instability, and halt operations at multinational firms. The confidence of foreign investors, already on edge, could collapse entirely, compounding currency depreciation and increasing India’s borrowing costs.

Ironically, it is India’s integration into global markets that makes it more vulnerable in a conflict scenario. Unlike Pakistan, which retains a more localized and insular economic model, India’s growth is dependent on uninterrupted global engagement, whether through exports, FDI, or service delivery. Any disruption in these areas risks triggering a wider economic crisis.

The short-term losses would include daily economic disruptions for India exceeding US$ 16 billion, as already seen during the Pahalgam conflict, widespread capital flight, and immediate hits to exports, tourism, and investor confidence. Medium-term effects could see a 2–3% GDP contraction, currency depreciation and credit rating downgrades. Whereas, the long-term damage would involve loss of global market share, weakened strategic industries, and a permanently higher fiscal burden due to reconstruction and increased defense outlays.

India’s globalized economy is its strength, and its greatest vulnerability in war.

In any future confrontation, the battlefield will extend far beyond the LoC and will stretch into India’s factories, energy grids, tech parks, and financial centers. The cost of another war, especially one initiated under a political pretext rather than strategic necessity, could be economically suicidal. India’s economy is its center of gravity, and the infrastructure supporting it lies well within Pakistan’s reach. In a future war, India stands to lose not just soldiers or territory, but the very foundation of its rise as a global power. Diplomacy, not drama, must define New Delhi’s path forward. Anything less invites not just military backlash, but economic ruin.

The author is a PhD in Strategic Studies.