Wars Hurt Economies

Qazi Hussain Asghar

In the modern globalized economy, war is no longer a test of military might alone; it is an economic liability of staggering proportions. The recent escalation between India and Pakistan, stoked by nationalist fervor and political posturing, has laid bare a fundamental truth: militarism is an economic self-infliction. India’s aggressive stance toward Pakistan, often couched in rhetoric of strength and sovereignty, has resulted in over USD 83 billion in direct and collateral economic damage without a single strategic gain. This figure of USD 83 billion excludes the cost of military assets downed during the conflict, a chilling reminder that this was not a hypothetical scenario but one with real losses. India’s gamble on brinkmanship has come at a massive cost, not just to its economy but to its credibility as an emerging power.

India’s aggressive posture resulted in over USD 83 billion in economic losses without a single strategic gain.

Perhaps the most visible impact of India’s war posturing has been investor flight. In just weeks following military escalation, foreign investors withdrew over USD 20 billion from Indian markets. This dramatic pullout was not merely a reaction to uncertainty, but a condemnation of India’s poor crisis risk management and diminishing investment security. The Reserve Bank of India was forced into emergency measures, including currency market interventions and bond stabilizations, moves typically reserved for major financial crises.

Mumbai’s financial sector worth over India rupees ₹200 trillion and home to the Reserve Bank of India and Bombay Stock Exchange sits within range of Pakistan’s Ra’ad II cruise missile. The implication is stark: even a limited conflict carries the potential to destabilize South Asia’s financial epicenter, a risk global investors are unlikely to tolerate.

Pakistan’s decision to close its airspace in response to Indian hostilities disrupted over 2,000 Indian flights, costing an estimated USD 600 million. Major carriers were grounded, international schedules rerouted and losses mounted. The cascading effects led to airline bailouts and layoffs, sparking domestic backlash against an administration that promised economic reform but delivered strategic blunders. The aviation, a key driver of India’s economic aspirations, found itself hostage to the very narrative of confrontation it was supposed to transcend.

India’s border states, including Punjab, Gujarat, and Rajasthan etc. saw trade with Pakistan freeze overnight. While trade volumes between the two countries are modest, the impact on regional economies, particularly on small and medium-sized enterprises, was severe. From textiles in Ludhiana to marble and pharmaceuticals in Gujarat, businesses dependent on cross-border supply chains and exports were paralyzed.

A 4-day standoff triggered a 16% drop in FDI and USD 64 billion in market losses.

Suspended infrastructure contracts, paused regional development initiatives, and increased freight insurance added another USD 25 billion to the already ballooning cost. Ports on India’s western seaboard; handling over 60% of the country’s cargo, suffered significantly as insurers doubled premiums amid the conflict. In the global logistics market, Karachi emerged as a more stable and cost-effective route, further sidelining India’s ambitions to become a regional trade hub.

India’s military adventurism cost it not only USD 10 billion in logistics and war-readiness costs, including two aircraft worth USD 2.4 billion, but also undermined its diplomatic credibility. The anticipated global support never materialized. Major powers urged de-escalation. Allies offered caution, not camaraderie. India found itself diplomatically isolated and was eventually forced into a ceasefire not out of strength, but necessity.

Prime Minister Narendra Modi’s narrative of Atmanirbhar Bharat (self-reliant India) suffered a major blow as the 4-day standoff led to a 16% drop in Foreign Direct Investment and market losses totaling USD 64 billion. The fragility of India’s “self-reliance” became painfully clear as global capital retreated and domestic investors grew wary.

While policymakers in New Delhi may view military engagement as a tool of deterrence or national pride, the economic consequences argue otherwise. A full-scale 30-day war could wipe USD 400 billion off India’s GDP, more than the total GDP of Pakistan. This isn’t conjecture; it’s a financial catastrophe in waiting. Gujarat’s ₹22 lakh crore economy, just 400 km from the Pakistani border, could be devastated by a single precision missile strike on key infrastructure like the Mundra port. Similarly, Ludhiana, India’s textile hub exporting ₹50,000 crore annually, lies within reach of conventional artillery, a vulnerability war would exploit, not secure.

It is time for policymakers and thought leaders in India and abroad to recognize the true cost of war. Military escalation in South Asia is not only dangerous, it is fiscally ruinous. For a country aspiring to global economic leadership, India cannot afford to hemorrhage billions in pursuit of momentary political gain.

Mumbai’s financial center lies within range of Pakistan’s Ra’ad II missile, a reality global investors won’t ignore.

Peace, diplomacy, and conflict de-escalation are not signs of weakness; they are investments in prosperity. A stable subcontinent, free from the specter of war, is essential for South Asia’s collective economic future. Pakistan’s constitutional commitment to non-intervention and regional neutrality provides a valuable example, one India would do well to consider.

In the end, it is not military victory, but economic resilience and cooperative diplomacy that will determine the true power of nations. War may rally crowds, but it shatters markets. And no economy can grow when it is bleeding.

Qazi Hussain Asghar is a PhD Scholar