Potential Indo-Pakistan War Could Trigger Massive Economic Losses, Warns Foreign Affairs Forum

According to the report, a brief, conventional war similar to past skirmishes could cost India anywhere between Rs 1,460 crore and Rs 5,000 crore per day in direct defense spending

Foreign investment would likely see a sharp pullback, with potential cancellations amounting to $11 billion (Rs 93,915 crore) in the war circumstances

Source : ABPLIVE AI

An analysis released by the Foreign Affairs Forum, based in Dubai, UAE, outlines the staggering economic toll an armed conflict between India and Pakistan could impose on the Indian economy, with projections ranging from several thousand crores in short-term military expenditures to over $500 billion in the event of a prolonged engagement.

According to the report, a brief, conventional war similar to past skirmishes could cost India anywhere between Rs 1,460 crore and Rs 5,000 crore per day in direct defense spending. 

This estimate is based on historical data, including the Kargil War in 1999 and the 2001–02 military mobilisation. For instance, during the Kargil conflict, approximately Rs 2,000 crore was spent on around 300 to 350 air sorties, while total military costs for the two-month engagement crossed Rs 10,000 crore.

However, the economic implications of a prolonged or full-scale war could be far more severe. The report highlights that if tensions escalate into a sustained military campaign, daily economic losses could surpass $17.8 billion (around Rs 1.34 lakh crore), factoring in the broader impact on trade, investment, and market stability.

Foreign investment would likely see a sharp pullback, with potential cancellations amounting to $11 billion (Rs 93,915 crore). Retail sectors could suffer losses exceeding $51 billion (Rs 4.35 lakh crore), and tourism, along with exports could witness steep declines.

The report draws a comparison between a potential four-week war scenario and Greece’s 2010 economic crisis. Under such a scenario, India could lose over $500 billion (Rs 43 lakh crore), roughly 20 per cent of its GDP. Other ripple effects could include a spike in inflation, a widening fiscal deficit, and a sharp depreciation of the Indian rupee, potentially dropping to Rs 90–100 against the US dollar.

Annual Defense Budget Rise

The analysis also notes that an extended military conflict could effectively double India’s annual defense budget, pushing it beyond $20 billion (Rs 1.71 lakh crore), thereby straining public finances and disrupting long-term development goals.

Historical precedents, such as the 1971 Indo-Pak war and the Kargil conflict, serve as benchmarks in the report. While the 1971 war cost India approximately Rs 200 crore per week, the financial impact of more recent engagements has dramatically increased in line with expanded military capabilities and economic interdependencies.