War Zone: Assessing the Economic Impact of the 2025 India-Pakistan Conflict

The recent escalation between India and Pakistan, has raised concerns about the potential economic repercussions for India. As tensions rise, it's crucial to evaluate how this conflict might influence India's economic trajectory, particularly in terms of GDP growth, manufacturing, and foreign investment.

A Lot to Lose Economically

For Pakistan’s fragile economy, the line between conflict and collapse has always been thin. With high external debt, a dwindling currency, and critical fiscal distress, the consequences of war could be devastating for Pakistan, whether or not an active conflict sustains.

But India, despite being far stronger economically, has much more to lose. Ranked among the top five global economies in nominal GDP and approaching fourth place, India has not only sustained growth over the last four years but has also successfully drawn a part of global manufacturing away from China.

India’s growing position in global trade and manufacturing puts it in a sensitive spot. A large-scale conflict could jeopardize years of work in building supply chains, creating infrastructure, and attracting global capital.

Much Bigger Than India 1999

Comparisons are often drawn to the 1999 Kargil War. India did emerge stronger then—but it’s important to note how different the scale was. Back in 1999, India’s GDP stood at approximately $450 billion. Today, the size of the Indian economy is more than ten times that.

Per capita income has also increased by nearly six times in this period. But the real transformation is in India’s global economic positioning. India is now one of the largest manufacturers in the world, conducting annual trade (goods and services combined) worth $1.74 trillion. These are not numbers that can afford external shocks like prolonged geopolitical instability.

India’s Rise as a Manufacturing Hub

One of the most important economic developments in the last three years is the expansion of global manufacturing into India.

Apple’s increased reliance on India for iPhone production is a landmark moment. Nearly 20% of all iPhones made by Apple are now being manufactured in India. This share is expected to rise to 35–40% in the coming years. In fact, Apple is on track to shift its entire US iPhone procurement base to India.

And Apple is just one example. Several global companies across electronics, pharmaceuticals, and renewable energy have been moving part of their manufacturing out of China, with India being a primary alternative. A full-scale war—or even sustained tension—could disrupt this flow of opportunity.

The only economy that might benefit from such a disruption is China. With both Bangladesh and Pakistan facing economic instability, India’s leadership in the regional supply chain is crucial. Any deviation could give competing economies the space to reassert dominance.

Does India Really Have a Choice?

Here lies the complexity. India has exercised restraint for decades, and it is possible that this has led to assumptions of inaction on the other side. While India may not seek a war, it cannot be expected to stay passive in the face of provocation.

Pakistan’s economic condition leaves it with little to lose—which increases the risk of irrational actions. That makes it even more important for India to send a firm yet measured signal. The focus should remain on containing the conflict, if not avoiding it, while prioritizing long-term economic interests.

The Bigger Picture

What must not be forgotten is this: the only real beneficiary of India getting caught in a regional conflict is China. The disruption allows China to hold on to its manufacturing supremacy while India redirects resources and attention toward conflict management.

For a country with rising influence on the global economic table, every day spent in uncertainty is a setback. India has grown, not just in size, but in ambition. That ambition is best realized through stability, consistency, and peace.

Final Thoughts

The war—if it stretches—will hurt India. Not because it is weak, but because it now has a far more critical economic role in the world. In 1999, India was emerging. In 2025, India is leading.

The country must continue to protect its citizens and borders, but with clarity that war must not derail growth. India’s rise is not just a regional story—it’s a global one. And for the global economy too, it is in everyone’s interest that the region returns to peace quickly, decisively, and sustainably.