India, Pakistan 2025 Crisis: Impact on Indian Businesses and Economy

The 2025 India–Pakistan crisis was ignited by the Pahalgam attack on 22 April. It brought not only military and diplomatic turbulence but also sharp ripples across India’s economic landscape because of the escalations in cross-border tensions. Indian businesses across sectors experienced significant disruptions, from aviation to agriculture. The conflict tested India’s resilience and exposed its vulnerabilities. It also highlighted the importance of strategic risk preparedness.

Impact on Indian Businesses

India’s commercial environment was immediately rocked by the 2025 India–Pakistan conflict. Businesses encountered operational, supply chain, and investor sentiment disruptions. These issues spread across both core and frontline service sectors. The crisis highlighted the pressing need for strategic risk frameworks. It also revealed vulnerabilities unique to certain sectors.

• Aviation and Logistics: India closed its airspace over parts of Jammu, Punjab, and Gujarat for several days because of the airstrikes and subsequent retaliation. There were cancellations of over 1,100 flights. This affected both domestic carriers and international routes, particularly those between South Asia and Europe. The cargo movement across the land borders, especially the Atari–Wagah trade corridor, halted completely. This impacted logistics and port supply chains. Maritime trade also saw minor delays due to heightened security at western ports like Mundra and Kandla.
• Stock Market Volatility: The Sensex and Nifty both plunged over 1,800 points and 450 points respectively, between April 23 and May 8. The stocks of defence sector companies like HAL and Bharat Dynamics rose amid expectations of military orders. On the other hand, hospitality, aviation, and banking stocks were hit the hardest. The rupee fell to an 18-month low of ₹85.12/USD before stabilising post-ceasefire. Foreign institutional investors pulled out over $4.6 billion from Indian equities during the conflict.
• Tourism Sector: The Pahalgam attack specifically targeted Hindu tourists. This led to mass cancellations in Kashmir and nearby states. According to the Ministry of Tourism, estimates of a 62% drop in bookings for May and June were reported. This impacted hotels, transport providers, and local businesses. Traveller advisories were issued by countries like the UK, US, and Australia. These advisories further dented foreign tourist arrivals. Religious tourism, including the upcoming Amarnath Yatra, faced potential delays and intensified security protocols.
• Trade and Exports: Though formal trade between India and Pakistan was already very limited, after the conflict it was entirely suspended. Exporters in Punjab and Rajasthan reported losses due to stranded consignments. These affected especially the textiles, pharmaceuticals, and agriculture sectors. India’s exports to Central Asia, via Pakistan, were also temporarily affected due to transit disruptions. Imports of specific chemicals and medical raw materials from the region were re-routed. This increased freight costs.
• Energy and Commodities: Conflict concerns and drone strikes near Gujarat refineries boosted Brent crude to $94/barrel temporarily. India has strategic oil reserves. These reserves were reviewed for readiness, causing temporary speculative trading in the energy markets. The power grids in Punjab and Jammu faced brief disruptions due to security fears and pre-emptive shutdowns. Prices of commodities like wheat, pulses, and cotton saw fluctuations. These were caused by disrupted supply routes and panic buying in border states.
• Water Security and Agriculture: The Indus Water Treaty came under stress. Political rhetoric in India threatened to restrict water flows to Pakistan. Farmers in the border regions of Jammu and Punjab faced dislocation. Standing crops were left unattended due to shelling and evacuation. Some reports from the border areas also pointed out that irrigation projects near the LoC were paused. There was damage to canals and water infrastructure. Agricultural mandis near border districts remained shut for over two weeks. This led to losses for small farmers.
• Cybersecurity and Business Continuity: Both public and private sectors reported over 700 cyber intrusion attempts during the conflict. Sectors like banking, telecom, and power companies were on high alert after reports of malware attacks from suspected Pakistani cyber groups. The RBI issued an advisory on digital defence continuity. It urged financial institutions to activate their cybersecurity protocols. Several large corporates activated Business Continuity Plans (BCPs). They also renewed their disaster recovery sites. The 2025 conflict marked a turning point for Indian businesses to view cybersecurity not just as IT hygiene but as a core strategic imperative. Organizations like the Global Risk Management Institute (GRMI) played a significant role. They provided professionals with the frameworks and resources needed to create resilient, risk-aware businesses.
• Investor and Global Perception: Credit rating agencies like Moody’s and S&P placed India on a “watch list” for the duration of the crisis. Global institutional investors also voiced their concern over regional stability. This prompted calls for deeper political risk insurance. However, India’s swift and decisive conflict containment improved investor confidence after May 10. The resilience of the Indian banking and digital infrastructure during the crisis received positive mentions in the international media. India’s GIFT City and other financial hubs initiated dialogues. They focused on developing core risk insurance instruments and sovereign risk hygiene strategies.

Estimated Losses and Economic Indicators (April–May 2025)

GDP growth projection for Q2 FY25 was revised down from 6.5% to 5.9% by the Ministry of Finance. The direct losses from the conflict are estimated at ₹48,000 crore. This includes damage to infrastructure, revenue loss, and capital outflow. The tourism and aviation sectors alone reported losses of ₹12,000 crore during the conflict. Industrial output in Jammu, Punjab, and parts of Gujarat contracted by 7.4% in April–May. This was due to labour shortages and logistics disruption.

Lessons for Indian Businesses

• Diversification of markets: Heavy dependence on specific routes and neighbouring transit nations can become a liability during such geopolitical crises.
• Cyber risk preparedness: The attacks underlined the urgent need for enterprise-wide digital threat management and workforce sensitization.
• Crisis simulation & planning: Companies with pre-existing BCPs managed the disruptions better than those without tested protocols.
• Insurance and risk finance: Businesses began exploring war risk and geopolitical covers post-May 2025.
• Strategic advisory and research: Institutions like the Global Risk Management Institute were cited as key partners. They help train Indian managers in geopolitical risk assessment and strategic foresight.

Conclusion

The 2025 India–Pakistan crisis was not just a military standoff. It was a real-world stress test for Indian businesses. While the economy showed resilience, the disruptions revealed critical gaps in cybersecurity, logistics, and sectoral interdependencies. Businesses had to respond with agility, digital maturity, and structured crisis playbooks. The episode reaffirmed that in the age of hybrid conflict, only economic preparedness and strategic foresight can be as vital as military might. Organizations such as the Global Risk Management Institute (GRMI) have emerged as important collaborators in this process. They offer strategic frameworks and essential training that help Indian companies better predict, manage, and reduce complex geopolitical risks.