Operation Sindoor: Pakistan’s Economic Implosion and the Cost of War

As an Indian economist, I’ve watched the unfolding of Operation Sindoor—India’s decisive strike on terror camps in Pakistan and Pakistan-occupied Kashmir (PoK) on May 7, 2025—with a mix of strategic admiration and economic scrutiny. This wasn’t just a military masterstroke; it was a calculated move that exposed Pakistan’s economic fragility. Today, I’m diving into the economic fallout for Pakistan and what a potential escalation into war could mean—how long can Pakistan hold out, and at what cost? Let’s break it down with data and perspective, straight from an Indian lens.

The Context: Operation Sindoor’s Precision

On April 22, 2025, a brutal terror attack in Pahalgam, Kashmir, claimed 26 lives, orchestrated by Pakistan-based groups like Jaish-e-Mohammed (JeM) and Lashkar-e-Taiba (LeT). India’s response, Operation Sindoor, was swift and surgical: a 25-minute operation targeting nine terror bases, including JeM’s hub in Bahawalpur and LeT’s in Muridke. Using Rafale jets and cruise missiles, India ensured no civilian or military targets were hit, as confirmed by the Defense Ministry. Pakistan, however, claimed 26 civilian deaths, calling it an “act of aggression” and threatening retaliation.

From an Indian perspective, this was a necessary strike to dismantle terror infrastructure. But economically, it’s a game-changer for Pakistan, amplifying its existing vulnerabilities. Let’s analyze the immediate impact and the stakes of escalation.

Immediate Economic Fallout for Pakistan

Pakistan’s economy was already a house of cards before Operation Sindoor. With a GDP of $340 billion (2024), inflation hitting 38% in 2023, foreign reserves at a meager $9 billion (barely two months of imports), and a rupee devalued by 50% since 2021, it was on the brink. The strikes delivered a body blow. Here’s how:

1. Stock Market Collapse

The Karachi Stock Exchange (KSE-100) tanked 5.5–6% post-strikes, losing over $2.75 billion in market cap—equivalent to a third of Pakistan’s defense budget. X posts reported a 6,200-point drop, signaling investor panic. India’s BSE Sensex, by contrast, dipped briefly but recovered, reflecting confidence in our economic resilience. Pakistan’s market crash underscores its inability to absorb geopolitical shocks.

2. Trade and Airspace Disruptions

Pakistan’s 48-hour airspace closure disrupted over 50 flights, hammering airlines, tourism, and trade. The Kartarpur Corridor’s shutdown hit local economies, while India’s suspension of the Indus Waters Treaty threatens Pakistan’s agriculture (24% of GDP). With exports like textiles and rice ($30 billion annually) already strained, these disruptions choke cash flow. India, with diversified trade and robust logistics, faces no such constraints.

3. Investor Flight

Pakistan’s terror economy—extortion, drug trafficking, and misallocated aid—has long deterred foreign direct investment (FDI), which limps at $1.5 billion annually. Operation Sindoor’s exposure of terror hubs makes Pakistan radioactive for investors. India’s growing FDI ($70 billion in 2024) and stable policies stand in stark contrast. Pakistan risks further isolation, with sanctions looming if its terror links are scrutinized globally.

4. Currency and Inflation Crisis

The Pakistani rupee, already battered, faces more devaluation pressure, spiking import costs for fuel and food ($60 billion annually). Inflation could surge past 50%, hitting Pakistan’s 40% poverty-stricken population hard. India’s rupee, backed by $650 billion in reserves, remains stable, shielding us from similar pain. Pakistan’s economic mismanagement amplifies its vulnerability.

5. Diplomatic Isolation

No major ally, not even China, offered Pakistan unconditional support post-Sindoor. China’s call for restraint protects its $60 billion China-Pakistan Economic Corridor (CPEC) investments. The U.S., distracted by global conflicts, is unlikely to bail out Pakistan. India’s diplomatic clout, bolstered by QUAD and BRICS, ensures global sympathy tilts our way. Pakistan’s isolation cuts off access to IMF or World Bank loans ($7 billion IMF bailout in 2024), leaving it stranded.

Operation Sindoor didn’t just neutralize terror—it crippled Pakistan’s economic confidence, trade, and global standing. But what if this escalates into war? Let’s assess Pakistan’s staying power and the costs.

Escalation Scenario: How Long Can Pakistan Sustain a War?

India and Pakistan have clashed four times since 1947, with Pakistan often buckling under economic and military strain. A 2025 war would be costlier, given modern warfare’s demands. Here’s how Pakistan stacks up.

Military Endurance

Pakistan’s military, with 650,000 personnel, 170 nuclear warheads, and a $10 billion defense budget (4% of GDP), is no pushover. Its JF-17 jets and Chinese drones are credible, but India’s 1.4 million troops, 180 warheads, and $80 billion budget dwarf it. Operation Sindoor showcased India’s precision (Rafale jets, BrahMos missiles), while Pakistan’s claimed retaliation (downing Indian planes) suggests limited counterstrike ability.

Pakistan’s fuel reserves, critical for air and naval operations, would last weeks, not months, due to import reliance. Ammunition and spares, dependent on Chinese and U.S. supply chains, could stall if allies push de-escalation. Indian defense experts note Pakistan’s “logistical constraints,” predicting symbolic strikes over sustained warfare.

Sustainability Estimate: In a high-intensity conflict, Pakistan could fight for 2–4 weeks before resources dwindle, assuming no external resupply.

Economic Costs

War is a budget-killer. Here’s the math:

• Daily Costs: A limited conflict (like Kargil 1999) could cost Pakistan $50–100 million daily for fuel, munitions, and troops. A full-scale war could hit $200–300 million daily, draining reserves in weeks. India’s deeper pockets ($650 billion reserves) ensure longer endurance.

• Economic Contraction: War would halt trade, close ports, and crash markets. Pakistan’s GDP could shrink 10–15% in months, with inflation soaring past 50%. The rupee could lose 20–30%, making debt repayment ($130 billion external debt) untenable. India’s diversified economy would weather similar pressures better.

• Infrastructure Losses: Indian strikes could target Punjab, Pakistan’s economic core (60% of GDP). Rebuilding factories, roads, or power plants would cost billions. India’s infrastructure, spread across a larger geography, is less vulnerable.

• Humanitarian Toll: War could displace millions, overwhelming Pakistan’s resources. Food shortages (exacerbated by water treaty suspension) and healthcare costs could add $5–10 billion in immediate expenses. India’s robust disaster management systems mitigate similar risks.

Total Cost Estimate: A one-month limited war could cost Pakistan $10–15 billion (3–4% of GDP). A prolonged conflict could exceed $50 billion, risking economic collapse.

External Lifelines

Pakistan’s allies—China, Saudi Arabia, Turkey—may offer rhetoric but not war funding. China’s CPEC investments are at risk in a conflict zone, and its neutral stance post-Sindoor signals caution. The U.S., focused on Ukraine and Gaza, may prioritize diplomacy over aid. Without bailouts, Pakistan’s war machine grinds to a halt. India’s global alliances ensure we face no such isolation.

Domestic Fallout

War would inflame Pakistan’s internal fault lines. The military, under General Asim Munir, might rally public support initially, but economic collapse could spark unrest, as seen in the 2023 Imran Khan riots. Balochistan and Khyber Pakhtunkhwa could see insurgencies flare. India’s internal stability, despite challenges, gives us an edge.

Sustainability Verdict: Pakistan could manage a short conflict for 1–2 months at $10–20 billion, but a prolonged war (3–6 months) would be catastrophic, likely ending in economic ruin or a forced ceasefire.

Strategic Implications for India

From an Indian economist’s view, Operation Sindoor was a masterclass in leveraging military precision for economic impact. It weakened Pakistan without committing India to a costly war. Our markets’ resilience, diplomatic clout, and military superiority position us to weather escalation far better. However, we must remain vigilant:

1. Strengthen Reserves: India’s $650 billion reserves are a buffer, but war could spike oil prices (we import 80% of crude). Hedging in global markets is key.

2. Boost Defense Exports: India’s $15 billion defense exports (2024) could grow, capitalizing on global demand amid regional tensions.

3. Monitor CPEC: China’s neutrality is a win, but we must watch for covert support to Pakistan. Diplomatic pressure via QUAD can counter this.

4. Prepare for Refugees: Escalation could trigger a refugee crisis at our borders, requiring humanitarian and economic planning.

The Final Word

Operation Sindoor was a strategic triumph, exposing Pakistan’s economic Achilles’ heel. The strikes crippled its markets, trade, and global standing, pushing it closer to collapse. If war erupts, Pakistan could limp through 1–2 months at a cost of $10–20 billion, but anything longer spells disaster—$50 billion or more in losses, with no recovery in sight. India, with its economic depth and global alliances, holds the upper hand.

As economists, we see the numbers tell a clear story: Pakistan’s economy is no match for India’s resolve. Operation Sindoor wasn’t just a strike—it was a warning. Pakistan must choose de-escalation, or face economic oblivion.

Sources: Web data and X posts for real-time insights. Always cross-check with official reports for investment decisions.