India Inc Backs Government, Sees Limited Economic Impact Amid Indo-Pak Tensions

Expressing firm support for the government and the armed forces amid ongoing tensions between India and Pakistan, India Inc believes that any economic impact from the current situation will be short-term and that the fundamentals of the Indian economy remain strong.

 “While it's very difficult to predict the impact on the economy, the fundamental Indian economy is very resilient. There could be some limited impact in pockets where disturbances are there. Otherwise, the Indian economy is very resilient. The supply chains are quite resilient,” Sanjiv Puri, president of Confederation of Indian Industry (CII), tells Outlook Business.

Puri, who is also the chairman and managing director of ITC, added that India Inc is completely supportive of the government’s actions. “We stand in solidarity with them. We want to salute the Armed Forces for the way they have handled the situation. India has also been very responsible—its response has been measured and calibrated. It has only responded to provocation on the other side and responded firmly, which is good.”

The tensions between India and its neighbour Pakistan flared after the terror attack in Pahalgam, Jammu and Kashmir, on April 22, 2025, killed 26 civilians. In retaliation, India on May 7, 2025, launched ‘Operation Sindoor’, striking nine terrorist camps, including the headquarters of Jaish-e-Mohammed in Bahawalpur and Lashkar-e-Taiba in Muridke, in Pakistan and Pakistan-occupied-Kashmir.

In a further escalation, Pakistan deployed drones targeting 36 locations along India’s western border in infiltration operations on the night of May 7 and 8. While in the evening of May 10, a ceasefire was agreed to by both India and Pakistan, a few hours later there were reports of ceasefire violations by Pakistan.

Puri added that the Indian industry is committed to making sure that the economy continues to perform and in case of any impact, bounce back quickly. "We are not seeing such a big disturbance. There are no big supply chains that are dependent…our trade with that country is hardly anything,” he says.

On the possible impact on foreign direct investment into India due to the tensions, Puri said such situations do lead to cautiousness and if at all there is any impact, it will be short-lived.

“Any uncertainty or development like that does create some cautiousness, but the reality is that India is a large consumer-driven economy, the fifth-largest economy, and is likely to become fourth-largest. A lot of reforms have happened. India is a democratic institution, with a rule of law. India has the talent and capacity to produce and export at scale. The capacity to produce and export at scale. So, a lot of positives are there. India is getting into bilateral trade agreements, the UK deal has happened, we are expecting the US and the EU deals to happen,” he says.

He added that this “deterrent action” has been taken towards better securing India and national security is also fundamental to economic progress. “So if any anxiety or cautiousness is there, it will be short-lived.”