PAPER 13/05/2025
Using a sectorally disaggregated Computable General Equilibrium (CGE) model, inclusive of direct cost estimates for military assets, infrastructure damage, disrupted trade and service sector impacts, this study estimates that India’s economy incurred at least $88.712 billion in realized losses over the four-day war with Pakistan (May 7-10, 2025). This modelling framework includes fiscal balance-sheet pressures, such as a surge in the BJP government’s budget deficit, which conventional market-capitalization-based approaches overlook; treats lost output (GDP contraction) as a tangible economic cost, not merely a paper wealth decline; integrates non-tradable service sectors such as tourism, civil aviation, and public-information campaigns, which are often excluded from headline war damage assessments.
The findings serve as a stark economic warning for New Delhi: even short military escalations carry unsustainable costs for India’s trillion-dollar economy undermining both fiscal stability and and compounding long-term economic vulnerabilities.