Over the past fortnight, the illusion held by people and businesses in both Pakistan and India about their governments’ commitment and capacity to safeguard security and economic stability has been thoroughly shattered.

As policy choices of the political leadership expose them to heightened risks, many, gripped by deep anxiety, have begun to doubt fundamental life decisions, from raising a family to building an enterprise in a region marked by persistent nuclear threat and volatility.

Amid the media frenzy and fog of disinformation, the Pakistani business community appear to be grappling with conflicting emotions. While their patriotic instinct calls for a strong response to India’s violation of sovereignty, they are deeply anxious about the potentially devastating impact on business and the broader economy if the conflict persists.

Many national business platforms and sector-specific bodies have refrained from publicly commenting on the conflict, citing a diversity of opinions within their ranks. A few leaders, dismayed by recent developments, have agreed to share their minds, but only privately.

“Putting on a brave face in a senseless, deadly contest that threatens to obliterate lives and decades of hard work is hardly a choice,” said a frustrated executive, when reminded of his earlier dismissal of war threats before the May 7 attack.

“It’s deeply painful to witness such pointless death, destruction, and reckless squandering of scarce resources while millions in the region still await basic economic opportunities and a decent life. Who, in their right mind, inflicts such harm on their own people?”

‘With tensions expected to persist, even if war is avoided, businesses urge continued diplomatic engagement’

“With supply chains disrupted, markets on edge, soaring shipping costs, surging insurance premiums, capital flight, assets in the country like gold, now requiring direct government interventions, not to mention interruptions at ports, airports and railway, and the breakdown of movement for people and goods, it will take time to gauge the full extent of economic damage, assuming we even survive this confrontation,” he added with visible disgust.

A business tycoon who, until last week, had regarded the threat of war as a “figment of the imagination” fuelled by vested interests now fears that the escalating cycle of attacks and counterattacks could persist long enough to cripple Pakistan’s economy. Defending his earlier stance, he remarked that war “falls beyond the scope of conventional forecasting tools” on which businesses typically rely.

The Pakistan Stock Exchange saw a partial recovery on Friday (May 9), rebounding from its worst-ever single-day drop of nearly 6,500 points on Thursday (May 8). The benchmark KSE-100 Index gained 3,647 points, or 3.5 per cent, closing the second week of cross-border tensions at 107,174.6.

Market sentiment was lifted by expectations of the International Monetary Fund approval for the next loan tranche, which helped restore relative calm in the capital market. Since the onset of tensions on April 23, the index lost 10,052 points, experiencing sharp declines interspersed with brief recoveries driven by hopes of de-escalation.

The rupee held steady at 282.5 per dollar in the open market on May 9, though currency markets remained volatile, with reported shortages in select foreign currencies. Consumer prices appeared fairly stable, with inflation under control through the end of the week. However, growing defence spending is adding pressure on already-strained public finances. GDP growth projections were modest to begin with, and the current situation is expected to further weaken prospects for any meaningful recovery.

Nasim Beg, CEO, Arif Habib Consultancy, offered a detailed response, noting that while India’s initial action, framed as non-escalatory, was expected, the ongoing aggression has caught many off guard. Pakistan’s business community believes military matters are best handled without public theatrics, in contrast to the Modi government’s hype-driven approach. “With tensions expected to persist, even if war is avoided, businesses urge continued diplomatic engagement and preparedness.”

On Indian businesses, Mr Beg suggested their public alignment with the government is more political compliance than true endorsement of escalation. “Most business leaders, regardless of nationality, understand the catastrophic risks of conflict and prefer stability over the high cost of conflict.”

Abdul Aleem, Secretary General, Overseas Investors Chamber of Commerce and Industry: While I can’t speak for the entire business community, I can offer a personal view. Geopolitical escalations — especially those threatening regional security — are inherently difficult to predict and lie beyond the scope of standard business risk models. While we can plan for economic volatility, military aggression is far less manageable. From a business perspective, stability is the foundation of sustainable growth. The focus must remain on diplomacy, strategic restraint, and preserving regional peace. As for the position of Indian businesses, I prefer not to comment.“

Majyd Aziz, former president of the Karachi Chamber of Commerce and Industry, noted that after the Pahalgam incident, Pakistani exporters received a surge of concern from global partners. “Anticipating escalation, businesses began reassessing freight, insurance, and delay-related costs. Indian ports blocked Pakistan-bound cargo, triggering reciprocal moves. Given that over 80pc of Pakistan’s trade relies on sea routes, disruptions pose significant risks.

“While business leaders support the government, a few advocate for robust diplomatic efforts. In contrast, Indian firms, backed by a large domestic market and limited trade exposure to Pakistan, remain resilient — though those operating abroad continue trading with Pakistani counterparts uninterrupted.”

Badruddin Kakar, a leader of Balochistan Chamber of Commerce and industry, blamed India for the escalation, attributing its aggression to the ruling party’s hate-based narrative. He criticised the Indian private sector’s tacit support for the government’s jingoism, noting it appears influenced by the Modi government’s pursuit of regional military dominance, while disregarding the serious risks such a strategy entails.

Responding to queries, Dr Sheikh Kaisar Waheed, former chairman Pakistan Pharmaceutical Manufacturers Association and MD, Medisure Laboratories, remarked, “Businesses typically prioritise operations and opportunities, not geopolitical forecasting. The current aggression is widely seen as rooted in India’s domestic politics. We expect the government to respond with restraint and rely on diplomacy to contain escalation.

“International platforms like the UN [United Nations] and OIC [Organisation of Islamic Cooperation] should be mobilised to apply pressure on India. At the same time, Pakistan’s pharmaceutical industry must urgently diversify its sources for active and inactive ingredients to reduce reliance on Indian imports and strengthen supply chain resilience.”

Published in Dawn, The Business and Finance Weekly, May 12th, 2025