India-Pak War Impact on IT Industry: Do Startups Need to Worry?

Could the escalating tensions between India and Pakistan disrupt India's booming startup ecosystem? Find out how geopolitical risks could impact the IT and startup sectors in India.

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Shreshtha Verma
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India-Pak War Impact on IT Industry: Do Startups Need to Worry?

As geopolitical tensions between India and Pakistan flare up again in 2025, questions arise not just about national security and diplomacy but also about the ripple effects across industries, especially India’s thriving startup and IT ecosystem. With over 100,000 startups and a $245 billion IT sector, India today stands at a digital crossroads. In the event of a conflict, what happens to young ventures, tech unicorns, and the global image of India as a digital powerhouse?

While defense experts analyze military strategies, it's time we asked if an India-Pakistan conflict escalates, do startups in India need to worry? This article explores the answer, blending current data, expert opinions, historical parallels, and startup-centric analysis.

India’s IT and Startup Sector: The Backbone of the Digital Economy

India’s IT sector, led by giants like TCS, Infosys, Wipro, and HCL, generated $245 billion in revenue in FY 2024. Meanwhile, its startup ecosystem is the world’s third-largest, contributing heavily to innovation in fintech, edtech, SaaS, agritech, and healthtech. Together, these sectors employ millions and drive a major chunk of foreign capital into the country.

Startups often operate with lean margins, high burn rates, and dependency on foreign investment and cloud infrastructure. Unlike tech giants with deep reserves and geo-diversified operations, early-stage startups may not be well-equipped to withstand geopolitical shocks.

How Could a Conflict Disrupt Indian Startups and Tech Industry?

1. Operational Disruptions in Tech Hubs

Major tech and startup hubs like Bengaluru, Hyderabad, Pune, and NCR could face curfews, restricted logistics, and heightened security protocols. For startups that rely on 24/7 delivery cycles, client servicing, and cloud-driven development, even a 48-hour disruption can lead to delayed product rollouts, missed deadlines, and revenue loss.

Case in Point: During the COVID-19 lockdown, multiple startups faced downtime due to staff unavailability and disrupted delivery logistics. A war-like situation could mirror similar or worse outcomes, especially in border-adjacent areas.

2. Cyberwarfare: The Silent Risk

In the 21st century, wars aren’t fought only on borders—they also unfold in cyberspace. Both India and Pakistan have demonstrated cyber capabilities. Startups, especially in fintech, SaaS, and edtech, manage critical customer data, payment platforms, and proprietary tech.

Potential Risks Include:

  • Data breaches

  • Ransomware attacks

  • Downtime of cloud services

  • Breach of customer trust

Historical Reference: APT (Advanced Persistent Threat) groups from both nations have been active for over a decade. In past conflicts, CERT-In had flagged increased vulnerability in banking and telecom networks. In 2025, startups with limited cybersecurity budgets are particularly vulnerable.

3. Funding Freeze and FDI Slowdown

Geopolitical risk directly impacts investor sentiment. Venture capital (VC) firms and foreign direct investors (FDIs) often adopt a wait-and-watch policy during crises.

Key Impact Areas:

  • Slower funding rounds

  • Investment delays or pull-outs

  • IPO postponements

  • Lowered valuations

Current Indicator: On May 8, 2025, following rising tensions, the Indian rupee saw its worst one-day fall in two years (touching 85.71 against the USD), and the Nifty50 fell by 0.6%. This already signals jittery investor sentiment, which can impact startup funding rounds.

Historical Lens:

  • Kargil War (1999): Sensex fell 12% before bouncing back post-conflict.

  • 2019 Balakot Strikes: Minimal market dip as escalation was contained quickly.

4. Talent Migration & Brain Drain

A prolonged conflict could lead to:

  • Skilled talent seeking opportunities abroad

  • Freelancers from India losing global contracts

  • Global clients preferring to shift projects to “safer” geographies

Startups already struggle with retaining high-quality talent. If tech professionals begin seeking stable markets like Dubai, Singapore, or the West, this could lead to a talent crunch.

5. Insurance, Logistics & Risk Premiums Rise

Startups that depend on physical infrastructure—like mobility, EV, agritech, or logistics—could see:

  • Disrupted supply chains

  • Higher business interruption premiums

  • Difficulty securing reinsurance for property, assets, or exports

Sector-wise Fallout for Startups

Sector Possible Impact
Fintech Surge in cyberattacks, investor hesitancy, risk aversion
Healthtech Logistic delays for med-tech hardware and imports
SaaS/AI Startups Risk of client attrition and overseas data center vulnerabilities
Edtech Cross-border collaborations and funding likely to be delayed
EV/Mobility Import costs rise due to crude oil spike; operations may halt
Agritech Supply chain breakdowns, pricing volatility

What Can Startups Do to Stay Resilient?

1. Cybersecurity Upgradation

Startups must invest in stronger firewalls, multi-factor authentication, and regular security audits. Collaborating with cybersecurity firms or incubators can offer affordable solutions.

2. Remote and Distributed Teams

Establishing tech and ops teams across geographies—especially in Tier 2–3 cities—can minimize disruption.

3. Open Client Communication

Transparent updates to global clients about continuity plans can prevent attrition or contract cancellations.

4. Diversified Funding Strategy

Avoid dependency on a single investor or country. Explore domestic VC funds, angel investors, or alternate models like revenue-based financing.

The Global Tech Chain Reaction

MNCs like Amazon, Google, and Accenture run large operations from India. If conflict escalates:

  • They may slow hiring

  • Relocate projects to APAC nations like Vietnam or the Philippines

  • Encourage “China + 1” to become “India - 1”

India’s ambition to become a global semiconductor and hardware hub could also slow down.

Recovery Scenarios: What History Suggests

Scenario IT/Startup Sector Impact
Short Conflict (2–4 weeks) Temporary funding freeze; fast rebound in 1–2 months
Localized Skirmishes Slight investor caution; minimal tech disruption
Prolonged Escalation Investment flight, talent migration, credit rating risks
Peace via Diplomacy Quick bounce-back; resilience boost to India’s image

Should Startups Be Worried?

Yes and No.

Yes, because early-stage startups are sensitive to shocks—be it operational, financial, or psychological. No, because the Indian startup ecosystem has shown remarkable resilience before—be it during COVID, global slowdown, or geopolitical uncertainties.

The key lies in preparedness.

From securing operations to managing investor relationships, startup founders need to become wartime leaders, proactive, calm, and strategic. India's digital dreams are vast, but safeguarding them in turbulent times will be the true mark of a new-age entrepreneur.

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