IMPACT OF INDO-PAK WAR ON INDIAN ECONOMY – IF IT ALL IT HAPPENS
"All I am saying give peace a chance",Ankit Jain, CEO, EBazar.Ninja
During wartime citizens are not supposed to question government and it is also a kind of a military rule.
Initially, it was killing of Burhan Wani by Indian armed forces and after that attack on Indian army base in Uri, which resulted in martyring of 18 army soldiers.
With India losing on patience as Pakistan continues to harbor terrorists despite continuous appeals from the International front to stop it.
Interestingly, after this the Karachi Stock exchange already plunged after the panic selling of small investors due to the Military drills carried out in the country.
Now, amidst these tensions and plunging stock market the cry of war can also be heard. But the question underlines is:
War is never happy as it brings sadness and loss which is both in economic and social. It will have an adverse effect on both the nations.
As told in the theories, wars are expensive affairs (in terms of money and other resources), destructive (of both capital and human capital) and disruptive (trade, resource availability and labor management).Larger economies contributes severe shocks to the economies of the nation and years to build back. If we look at the wars and economies post war it has been under huge adversity. Surely, Indian missile system can bankrupt Pakistan. Both India and Pakistan have nuclear stocks with them and this can make things further worse.
The major impact of war between India and Pakistan will be inflation and as it will push the prices of the commodities thus reducing the living standards. The cost of common items is going to be high as there is less availability too. War has profound impact on the economy, on government and its fiscal and monetary policy. An inflationary pressure is going to surge on the country and create a dark cloud on the growth and infrastructure of the country and the prolonged wars attribute to the deep economic crisis.
It is going to be pushed decade back in case of economy and development. Current GDP growth in India is expected to be 7.20% in the quarter according to Trading Economics Global Macro Models and in the future it is going to trend around 5.20%.In addition to this addition 1 % comes from well harvested rural economy of India.
As per the growth India could grow well to 2 trillion real economies and also in the stock market capitalization. With the current GDP growth rate soon India is going to emerge as the major economy in the world till 2020 and till now it is faster growing economy with growth rate of 7.4% GDP.
But if war happens it is going to setback for the Indian economy .First of all there is going to be sharp increase in the military expenditure. It is now 1.7% of the GDP but during war will increase it considerably. It will also bring down the value of rupee against the dollar.
If we take one example of the Kargil war which happened in year 1999-2000 .The total cost of expenditure was Rs.39,897 crores on military till 1998-1999.
During the Kargil war, year defense expenditure risen up to 18% and now at Rs.47,071 crores. Defense expenditure was continued to be increased in the next year also to 16 % and in the two years there has been 36% increase in defense budget around total of 14,564 crores growth in the two years during Kargil war. The investment in the defense has left government with limited options. It means less spending on the infrastructure and social sector.
From the above example, it can be incurred that apart major destruction of the civil infrastructure it also impacts economy in the worst possible manner which takes years to revive. The economy is going to be in slump if war happens between both the nuclear powers. A war also causes colossal human sufferings. It destroys home and causes numerous other sufferings too.
This war is going to be minus shooting, in that case all withdrawals from the concessions given to Pakistan during SAFTA (South Asian Free trade Area) and review of Indus Water Treaty (IWT) between both the countries. Recently, three moves have been made by India:
• Review Indus Water Treaty
• Boycotting SAARC summit which is going too held in the month of November
• Review of MFN status.
Let’s keep our fingers crossed and hoping that all measures can eradicate the militancy in the valley and bring back peace without war.
These views are of Mr. Ankit Jain,CEO,E Bazar.Ninja, on how war disarrange the normal lives of the citizens and how it affects economy.In the end he says" All I am saying give a peace a chance".
The chart has been taken from the Ministry of Stats and Programming Implementation.
The views are completely on the basis of repercussions faced in past as in the form of Kargil war.
The statics of the Kargil war is taken from The Hindu.