The irresponsible military brinkmanship and war mongering stance and attitude towards Pakistan over the last few years has not only ruined the regional stability but the brinkmanship has cost the Indian economy a huge financial toll on its own ailing economy and it has indicated the strong contradictions between what India says in the war rhetoric and the financial facts about it. The total cost of these gaffes, airspace closure, withdrawal of investors and discontinued trade as well as its spending on the military has since surpassed the estimated USD 83 billion with the imminent loss nearly reaching USD 103 billion which is a lot of money considering the fact that an economy like this is already facing a slow down with the rising cost of unemployment.
What is more serious with this loss is that it does not count the destruction or shoot down of high value military equipment such as fighter jets whose cost of replacement alone goes into billions of dollars. The New Delhi propagandists attempted to present, this high-stake gamble has become a harsh lesson at not only economic miscalculation but also crisis management that all the common people of India will have to end up paying, that is, the common Indian taxpayer will have to pay a very high price in the 21st century to fund the New Delhi geopolitical adventurism of the 19th century.
Among the earliest and the most notable casualties of an economic strain of the conflict driven brinkmanship was the Pakistani air space closure to Indian airline flights, which caused a direct loss of more than USD 600 million to the already ailing aviation industry because close to 2,000 Indian flights had to be grounded. The Air India, IndiGo and SpiceJet had to stress-reroute, extend flight duration, consume more fuel and badly affected their balance sheets rendering them to be bailed out by the government to stay afloat. The euphoria in political circles touching upon surgical strikes and vengeful talk on the one hand and grounded planes, soaring airline losses and the debate on bail, on the other in Parliament was a sobering one as wars are not fought exclusively on television but also in the markets, factories and in airports.
Frightened with the possibility of war between India and Pakistan, international investors withdrew USD 20 billion invested in Indian equity and debt markets causing the rupee to plunge and the Reserve Bank of India (RBI) has had to intervene to curve the depreciation of the rupee and contain an upward pressure on bond yields. It was not just an emotional knee jerk reaction because this capital flight was a cold-blooded calculation by the international financial community that India was no longer a safe haven to invest in foreign direct investment (FDI) and portfolio capital in the event of geopolitical upheavals. The net effect of this was not just the instant liquidity crunch but also a blow to the reputation of India as a stable place to invest as international board rooms.
The India-Pakistan trade route was once a vital conduit in sharing commodities like textiles, cement, pharmaceutical products and agriculture products but political victim of the gambit played by the Indian prime minister Modi. In these states alone, thousands of exporters and transporters who just adopted to aftershocks of GST implementation and discontinuation of supply chains due to COVID related disturbance saw their markets disappear overnight, resulting in layoffs, building inventories, and idle transport fleets. On the military front, escalation was so staggering as well.
Besides wasting more than USD 10 billion in military logistics, high alerts, and mobilization, India lost two high value aircraft worth USD 2.4 billion which proved to be a financial and political humiliation to New Delhi that could not commit without a forced ceasefire. It’s domestic hoorah story and the hard cold facts of the budget, the government of Modi was driven onto the defensive in a very humiliating fashion not by bravery or diplomacy but by crumbling markets and depleted finances.
Worse still are the predictions of a long war to what the Indian economy would cost should an all-out war take place. As indicated by some of the influential scholars of the economic sphere, a 30-day conflict would take USD 400 billion off India GDP which factually exceeds the turnover of Pakistan annually. Such an extension is vividly reflective of fiscal suicide of the war mongering policies in New Delhi, as nationalistic zeal is potentially creating a fiscal disaster. It is the weakness that India particularly faces in its western industrial belts including their pace setter of Gujarat where the state economy of 22 lakh crore rupees is only 400 km away from the missile launchers in Pakistan.
One precision attack on strategic installations such as the Mundra Port, the export hub of India, would permanently knock the export machine of India and leave millions in export-related industries in its death throes, halting billions of dollars of trade across its markets. Mumbai the financial hub of India has a 200 trillion Rupees financial center, the reserve bank of India (RBI), the Bombay Stock Exchange (BSE) and other giant financial establishments are also in equal danger.
The flimsy dream of Atmanirbhar Bharat (self-reliant India) came crashing to a spectacular end at the precipice of the 4-day standoff that cost the country estimated losses worth USD 64 billion and a plunge of 16 percent in the flow of foreign direct investment (FDI). This resulted in the illusion that the economy of India would be able to decouple itself with the world markets or even military shocks without serious consequences being realized.
The economic globalization experienced in India implies that even small-scale conflicts attract penalizing investor responses, soaring insurance rates and crashing confidence which is lethal in the case of a nation that wants to emerge out of a developing economy into a developed one. War may be good television; economically it is impractical idiocy.
Further bolstered by the fact that India has a heavy dependence on the western Indian ports that process 60% of all the cargo traffic. In the recent Indo-Pak standoff, the international shipping insurers increased their freight rates by two folds in shipping to make port calls at Indian ports mentioning the war clause. In the event of a fresh military confrontation, international cargo companies might switch to alternative safer routes through Karachi or the Gulf giving a setback to India export-oriented industries. Trade corridors that are lost to competitors are hardly regained. In short, the hawkish attitude of India vis-a-vis Pakistan has not earned strategic benefits but dire economic self-imposed injuries.
The Modi government that has wanted to emphasize its nationalistic muscle has reduced the contiguity in the relationship between security policy and economic stability. Each day of stepping up courts’ fiscal withdrawal, each military hazard initiates capital flight and each border confrontation expedites industrial risk and market panic. The mirage of a triumph gives in reality bad news that the economy of India cannot afford long-term face up without endangering its own economy in fiscal bankruptcy.
