Can India and Pakistan afford a Full-scale War?
The question would be foremost on the mind of any sensible person anywhere in the world. War is a curse on humanity. No one wins in the long run especially when it concerns neighbours. 
 
Pakistan today retaliated to India’s pre-dawn bombings on Tuesday on terrorists’ training hideout in Pakistan by its Mirage fighters. So far, both countries have lost a fighter jet each, with firing being exchanged on many sections of Kashmir border. One Indian air force pilot has been captured alive by Pakistan. 
 
The tit-for-tat firings and bombings have forced both the countries to vacate critical airspace for their respective air force, causing massive disruption and potential economic loss. India ordered 8 airports in three northern states to be closed for civil traffic, including vacating New Delhi airport. 
 
Relations between the two neighbours have remained bitter and peace always short-lived since Pakistan was carved out of India in 1947 by the departing British, who left the northern Kashmir state disputed. The two have fought three full scale wars, with the last one in 1971, which led to dismemberment of Pakistan’s eastern wing and emergence of Bangladesh. 
 
In 1999, the two fought a limited area war as India battled to get illegal Pakistani incursions on Indian mountains around Kargil in Jammu & Kashmir. The two lost more than 1,500 soldiers in 1999, and more than 5,000 in 1971. About 93,000 Pakistan soldiers surrendered in 1971, and millions of East Pakistan refugees flooded India, causing economic distress around the same time as the first global oil shock of early 1970s. 
 
What makes the present escalation dangerous is the fact that both countries officially went nuclear in 1998. Even as the chances of the use of nukes remain miniscule, they remain a latent threat. 
 
While a war will hurt both badly, it could damage Pakistan much more severely because of the fragility of its economy and state of finances. 
 
The Islamic republic, with population of 197 million, a small GDP base of $305 billion, has a central fiscal budget deficit of 5.5% in 2017-18. Just about $27 billion of the revenue came from taxes, and the latest budget set aside 26% of total expenditure of Rs 4,200 billion towards defence spending, leaving little for development. 
 
Its current account deficit (CAD) surged 60% in the quarter ended September 2018 to 4.7% of the GDP, highlighting its inability to pay for imports. Its currency remains weaker and stock markets shaky to any turbulence.
 
Its top five exports comprising more than 57% came from cotton, apparel, crochet or knitted clothing, and clothing accessories. Other key exports include cereals, fish, salt, leather, sugar, sulphur and cement, making it extremely vulnerable to vagaries in prices, trends or cycles. A 13% increase in remittances from nationals living overseas helped bridge the gap. 
 
The south Asian nation that draws comfort from being part of Organisation of Islamic Conference (OIC) is seeking a loan from International Monetary Fund and prime minister Imran Khan, a former cricket captain who won his country the world cup, has visited many friendly countries seeking loans and help, exposing its vulnerability. 
 
The country banks on its close relations with China. Yet, the Belt and Road Initiative and China-Pakistan Economic Corridor, valued at $62 billion, which runs across Pakistan, leaves it nervous of retaining its sovereignty with over-dependence on the mighty global economy. 
 
Poverty remains a bane of both the countries. Thirty percent of Pakistanis and about a sixth of India’s 1.3 billion live under poverty, as per the World Bank, which defines poor as those living on less than $1.9 per day. The potential human cost for both makes it worse as the two remain home to some of the poorest, underfed and sick children in the world. 
 
Pakistan remains a high child mortality rate country, where one in every 14 child dies before reaching the age of one year and one in every 11 doesn’t survive fifth birthday. With an average literacy rate of 59%, just about 39% of its population get piped water. River Indus, which flows from India provides for almost 90% of its irrigation needs. Its Balochistan state, which accounts for almost half the country’s landmass, remains barren most part of the year. 
 
While India is not immune to the curse of war, its $2.7 trillion economy, a shade behind France and the UK, and among the world’s top six, gives it greater depth to last any long drawn out war. India is also among the fastest growing large economies. Yet, it too doesn’t have the luxury of splurging on wars. 
 

Pakistan’s PM, Imran Khan, made an appeal late afternoon, "I ask India: with the weapons you have and the weapons we have, can we really afford a miscalculation? If this escalates, it will no longer be in my control or in Modi’s. We invite you for dialogue…better sense must prevail.’’

 
Better sense will save both the countries from a disaster. 
 

 

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COMMENTS

Nagarajan Ramachandran

3 months ago

This article lists out facts but the spin is interesting and almost in sync with Pakistan's positioning of itself as India's equal. Yes, both countries cannot afford a war and India would rather not get into one, TV warriors notwithstanding, but if it ever did happen, Pakistan would be hard pressed to hold fort for more than 3-4 days. This does increase the risk of breaching the abnormally low nuclear threshold that Pakistan seems to prefer but with the right capabilities, India can push towards a strategic advantage before the international community forces a detente. The former NSA, SS Menon, writes in his book about the lack of sufficient divergence in our defence capability to risk going to war after 26/11. The sad part is that 10+ years down the line, five of which were under a so called muscular government, the net addition in hard defence capability has been negligible leave alone strategic reforms like a full fledged CDS and theatre commands. On paper, the defence of India is ironically the responsibility of the Defence Secretary, a generalist IAS officer! Coming back to this article, it doesn't sufficiently underline the point that while both countries cannot afford a full scale war, Pakistan will find it difficult to survive it.

Suketu Shah

3 months ago

Give us our Kashmir now or lets have a war now.This matter is gone on 70 yrs too long and needs to be resolved either way now.

Mango man

3 months ago

If there is any conventional or nuclear war between India and Pakistan, whether it be in Karachi or Mumbai, we will not be seeing it in our drawing rooms, we will be 'facing' it in our drawing rooms. If that happens do we even know how to be prepared for such a war? Out of the 10 people I checked today, no one had an answer and most thought it will not happen or if it happens they will be safe! Yes, Pakistan has been waging a covert war on us. We too should do the same and play it in Baloch, Sindh and incite minorities in Pak, if the Pak Army or ISI continues to meddle in our internal affairs. At some stage, it may also happen that China's treatment of the Uighurs becomes an issue of confrontation between Pak's fundamentalists and the Chinese government, forcing it to stop supporting the likes of JEM and maybe going after them. Going to war is no solution. Pak may suffer more but even if it is less for us, it is a lose-lose strategy. It is time we stopped being obsessed with Pakistan and look to surge ahead as an Economic super power. We should be competing with the likes of China & US and be counted as one amongst them in terms of economic super power than keep tackling Pakistan and treat them as equals. If we do, that gives them more publicity in the international arena than us. A low and covert warfare against Pak (if they do not reform their ways) is more than sufficient to hit back and keep them occupied. A high intensity eye ball to eye ball is good to up the din at the Wagah border for both countries but not to engage in a high intensity war. Patriotism and jingoism are two separate things. Confusing both and mixing them together becomes a dangerous cocktail!!

REPLY

deviraja shetty

In Reply to Mango man 3 months ago

Wonderfully put

Ajit Duge

3 months ago

India has waged a war against terrorism and not Pakistan.. Hence India should take this to its final conclusion and this will also help in solving the Kashmir problem which has cost us a lot in last 70 years,,

Jingo

3 months ago

Not sure.. what’s the solution which the author is coming up with?? India should look the other side to all the attempts being made hybrids pakistan to keep Kashmir boiling?? Most parts of India are peaceful and have made significant economic progress since independence. This is despite being home to probably amongst the most corrupt regimes in the world. Our bureaucracy eats away a significant part of budget by way of nexus with corrupt politicians and businessmen. Still we have a long standing army which is ready to make the supreme sacrifice to keep us safe. We on the other hand want them to die a thousand deaths when the terrorists keep attacking in different ways and forms?? Till when? Till the citizens of India are ready to give away Kashmir to Pakistan? Similarly we would give away Bengal and Assam to Bangladesh one day? And Arunachal Pradesh to China? Unfortunately the education and wealth some people are able to afford seem to make them go weak in the knee on first signs of danger. When the terrorist attacks hit us in Mumbai repeatedly what did we do? Nothing!! We ratcheted up the pressure for a few weeks and then went about seeing the judicial drama over Kasab!! It is high time that India give back to Pakistan in the same terms. If we cannot afford Nuclear war, they cannot as well. It is better to die with honour than die every day. Instead of being a coward, let us all support our political leadership and armed forces to take the battle to the enemy and remove the scourge of terrorism for the longest time. Jai Hind!

AAR

3 months ago

1. I saw on Twitter many Pakistanis asking for better treatment of the captured Indian airforce pilot and even his safe release. People everywhere are the same they live for socio-economic progress not for death and destruction. Also true that terrorists like ISI or haters like RSS exists everywhere though in small numbers.
2. Srilankan navy killed nearly 800 Indian fisherman and India did not go to war with Srilanka. In contrast, Pakistan has always treated captured Indian fisherman with dignity and released them promptly.
3. In my personal interactions with Pakistanis in UK or in Dubai, Pakistanis look upto India as a big brother and they simply adore our movies, IPL and South Indian culture.
4. I think the hatred between two countries is generated not by people but by Pak Army, Islamic/Hindutva forces and Arm sellers.

Having said all this I don't have any magic solution just a wish list to have a friendly neighbourhood.

Dr.Dhananjaya Bhupathi

3 months ago

https://www.moneylife.in/article/can-india-and-pakistan-afford-a-full-scale-war/56466.html
1. When Pakistan's democracy failed to come out of clutches of terrorism, let Indian Govt., root out bases of terrorists in Pakistan.
2. When Pakistan Army is within barracks, leaving terrorists to attack Indian targets through 'proxy-war'; prudent to let IAF & the Indian army to eliminate terrorist bases in Pakistan.
3. In the words of Indian PM, Shri Narendra Modi 'INDIA & PAKISTAN MUST UNITE TO FIGHT OUT POVERTY OF PEOPLE IN BOTH COUNTRIES'.
https://www.youtube.com/watch?v=T7fOf8rUrdw.
Let’s hope for Pakistan PM, Imran Khanji to let change take place for the good of everyone in both countries.
6. SATYAMAEVA JAYATHE!!!

Post Balakot Air Strikes, Indian Markets Likely To Gain: SBI
Indian Air Force on Tuesday carried out pre-dawn air strikes on terror camps across the Line of Control (LoC) in the Pakistani side, 12 days after Pulwama terrorist attack in Kashmir. While the initial response of the financial market has been negative, State Bank of India (SBI) says it believes such attacks are unlikely to have any material impact on the markets.
 
In a note, SBI says, "...the impact of todays’ air strikes will have no material impact on the markets as like the Kargil and Uri. For one thing in common, these conflicts are more localised in nature. Also, now that India has clearly reaffirmed that its patience cannot be taken for granted, these strikes in fact act as a positive deterrent for the markets for the decisiveness in India’s foreign policy."
 
For example, the Kargil War was fought between India and Pakistan in Kargil during May to July 1999. During this period, leading indices of Indian stock markets showed an initial decline but strong recovery thereafter. 
 
The Sensex and the NIFTY declined by 286 points and 79 points in three trading initial days, respectively, but recovered strongly thereafter and ended higher by 652 points and 191 points, respectively, when the conflict ended.
 
 
During the period, the Indian rupee had depreciated by 1.2% against the dollar, while there was a minor change of 2bps (basis points) in 10-year government securities (G-Secs). It may be noted that India had a fiscal deficit of close to 6% in FY2000. Interestingly, the rupee stayed at the nearly the same level during the rest of the FY2000 indicating that the value of the rupee is more determined by external factors, the note says.
 
The overall impact of the Kargil War, thus, was actually market-positive, SBI says, adding that the economy grew at the same pace in 1999-2000 as the year before—a healthy 6.5%.
 
In a similar vein, according to SBI, post the Uri surgical strikes, Indian financial markets gained with the Sensex climbing by more than 100 points and the rupee appreciating. 
 
On 29 September 2016, India announced that it conducted 'surgical strikes' against terrorist launch pads across the line of control in Pakistani-administered Kashmir, and inflicted significant casualties. 
 
 
SBI says, "Post the surgical strike, the leading indices of Indian stock markets showed decline for couple of months but recovered thereafter. The Sensex and Nifty had declined by 1,462 points and 491 points, respectively in the post three months, but recovered thereafter and ended higher by whopping 3,456 points and 1,198 points, respectively in post one year. After one year, the rupee had appreciated by 2.36% against the US dollar, while 10-year G-secs moderated by 20 bps. Overall impact of the Uri surgical strike war was actually positive for the market."
 
"Indian economy is currently on a sound footing with favourable macro numbers. Clearly, for India, historical evidence shows that geopolitical risks do not translate into political risks," SBI concluded.
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COMMENTS

puranikmukund60

3 months ago

wondeful analysis. Market can go down only if we are on loosing side. Along with India if figures of Pakistan share market would have been listed it would have given crystal clear idea how really the market moves.

Ramesh Poapt

3 months ago

bad view of SBI

V ganesan

3 months ago

Always valuation matters.if the market undervalued it goes up after immediate panic. It goes down if it is overvalued news is the trigger for fall

Overweight food basket driving India's CPI trajectory: Report
India's headline (CPI) inflation dropped to an eighteen-month low of 2.05% in January 2019, raising concerns about risks to consumer demand and growth trajectory. An in-depth analysis by Acuité Ratings & Research Ltd indicate that the food basket is relatively overweight in the current economic context given increasing consumer spending on discretionary items, healthcare and education. 
 
"Since higher weightage on food items in the consumer price index (CPI) continues to drive the current low inflation regime, a redistribution of the weightages may need to be considered for a better reflection of the consumption basket and the inflation trajectory," the ratings agency says.
 
Category wise Weight Distribution:
 
 
Source: MOSPI, BCB, Statistics South Africa, Acuité Research
Note: # indicates weight for communication is included in transportation, * indicates weight for that segment included in other categories. 
 
Consumer inflation has slipped to an eighteen-month low of 2.05% with a nearly 165 basis points (bps) fall in the last four months. While the core inflation stood at 5.45% during the said period, food inflation as a standalone metric stood at -2.17%. 
 
Acuité Ratings says it expects the overall CPI inflation to be pegged at 3.4% level for FY19 in the context of a weak short-term outlook for food and fuel prices.
 
The CPI inflation is essentially a combination of food-fuel and core inflation figures. While the former tracks the various items in the food and fuel basket, the latter contains all other products and services, which are essential in a household's basket representing both discretionary and non-discretionary spending.   
 
Food items account for 39% in India's overall consumer inflation basket. If we compare India's CPI weightages to that of its BRICS peers, the disparities are visible. As against 39% weightage of food basket in India, the category's share is only 25.5% and 19.1% in Brazil and South Africa, respectively. 
 
"While it is understood that both these contemporaries are termed upper middle-income countries as compared to India's classification of lower middle income, India's economy is also getting increasingly aligned to that level. This is because India has been averaging a GDP growth of 7.5% over a period of 10 years) as compared to the other two, averaging less than 3%," it added.
 
Acuité Ratings says while analysing other segments of the CPI basket, it is seen that the average spend on healthcare, education and lifestyle items is increasing steadily. "This development," it says, "pertains to the rising per capita income, increasing urbanization, better standards of living and reallocation of the household expenditure. As households begin to spend more on non-discretionary items, the prominence of food declines over time - a sign of a mature economy driven by diverse consumption categories." 
 
Further, higher inflation in protein-based items such as meat and fish (+5.1%) is clearly a sign of things to come; although the healthy supply side in some protein categories such as milk and pulses categories has diluted the firm price trend of late. The discretionary items are showing a steady price growth trend signifying inflationary tendencies in the core category.
 
"While India's per-capita Income is growing at 5.8%, the price trend of food articles is currently in negative zone and this is a matter of comfort for the policy makers. It is evident that through improving logistical support and storage infrastructure, India has started to control its food inflation in a significant way. The low pricing volatility in seasonal fruits and vegetables as well as in high growth protein-based items in the recent past has been a driving factor for the low food inflation," the ratings agency says. 
 
As per Acuité Ratings, items such as housing, amusement and recreational expenses, consumer durables, FMCG and transportation have gained in prominence over time as part of average household expenditure but continue to represent a lower weightage in the overall price index. "We believe this deserves a serious examination since the weightages in the Indian consumer price index must represent the evolving ground realties of the Indian economy," it concludes.
 

 

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