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Huge Cost and Low Returns of War

War may turn out to be quite detrimental to the economy where stakes are higher for India than Pak

Madhurendra Sinha
Publish Date: Oct 25 2016 4:54PM | Updated Date: Oct 25 2016 4:54PM

Huge Cost and Low Returns of War

 The ease with which the possibility of war with Pakistan is being parroted by the hawks on both sides of the border as also sections of their media may turn out to be quite detrimental to the economy where stakes are higher for India than Pakistan, warns the editor of Policy Pulse


The Indo-Pak border tension and a war cry by the so-called nationalists have put a question mark over India’s ambitious target of becoming the third largest economy in the world.


This requires not only a fast paced growth but also continuous foreign investments (FDI). It is indeed true that India taught a lesson to Pakistan by an Israel-type surgical strike, breaking decades’ old tradition of not invading an enemy’s territory. Even during the Kargil war, India didn’t allow its troops to storm into Pakistan-occupied Kashmir. It was a wise decision by the then Prime Minister Atal Behari Vajpayee, which got India a lot of support from other countries.


But this time it was a different game altogether. The attack by the heavily-armed militants from Pakistan on Pathankot and then on Uri created a war-like situation and Indian public demanded immediate retaliation. Prime Minister Narendra Modi, under pressure from his own partymen apart from the citizens of the country, decided to do something to rattle Pakistan. Those who know Modi also know that he is the king of surprises and can anytime do something which others can’t even imagine. This time he did it again and took not only India but other countries also by surprise. Although India’s decision of doing a surgical strike is fully justified, but the continuous chant of a war with Pakistan is creating a different situation. The fact remains that we can’t afford to have a war with any country because our priorities are different. We are not a pariah nation like Pakistan which doesn’t have any economic ambitions.


Experts feel that what India did was the best option available in the current circumstances; still it must restrain itself and resort to diplomatic isolation of Pakistan rather than going into a full-scale war. They say wars are expensive (in money and other resources), destructive (of capital and human resorces), and disruptive (of trade, resource availability, labour management). Large wars constitute severe shocks to the economies of participating countries. Notwithstanding some positive aspects of short-term stimulation and long-term destruction and rebuilding, war generally impedes economic development and undermines it.


Noted columnist Swaminathan Anklesariya Aiyar, talking on the perils of war, says, escalation is best curbed by India using carefully calibrated force only occasionally, and by using fancy terminology like “surgical strikes”. He suggests limited use of force against Pakistan and using other available options so that a war could be avoided, which is not in the interest of the budding Indian economy.


The most consistent short-term economic effect of war is that it pushes up prices and consequently reduces living standards. Not only that to meet the war expenses governments may also tend to increase taxes and slap surcharges which ultimately increase the cost of the people’s living. This scenario cannot be any different in India. We are facing inflation and increase in prices of day-to-day goods. A typical war will create havoc with people’s life and bring misery to millions. Above all, recurring war has drained wealth, disrupted markets, and depressed economic growth in many countries of world that went to war. Who will forget the fact that USA lost $4.8 trillion while fighting in Iraq and Afghanistan? The cost to American tax payers is going to be more than $2.4 trillion by 2017. These figures reveal the futility of wars. Governments have to borrow huge amounts of money to fight a war and in fact USA had to borrow the entire money to finance military operations. The investments in military operations obstruct investment in core public economic infrastructure, which ultimately hampers development and growth.


The impact of war will be more on agriculture than anything else. Thousands of acres of land will not be available for agriculture purposes, reducing country's grain output to a low level. Not only that, fertile land in states like Punjab, Haryana and Jammu-Kashmir will become infertile because of extensive use of ammunitions and landmines. It will take years to get them in their old form. Farmers in these areas will be the worst hit. Water in canals and rivers will be polluted or may become poisonous, thus creating scarcity of potable or drinking water. This will again hurt farmers who use these for irrigation purposes. Quality of crops will suffer badly and they may become health hazards. Thousands and thousands of cattle will be killed, which will create shortage of milk in the country. Children will be deprived of milk and other nutrients. Their education will suffer and they may be affected mentally also.


In the 1965 war we have seen mass hoarding of grains and other essential items, including medicines. Black marketeers made huge money and the common man suffered badly. During a war corrupt businessmen earn huge money simply by resorting to unfair means. Poor people suffer the most since scarcity of food becomesa common phenomenon. Inflation also makes life harder for everyone and cost of living becomes very high. In fact, salaries of employees also go down because of reducing profits of the employers.


These facts and assumptions may look gloomy and pessimistic, but the fact remains that they are very close to realty. These happened in the past and may recur in the future also. Life will not be the same.  


Yes,wars have influenced economic history profoundly across time and space. But at the same time winners of wars have shaped economic institutions and trade patterns. Wars have influenced technological developments. For instance, auto industries saw rapid development in technology during the Second World War. Same was the case with the aviation sector. A large number of scientific inventions took place during the Second World War itself. A war may be bad for the common man, but is always good for corporate houses who do brisk business during those times, says Shubhrangshu Roy, former editor in chief of Financial Chronicle. According to him, most of the Indian corporate houses like Birla, Dalmiya, Modi, Shriram group etc got rich during the World War-II. They got good orders and contracts from the British government for their companies, which boosted their growth.


Shubhrangshu adds that many of present-day textile mills used to manufacture tents for the British army, who in turn earned huge money which they later on used to establish textile mills. Bhai Mohan Singh, founder of Ranbaxy, made roads, bridges etc in Assam during the World War. He earned huge money and ultimately fulfilled his dream of setting up a pharmaceutical company. This changed his course of life. He further says a war always creates demand for related industries and gives them a chance to prosper. Industries ranging from sugar to textiles grow to a great extent; they have a complex yet fruitful relationship.


Still we must not forget lessons from Mahabharata, which was fought for a noble cause. Although Pandavas won the war under the able guidance of Lord Krishna, but what they got after that could not cheer them. They lost all their brave men, many of whom were their relatives. Therefore, it would be prudent to go after other options which are available. The Indus river water treaty and other diplomatic steps are there to start with. India can arm twist Pakistan through these methods without being criticised by other countries who came in favor of India after Pathankot and Uri attacks. Delhi should try to further isolate Pakistan in United Nations which PM Modi and his team are doing effectively. We can only hope that the prevailing tension does not escalate further and jeopardise our growth prospects. A victory over Pakistan will not take us anywhere, but a superfast growth will make us join the top five economies of the world.


Japanese author Haruki Murakami wrote in his famous book Kafka on the Shore –“Listen up-there’s no war that will end all wars”. Remember we have already fought three wars with Pakistan -- the Indo-Pakistani Wars of 1948, 1965, and 1971 besides the Kargil showdown -- and may be preparing for the fourth. Maybe this time also we win, but would that be without any cost?