Costing this conflict

Taking a purely moral stance against war is quite a different thing to rationally calculating the political and economic fallout of the comi...

Taking a purely moral stance against war is quite a different thing to rationally calculating the political and economic fallout of the coming conflict in the Middle East.

The decision of the Indian government to oppose unilateral US action may have a diplomatic, and some would claim moral, logic to it but is not warranted purely by either economic concerns or the political consequences of the collapse of the post-Second World War security framework.

While the India government must have a strategy for managing the fallout of war, the constitution of a “crisis management” group should not give the impression that India is likely to find itself in a “crisis” when real action begins.

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The nervousness of markets is understandable and worries about an increase in oil prices and disruption of tourist and business traffic are legitimate. But none of these costs need be long term. Indeed, if the US succeeds in securing a quick military solution to the challenge posed by Saddam Hussein, economic normalcy should be restored sooner rather than later, even if the political ripples of the event will be felt far and wide and for a long time to come.

There is also no need to exaggerate the scale and cost of a feared massive airlifting of Indian nationals out of the region as had happened in 1990-91 Gulf War.

At that time, not only were there many Indians in Iraq but the several thousand Indians in invaded Kuwait had also to be brought home to safety. This time there are very few Indians left in Iraq. More importantly, there is unlikely to be any fallout in Kuwait or the Persian Gulf region and Indians working in these countries should feel safe enough to stay put rather than rush home.

As for the Indian economy, apart from the short-term nervousness of markets, an early end to conflict will help bring oil prices down, after an initial spurt. The Indian economy is capable of absorbing the immediate shocks.

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Even at the time of the 1990 Gulf War, many Indian analysts argued that the impact of the drain on foreign exchange reserves would have been much less on the economy if the domestic management of economic policy had been on the right lines. This is as true today as it was in 1990.

If the government pursues sensible economic policies at home, aimed at ensuring fiscal consolidation and revival of investment, the dent created by war can be ironed out in the medium term. If, however, domestic economic management is faulty, external factors will only aggravate a bad situation.

For all these reasons one must not exaggerate the economic concerns about war, whatever else may shape public and diplomatic opinion in New Delhi.