Indian equities are expected to remain stable, despite geopolitical tensions between India and Pakistan, a recent report by JM Financial said.
This prediction was based on assessment of historical trends. “past data suggests that the Indian equity markets have not been negatively impacted significantly during such conflicts, but the Indian economy has been adversely affected,” JM Financial has said according to an ANI report.
The report reviewed four major military conflicts involving India, the 1962 war with China, the Indo-Pak wars of 1965 and 1971, and the Kargil war of 1999. In each case, equity markets either saw a swift recovery or ended up registering only limited negative reactions, while the broader economy faced more substantial consequences.
History
1962 Indo - China war
After the 1962 Indo-China war, India’s GDP shrank by 0.8 per cent.
1965 & 1971 Indo - Pak wars
The economic damage was even more pronounced during the Indo-Pak war of 1965, when GDP growth tumbled down sharply to 2.6 per cent, down from 7.5 per cent in the previous year.
In the 1971 Indo-Pak conflict growth slipped to 1.6 per cent from 5.2 per cent the year before.
1999 Kargil war
Interestingly, the Kargil war in 1999 deviated from this pattern. Rather than slowing down, India’s economy accelerated, with GDP growth rising to 8.9% from 6.2 per cent in 1998. The war that was fought between May 3, 1999 to July 26, 1999, saw Nifty jump 7% at the end of the third day of the war, while at the end the benchmark was 35.6% up.
The report hence argued that the economic impact of conflict can vary significantly depending on both internal resilience and external factors.
Can India’s economy withstand the India-Pakistan tensions shock today?
Even though India’s economic health could be dampened by military escalation, its impact would be severely less than the past because of its current robust economy.
The firm said that while wars tend to strain national resources, at present, the economy is better positioned to absorb such shocks than it was at any other time during the past conflicts.This buffer is attributed to structural reforms, a more diversified industrial base and strong macroeconomic fundamentals that shield against any full blown economic shock.
This prediction was based on assessment of historical trends. “past data suggests that the Indian equity markets have not been negatively impacted significantly during such conflicts, but the Indian economy has been adversely affected,” JM Financial has said according to an ANI report.
The report reviewed four major military conflicts involving India, the 1962 war with China, the Indo-Pak wars of 1965 and 1971, and the Kargil war of 1999. In each case, equity markets either saw a swift recovery or ended up registering only limited negative reactions, while the broader economy faced more substantial consequences.
History
1962 Indo - China war
After the 1962 Indo-China war, India’s GDP shrank by 0.8 per cent.
1965 & 1971 Indo - Pak wars
The economic damage was even more pronounced during the Indo-Pak war of 1965, when GDP growth tumbled down sharply to 2.6 per cent, down from 7.5 per cent in the previous year.
In the 1971 Indo-Pak conflict growth slipped to 1.6 per cent from 5.2 per cent the year before.
1999 Kargil war
Interestingly, the Kargil war in 1999 deviated from this pattern. Rather than slowing down, India’s economy accelerated, with GDP growth rising to 8.9% from 6.2 per cent in 1998. The war that was fought between May 3, 1999 to July 26, 1999, saw Nifty jump 7% at the end of the third day of the war, while at the end the benchmark was 35.6% up.
The report hence argued that the economic impact of conflict can vary significantly depending on both internal resilience and external factors.
Can India’s economy withstand the India-Pakistan tensions shock today?
Even though India’s economic health could be dampened by military escalation, its impact would be severely less than the past because of its current robust economy.
The firm said that while wars tend to strain national resources, at present, the economy is better positioned to absorb such shocks than it was at any other time during the past conflicts.This buffer is attributed to structural reforms, a more diversified industrial base and strong macroeconomic fundamentals that shield against any full blown economic shock.
You may also like
Clubber who killed 'hero' dad by punching him outside nightclub jailed for manslaughter
NHRC seeks ATR from Odisha CS over underutilisation of DMF funds
Air India to resume flights on routes affected by India-Pakistan tensions
China denies reports of sending cargo plane with military supplies to Pakistan
Telangana attracted Rs 3 lakh crore investment in 15 months, says CM
