Operation Sindoor – Analysing the Balance Sheet of Border Conflicts
Introduction
Imagine a ledger, thick with pages, each one scribbled with numbers, deals, and balance sheets. Now picture two countries, India and Pakistan, each keeping their accounts, but their books are constantly in the red. Since 1947, these two nations have been locked in a turbulent financial and political tango, a dance of territorial disputes, wars, and uneasy peace. Each new chapter in their history seems to be written in a language of conflict, with borders drawn in ink and blood, and every disagreement quickly escalating into a major financial undertaking. From the day they were carved out of the same soil, India and Pakistan’s relationship has been anything but peaceful. It’s a story of partition, loss, and the birth of two nations with simmering tensions over Kashmir, water rights, and military might. And as the decades passed, the wounds never quite healed. Conflicts erupted, armies were mobilised, and the air was filled with the thrum of helicopters and the rumble of tanks. But behind all the headlines of border skirmishes and military posturing, there’s another, quieter story unfolding: the story of how this constant tension impacts the economy.
For the people of both nations, the consequences of war and the ever-present possibility of war don’t just end at the border. They extend into the stock markets, where every political move is followed by a sharp dip or rise in numbers. They seep into the halls of defence companies, where lucrative government contracts keep the wheels of war grinding. They even sneak into the cricket stadiums, where IPL matches become more than just a sport; they become a battlefield of their own, shaped by national pride, diplomacy, and, occasionally, international relations. But what if we stopped to look at this conflict not through the lens of politics, but through the lens of economics? What if we started counting the costs, not in terms of weapons or military personnel, but in the dollars, rupees, and rupees lost or gained by millions of ordinary people? As the decades roll on, the consequences of war ripple outward, affecting everyone from stock traders in Mumbai to tourists in Lahore. Even peacekeeping, it seems, needs bookkeeping. So, let’s dive into the balance sheet of this ongoing saga, because sometimes, the true cost of a conflict isn’t just measured in bullets and bombs, but in the silent figures we rarely stop to count.
Defending Sovereignty
Following the partition in 1947, India and Pakistan were destined for a turbulent relationship, primarily fueled by the unresolved Kashmir issue, with both countries staking claims to the region. Over the decades, this territorial dispute ignited several wars, each one marking a chapter of deep-rooted animosity. The wars of 1947, 1965, and 1971 were not only about military confrontation—they were about sovereignty, pride, and the right to exist as separate nations. However, as the years went on, Pakistan’s role in supporting terrorism across the border escalated. Rather than seeking peace, Pakistan increasingly turned to proxy warfare, backing insurgents and militants to destabilise India through attacks on civilians and military personnel alike. India has faced countless acts of terrorism sponsored or tolerated by Pakistan, from the 2001 Parliament Attack, where militants stormed India’s heart of democracy, to the horrific 26/11 Mumbai attacks in 2008, when terrorists took control of key locations in Mumbai, killing over 170 people. More recently, attacks like the Uri attack in 2016 or the Pulwama attack in 2019, which claimed the lives of over 40 CRPF soldiers, and the Pahalgam attack this year, where civilians were targeted, have brought the severity of this ongoing issue to the forefront. These attacks are not isolated incidents but part of a systematic strategy aimed at destabilising India through violence and terror.
In the aftermath of each conflict, India demonstrated a remarkable ability to regroup and rebuild, turning each challenge into an opportunity for growth. The 1971 Indo-Pak war, which led to the creation of Bangladesh, remains a shining example of India’s military prowess and strategic brilliance. The bravery, tactical ingenuity, and unity displayed by the Indian Army during that war are a source of national pride and inspiration. Even in more recent times, when faced with cross-border terrorism, the Indian Armed Forces responded with unmatched resolve and precision, carrying out surgical strikes to neutralise threats without unnecessary escalation. We, at Greenvissage, stand today proud of our military, not just for their bravery, but for their ability to protect the country with the professionalism and compassion that is often unseen by the outside world. Their efforts have been instrumental not only in defending the borders but in maintaining a sense of national unity and security for over seven decades. India’s military isn’t just a force of defence; it is a symbol of the nation’s strength, resilience, and unwavering commitment to peace through strength. And as we continue to face the challenges that lie ahead, we can rest assured that our armed forces will always rise to the occasion, ensuring that our sovereignty remains unchallenged and our people are protected.
Stock Market Volatility
One of the most immediate reactions to border tensions or terrorist attacks is the volatility in the Indian stock market. For instance, in the wake of the 2001 Parliament Attack or the 2008 Mumbai attacks, stock indices like the Sensex and Nifty saw significant declines as investor sentiment plummeted. Geopolitical instability leads to an increase in market uncertainty, causing both domestic and international investors to pull back their investments. When terrorist attacks or military skirmishes occur, there’s a fear that escalation could lead to a war, and such fears push markets into a state of turmoil. On the other hand, defence companies, such as Bharat Dynamics, Hindustan Aeronautics, and other suppliers of military equipment, often see a surge in their stock prices as the government typically ramps up defence spending in response to these threats. While the government may significantly increase defence spending, in times of war or national emergency, Governments often take control of or directly influence the operations of these companies, prioritising military needs over profit-making motives.
In the event of a conflict, private defence contractors may see their operations shifted to focus entirely on meeting government orders, with little room for independent decision-making. This transition can disrupt the normal functioning of these companies, leading to potential financial losses, workforce issues, and operational inefficiencies. Moreover, in such times, the government may impose price controls, limit exports, or nationalise certain defence companies to ensure that resources are channelled directly into the war effort. While this is essential for national security, it can harm the long-term growth and stability of the defence sector. Companies may also face supply chain disruptions, heightened regulation, and increased scrutiny, which can affect their ability to deliver products and meet commercial demands. For the defence sector, therefore, the onset of war doesn’t just mean higher orders, it also means the loss of autonomy and potential financial strain, as the focus shifts entirely to fulfilling the immediate needs of national defence.
Impact on Foreign Investments
Terrorism and military conflicts significantly affect foreign direct investment (FDI) into India. Multinational corporations, hesitant to invest in regions with heightened instability, often delay or cancel plans to set up operations. Even if the conflict is localised, global companies may perceive India as a risky destination due to the potential for escalation. This, in turn, hampers economic growth as foreign capital plays a key role in driving job creation, technological advancement, and infrastructure development. Moreover, trade relations also suffer when geopolitical tensions rise. Pakistan, as India’s neighbouring country, is a key trade partner, particularly in terms of agricultural exports and cross-border business collaborations. Conflicts disrupt these supply chains, leading to an increase in transportation costs and loss of trade revenue. The consequences ripple out to the regional level, as India and Pakistan’s trade routes and joint ventures are severely impacted.
The ongoing trade tensions between the United States and China have had a significant impact on global supply chains, leading many companies to rethink their manufacturing strategies. The imposition of tariffs by the US on Chinese goods, along with rising labour costs and a volatile business environment in China, had prompted many multinational companies to seek alternative manufacturing hubs. India, with its growing economy, large workforce, and competitive labour costs, has emerged as a prime destination for companies looking to relocate their production away from China. For India, the US-China trade war has been a blessing in disguise. The tariffs, which made Chinese goods more expensive in the US market, created an opportunity for Indian businesses to step in. Companies from sectors like electronics, textiles, and automotive parts have increasingly chosen to set up production facilities in India, attracted by lower labour costs, a large consumer market, and the government’s push for initiatives like Make in India and improved ease of doing business. This shift has not only provided a boost to India’s manufacturing sector but has also contributed to job creation, increased exports, and an overall strengthening of the economy. Major corporations in industries such as Apple, Samsung, Foxconn, and Tesla have already moved parts of their manufacturing to India, creating a ripple effect in terms of investments, technology transfer, and long-term economic growth.
However, this economic opportunity could be significantly affected by the resurgence of military conflicts, particularly between India and Pakistan. A war or an escalation of tensions in the region could have serious consequences for India’s ability to maintain this momentum. Geopolitical instability can lead to disruptions in the supply chain, making India a less attractive option for companies seeking stability. In the event of an open conflict, the security concerns in the region would overshadow the benefits of moving operations to India. International trade could be severely affected if tensions spill over into broader regional instability, threatening India’s trade routes and access to global markets. Businesses may reconsider their investments or shift focus to safer alternatives in Southeast Asia, Vietnam, or other regions.
Tourism and Hospitality
India’s tourism industry, which significantly contributes to its GDP, suffers immensely during periods of heightened conflict. The 2008 Mumbai attacks, for example, saw a noticeable drop in international tourism, as foreign tourists became wary of travelling to destinations seen as vulnerable to terrorist attacks. The situation worsens when specific regions, such as Kashmir, are directly affected by violence—tourists shy away from visiting places deemed risky, leading to a sharp decline in revenue for the hospitality industry, local businesses, and tour operators. Similarly, domestic tourism also takes a hit, with people hesitant to travel to areas perceived as dangerous. The tourism sector, which is highly sensitive to security concerns, faces long-term setbacks, as global perceptions of safety take years to rebuild. Regions heavily dependent on tourism for their economic livelihood, such as Kashmir, Pahalgam, and Goa, experience immediate losses. The recovery of this sector often takes years, as potential visitors remain cautious even after tensions subside.
The Indian Premier League (IPL), a symbol of India’s global sporting prowess and a massive commercial enterprise, also found itself caught in the crossfire of geopolitical tensions and military conflicts. When tensions flared, the IPL felt the ripple effects, with BCCI calling off an ongoing match, international players hesitating to participate, and the league facing an uncertain atmosphere. In 2008, for example, after the devastating Mumbai attacks, security concerns led to the suspension of the tournament for a brief period. Similarly, when military escalations occur, particularly with Pakistan, the tournament can suffer from political backlash, fanboycotts, and the loss of overseas sponsorships or broadcasters. The IPL, which thrives on international participation and a festive, unifying atmosphere, became a casualty of strained relations, as the focus shifts from entertainment to national security, and the league’s ability to function smoothly is compromised by the shadow of conflict.
Defence Spending and the Opportunity Cost
In the wake of every conflict or terrorist attack, India significantly increases its defence spending. While this bolsters national security and strengthens military readiness, it comes at a high economic cost. The funds allocated to defence, which often result in the procurement of arms, ammunition, and advanced technology, are diverted from other critical sectors such as healthcare, education, and infrastructure development. The opportunity cost of defence spending is immense, essential social and economic investments are often delayed or underfunded as a result. This emphasis on defence spending also affects India’s fiscal policies. Large defence budgets can lead to increased national debt, which can have long-term implications for India’s credit rating and global economic standing. While the need to maintain military strength is undeniable, the persistent focus on defence spending comes at the expense of much-needed investment in the nation’s economic development, leading to an imbalance in national priorities. The cumulative effect of repeated conflicts, military responses, and terrorism is a drag on long-term economic growth. Continuous defence spending, disruptions to trade and tourism, and the diminished foreign investment create an environment of stagnation, preventing India from reaching its full economic potential. While India has demonstrated remarkable resilience in bouncing back from these challenges, the long-term costs of these ongoing threats cannot be overlooked. Moreover, regions that experience the brunt of these conflicts, such as Jammu and Kashmir, suffer from economic underdevelopment due to persistent instability. The disruption of local economies in these areas makes it harder to attract investment and create sustainable growth. For the people living in these regions, the constant state of alert is not just a military reality but an economic one, keeping them trapped in a cycle of poverty and limited opportunity.
The Social and Psychological Toll
Beyond the tangible economic impacts, there is also a significant psychological toll on the population. The constant threat of violence—whether in the form of terrorist attacks or border skirmishes—creates an environment of uncertainty that can lead to lower consumer confidence. People are less likely to spend money or make long-term financial commitments when they live in fear of conflict. Businesses, particularly small and medium enterprises, face challenges in sustaining operations as the market for goods and services shrinks. Moreover, the mental health impact of ongoing violence and the loss of lives affects the productivity of the workforce. Grief, trauma, and the fear of further attacks lead to a decrease in labour productivity, especially in conflict zones. These effects, though harder to quantify, ultimately contribute to the slowdown of economic growth and a reduction in the quality of life for millions of citizens.
References
- Economic Times – As India-Pakistan conflict grows, here’s how equity markets, GDP have navigated wars
- The Hindu – What a war with Pakistan could really cost India
- Reuters – India’s appeal for investors dimmed but not derailed by conflict with Pakistan
- Outlook Business – India-Pakistan Conflict: Can Both Nations Afford a Full-Scale War?
- Image by storyset on Freepik
