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The Economic Consequences Of War
Dr.Akmal Hussain
Newspaper: Daily Times
Dated: Thursday, August 29, 2002

As India persists in keeping its forces in a war like posture on its western border, inducing a reciprocal response from Pakistan, there is a clear and present danger of escalation. This was illustrated by the incident on 23rd August 2002 when Indian troops supported by their air force launched an unsuccessful attempt to intrude along the line of control in the Gultari sector. The longer the military forces of the two countries remain deployed in forward positions, the more frequent such incidents are likely to be and therefore the greater the chances of igniting a war. There is a dangerously misleading formulation amongst some strategic thinkers in India that it can achieve its objectives of coercive diplomacy through a limited conventional war with Pakistan. (limited either in space but for an extended period or limited in time but over an extended space). In any case it is this proposition that underlies sharply escalating Indian military expenditures in recent years, to acquire hi-tech weapon systems for its conventional armoury. In this article we will question the prevailing logic of "national security", and then examine the economic and human consequences of a brief but full scale conventional war between India and Pakistan.

South Asia is the poorest and yet the most militarized region in the world. The arms race between India and Pakistan (with these two countries accounting for 93 percent of total military expenditure in South Asia) is primarily responsible for this cruel irony. According to Dr. Mahbub-ul-Haq's Report on Human Development in South Asia, India ranked by the World Bank at 142 in terms of per capita income, ranks first in the world in terms of arms imports. Pakistan is not far behind, being ranked 119 in terms of per capita income, and tenth in the world in terms of arms imports. What is even more significant is that while global military spending declined by 37 percent during the period 1987-94, military spending in South Asia increased by 12 percent.

These military expenditures whose scale is unprecedented in the developing world, are being undertaken in the pursuit of "National Security". In a situation where 53 percent of the children in South Asia are malnourished and 36 percent of the population deprived of safe drinking water, the logic of such large and growing military expenditures needs to be questioned. The trade-offs between military expenditures and the provision of basic services are worth considering. For example, a modern submarine with associated support systems, costs US$ 300 million, which would be enough to provide safe drinking water to 60 million people. The issue that arises is whether national security can be sustainable when achieved at such heavy cost to citizens' security?

Given the diplomatic capability of the international community and the military capabilities of India and Pakistan respectively, a conventional war if it comes, is not likely to last for much longer than 20 days. Let us examine the economic cost of a war of this duration between the two countries. According to one estimate, just the operational cost of a 20 day war (i.e. the cost of fuel, ammunition, spare parts and extra pay to soldiers) would be about Rs.100 billion for Pakistan (Rs.5 billion per day) and Rs. 160 billion for India (Rs.8 billion per day). If we add to this the cost of mending the expected damage done to airfields, bridges and railway lines alone, the cost increases to about Rs.200 billion for Pakistan and about Rs.260 billion for India (assuming that the level of damage to such infrastructure is the same on both sides). This estimate does not include the cost of replacing weapons, building manufacturing units and other assets destroyed during the war, nor does it take account of the negative impact on investment and GDP growth resulting from budgetary pressures and infrastructure bottlenecks in the immediate aftermath of the war. Thus, just the running expenses of a 20 day war may be roughly Rs.200 billion for Pakistan and Rs.260 billion for India. This constitutes 9% of central government revenue of India and about 46% of total revenue receipts for Pakistan.

The macro economic consequences of such expenses would include a squeeze on development expenditure in India for at least one year after the war and for at least two years in the case of Pakistan. At the same time in the period immediately following the war, restrictions may have to be placed on imports including industrial raw materials and crude oil, leading to declining investment , slower growth of GDP and severe shortages of consumer goods combined with high inflation rates. Moreover additional taxes would have to be placed on the public to finance the sharply increased budget deficits.

It is clear that the economic consequences of a short duration conventional war between India and Pakistan would lead to acute financial pressures on both countries, deteriorated infrastructure, a sharp slow down in investment and GDP growth, shortages of consumer goods, inflation and unemployment. These economic consequences are likely to have a relatively greater impact on the poorer social groups and the relatively backward regions. The resultant intensified polarization in society and politics are likely to accentuate pressures on state structures in both Pakistan and India.

A deadly dimension has been added to the India Pakistan military tensions, by the fact that both countries have nuclear weapons. There are three features of the sub continental strategic environment which imply a high probability of a conventional war escalating into a nuclear war. Consequently nuclear deterrence is inherently unstable in the India Pakistan context: (a) The flying time of nuclear missiles between India and Pakistan is less than five minutes. This creates the danger of nuclear missiles being unleashed in response to disinformation about an enemy attack. (b) The absence of a second strike capability makes a pre-emptive nuclear strike probable, during a period of high tension, inspite of India's claims to a no-first use doctrine. (c) The unresolved Kashmir dispute which fuels tensions between the two countries, and makes them susceptible to disinformation about each other's intentions. The presence of these factors makes the probability of a nuclear war higher than in any other region on earth. To the extent that this is so, the concepts of deterrence and national security through nuclear weapons in South Asia become questionable.

Recent estimates suggest that even in a limited nuclear exchange between India and Pakistan, with their existing nuclear capabilities, over 100 million people would die and many hundreds of millions more would subsequently suffer from radiation related illnesses. Under these circumstances the threat to citizens' security in South Asia as a result of pursuing the arms race, has become incalculably greater than before. Moreover, given the high rate of obsolescence of nuclear weapons, the resource cost of a nuclear arms race will accelerate the diversion of resources from development to weapons of mass destruction. Consequently, while it is certain that poverty would be accentuated, and human security undermined, the achievement of 'national security' in India and Pakistan through such means would remain questionable.

If poverty is to be overcome, and indeed, if life itself is to survive in South Asia, then a new mindset in the conduct of governance may be necessary. There is a need to get out of the strait jacket of notions in which power is based on the capacity to kill, and insecurity is fuelled by demonized perceptions of each other's identities. The new mindset of governance would be drawn from the wellsprings of love, universal humanism, and the desire for a creative interplay amongst culturally diverse people. These wellsprings irrigate the respective civilizations in South Asia. Only within this radically different psychic perspective of governance would it be possible to resolve outstanding territorial disputes, achieve nuclear disarmament and reap the peace dividend for the peoples of South Asian countries.

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