The Second World War extinguished three per cent of the global population over the six years that it raged. About 80 million people died, mostly civilians, in the Soviet Union, China, Japan and Europe, where the war was fought. It also decimated the economies of Europe and Japan. Europe’s share in the global economy reduced from about 40 per cent, during the Great Depression in 1935 to 25 per cent by 1945.

There was only one winner — the United States — which developed its manufacturing and infrastructure behind the grand isolation assured, in those days, by the Atlantic Ocean to the east and the Pacific Ocean on the west. By the end of the war, its share of global GDP was 40 per cent. To be sure, American GIs and officers died in the war. But their families back home lived safe and productive lives.

Wars are best when offshored: The sobering lesson is that only wars fought offshore can be profitable, though it is undeniable that the United States used its war profits productively. It rebuilt devastated Japan and Europe, funded the creation of the United Nations to prevent and ameliorate the impact of conflict, the International Monetary Fund to promote fiscal and price stability and the World Bank to fund post-war reconstruction and later development.

All three did the job well. The question today is whether China, the contender for the global pole position, is similarly committed to exercise its dominant economic power in trade and manufacturing for global benefit or whether it will continue transactional agreements to maximise profits? Admittedly, the new trend set by America in Ukraine is uninspiring.

India’s experience: Even short wars are expensive. India’s post-Independence wars have been short. The 1962 war with China lasted for one month till the Chinese withdrew unilaterally. Nevertheless, growth in gross value added dipped from 3.1 per cent earlier to 2.1 per cent in that year.

In 1965, India responded to “Operation Gibraltar”, an assault by Pakistan on India. The war lasted for seven weeks. Growth was a negative-3.6 per cent, versus 7.6 per cent in the previous year, though drought combined with war to deplete growth.

The 1972 war to assist the Mukti Bahini against Pakistan’s oppressive regime in East Bengal was a response to pre-emptive air strikes on India by Pakistan. It lasted just 12 days. Growth fell from 6.5 per cent earlier to 5.0 per cent. It reduced further to one per cent in 1972 and to negative growth in 1973 though, yet again, drought aggravated the economic impact.

This dataset supports the IMF assessment that conflict, even in the short term, reduces GDP by one to two percentage points. South Asia also loses from war between Pakistan and India, despite regional cross-border trade being low at five per cent versus 25 per cent in next-door Southeast Asia.

War will further postpone regional economic integration. Cross-border discord will heighten as existing, albeit sparse, B2B and P2P relationships get shredded. The ill-advised notion, voiced in Bangladesh by some recently — albeit not supported by the government — of joining with China to annex India’s Northeast if India attacks Pakistan, speaks to the kind of hysteria war clouds generate.

Playing into China’s game plan: Who gains? The clear winner is China.
War would retard India’s growth, further compromising its capacity to “manage” China. Should this not worry the US? That depends on whether they view India as a “client state” or a significant “partner”. As a client state, dependent on the US for assistance, technology and geo-political heft, India’s reliance would increase, which might suit America in the short term.

However, as a “partner state”, independently capable of investing in aligning strategic focus, a weakened India could become less useful in shoring up democracy and fair trade in the Indo-Pacific. Sadly, America’s own continued commitment to these strategic principles is now in doubt.

Spend to maintain peace, not to fund war: If India is to remain self-reliant, it must spend to maintain peace, not to fund a war. Domestic reform to unleash private investment, enhance fiscal stability and negotiate plurilateral investment and trade treaties integrating India into strategic global goals selectively, are key. The problem is domestic. The government must enlarge the domestic negotiating space to integrate, discordant segments — farmers and small business — representing about one-half of the popular vote? Over the past decade, welfare measures — both private and community-based — have ballooned, undergirding the incomes of the bottom one-third of the population and protecting families from falling back into dire poverty (below PPP $2.15 per person day). Doing more of the same at higher levels as applicable for lower middle-income economies (PPP $3.65 per person per day), implies additional targeted assistance for about one-third of the population, equal to about 11 per cent of current GDP.

Catch-22: With government revenues at about 17 per cent of GDP, enhancing welfare support is affordable only if the economy grows faster — which war would inhibit. A balance between indirect incentives to promote employment-linked income enhancement and direct welfare support is therefore a sensible compromise. Allowing state governments to design the incentives can help reflect contextual specificities and opportunities. Sadly, we have been negligent in the devolution of powers, particularly to cities and villages, where the space for negotiating proposals for “shared growth” exists since communities live in proximity.

Technocratically devised plans in remote New Delhi, in contrast, lack context and specificity. The Belfast “Good Friday Agreement” in 1998 ended three decades of intense sectarian violence in Northern Ireland. It was based on devolution of more powers from the UK government to Northern Ireland.

Experimenting with devolution to enhance equity can also spur growth.

India is a relatively young democracy and, like Pakistan, very culturally diverse.

Unlike Pakistan, political power in India still flows from the people, and we have not succumbed to monotheism of any kind. Contestation between political parties is at the heart of Indian democracy, unlike in homogenous China. The ensuing complex political web of accommodations and compromise is not a design fault. Admittedly, it slows down development.

But it provides a forum for the settlement of differences and active engagement to overcome shared challenges. The Covid-19 pandemic was one such. Dealing with external aggression is another unifying force, especially if it is a war that we neither provoked nor sought. Winning will require keeping our powder dry, garnering global support and continuing to invest in innovation, productivity and equity.

The writer is Distinguished Fellow, Chintan Research Foundation, and was earlier with the IAS and the World Bank