Is there a widening impact of Israel -Hamas war on Indian economy?

  • Industry News
  • Oct 31,23
Israeli–Palestinian conflict is deeply affecting the world economies. Indian manufactures and exporters also concerns on its effect on the country’s economic relations. Ayushi Khandelwal evaluates the effects of the war on Indian economy.
Is there a widening impact of Israel -Hamas war on Indian economy?

Historically, wars have always brought in destruction for the mankind, the society and the environment. Where a few months back, the world witnessed the global synergy at the land of India during the G20 Summit, there today the ongoing Israel-Hamas war is dividing nations into borders and stands. The shining light on the global market after the G20 Summit is slightly deviated.

The recent developments have intensified economists' greatest concern: the fear that the conflict could spread throughout the region, posing a lasting danger to global energy and trade infrastructure. World Bank President Ajay Banga, in recent statement concerned about the world economy and said that there is so much going on in the world and geopolitics. Eventually when all of this is put together the “impact on economic development is even more serious.” He said the world is at a “very dangerous juncture” and the private sector investment requires in the developing economies are getting hurdled by the political risks.

Whereas as far as India is concerned the India-Israel economic and commercial relations combines of import and exports of defence, machinery and transport equipment, pearls and precious stones, automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textile and apparel products, base metals and transport equipment, agricultural products, and petroleum oils. India is Israel’s second-largest trading partner in Asia and the seventh-largest globally. However Dr Devendra Kumar Pant, Chief Economist and Senior Director, Public Finance, India Ratings and Research, suggests, “India’s trade link with Israel are not at a very large scale if compared to the other economies of the world. The impact of the war will be lesser than the Russia-Ukrain conflict where the commodities like gas, fertilisers and wheat were affected by the global prices.”

After the Israel-Hamas conflict broke in the first week of October, the increasing oil prices concerns were raised continuously. Dr Pant says, “It is really difficult to pin point at this point that if the rising oil prices are mainly because of the war, because the oil barrels’ prices before the war was also around $90 per barrel. The prices were elevated in the September mainly because of the production costs and other issues.” According to a few analyses there is a threat that the prices will cross $100 per barrel mark if the conflict expands more. India should buckle up and be prepared for any such situation as the country’s dependence on oil includes a lot of factors.Exporters and manufactures of the country are looking forward to the ambitious India-Middle East-Europe Economic Corridor (IMEC) for easing their trade movements and getting business opportunities. The rail link within the corridor plan aims to speed up the India-Europe trade by 40 per cent. The recent conflict bears the threat conflict of slowing down this development. The economist, Dr Pant analyses, “The IMEC plan is currently into conceptualisation stage. It involves relations between different economies. So, if there is a difference of opinion between the countries it might have some impact on the same and get delayed but nothing is concrete right now on it.” Explaining the impact if the economic relations of the countries with India, he says, “If country A and B have worsen economic relations, and country B and C have conflict of opinions, so it is not going to affect the relations between country A and C. India’s relations with the member countries of the corridor should remain same as earlier.”

Overall the ongoing conflict is impacting the world economy and shows a threatening impact on its slowdown. As we are living into a globalised economy, directly or indirectly it is affecting certain operations in India as well. The bigger risk for India remains if the war expands to the Middle East as the economic relations with this geography has a widening impact on country’s trade relations. However, developing peace by any possible means will be in the favour of all.

Dr Devendra Kumar Pant, Chief Economist and Senior Director, Public Finance, India Ratings and Research


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