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War and its Impact on Economy

July 04, 2022 · ROOPAK J PRAKASH

War : Price paid to showcase Power 

The conflicts which occur in an uncontrollable world have consequences. The conflicts resulting to large-scale wars have capability to create destruction and chaos, not only during the passage of war but also in the long future of the countries involved and as well as the world. This three-letter word “WAR” has always proven to be horrifying whenever it is encountered on this planet. This is also not new as from prehistoric era till modern days wars have been taking place whether for survival or to prove powerful.

War rarely brings any optimism along with it rather things worsen with each passing day

  • innocent lives are lost
  • Security is threatened
  • Basic aminities are affected
  • With the advent of technology environment is disturbed to a great extent and
  • Most importantly we wrap up a dark, bleak, unsustainable gift for the generations to come.

Impacts of War on World

  1. Economic Inflation: The conflict that occurs in one part of the world has an immense ability to destabilise the whole world’s economy. The war adds to the series of supply shocks that have struck the global economy in recent years. Like seismic waves, its effects will propagate far and wide—through commodity markets, trade, and financial linkages.
  2. Effect on Human: It forces the human to leave their homes in order to escape from the brutal impact of the war and are being pushed to find shelters in neighbouring countries or in a new place unknown to them
  3. Effect on Globalization: Many commentators have argued that the invasion and sanctions may contribute to greater market fragmentation and deglobalization.13 A decline in global integration had already been a prevailing trend prior to the war.
  4. Environmental Effect:It is no doubt that war results in destruction of environment. The military actions end up being a major cause of air, land and water pollution. War in industrialized areas creates extensive risks of toxic contamination, given the concentration of power generating stations, chemical plants, metalworking, factories and the like.
  5.  

Russia Ukraine war and effect on India

The recent Russia-Ukraine horrible development has subsequent results and a domino effect on all portions of the world along with India. Though, India has till now maintained a neutral stand on Russia Ukraine war it is not excluded from suffering the Consequences

1. Crude oil: The highest macro headwind for India is a rally in crude cost. The crude oil has increased to $105 per barrel while the Gold crossed the $1900 mark in between risk hatred. RBI might surge the interest because of the inflationary effect

2. Trade

  • The India-Ukraine bilateral trade is supposed mandated between the rising border tensions between the Eastern European Nations and Russia.
  • Pharmaceuticals is the biggest part that India exports to Ukraine. India is the 3rd largest exporter of Pharmaceutical products to Ukraine, after Germany and France in terms of value.
  • Ukraine is India’s one of exporter of sunflower oil, obeyed by inorganic chemicals, iron, and steel, plastics, chemicals, etc. 

3. Banking: Till date, banking sector has remained resilient to the ongoing conflict. The indicators of financial health—profitability, asset quality and capital adequacy—has risen to a new peak, thus showing a strong banking scenario.

Impacts of war on Entities and start up:

1. The War leaves the global economy with two key points of vulnerability — high inflation and fragile financial markets. Resulting in rise of interest rates  which will incentivize capital rotation into bonds rather than equities, therefore less capital will be allocated to venture (and start-ups as a result).

2. The impact of inflation, rising interest rates, geopolitical tensions has an obvious effect on the public markets, and plunging markets are making it harder for firms to tap funds for investment. The public market reduces price to sales multiples for publicly traded technology companies which ultimately has an impact on private market resulting in decrease in its valuation. Thus, less money in the private markets means smaller funding rounds for small business and start-ups. 

3. Geopolitical uncertainty and global conflict almost always negatively impact the stock market. The IPO market will slow down given macro uncertainty.

Conclusions

The result of war is very straight forward and accurate one wins and the other loses but the winner doesn’t actually Wins as it destroy itself Economically, socially geographically and politically. Nations should understand that war will only worsen situations and is no solution for any altercations rather, we can choose the path of diplomacy or soft power to strengthen bond amongst nations, find solutions to problems that people face and focus on growing together. As in a globalized world nations can’t grow individually the growth can happen only with togetherness. So wherever possible wars should be avoided and peaceful diplomatic solutions should always be entertained.

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