The Economic Impact of the India-Pakistan Conflict – International Banker

Report on the India-Pakistan Conflict and its Implications for Sustainable Development Goals

Executive Summary: Conflict Overview and the Undermining of SDG 16

A brief but intense military conflict between India and Pakistan from May 7 to May 10 has generated significant economic and social repercussions, posing a direct threat to the achievement of the Sustainable Development Goals (SDGs) in the region. The hostilities, which included missile strikes, cross-border raids, and cyber operations, represent a severe setback for SDG 16 (Peace, Justice, and Strong Institutions). While a fragile ceasefire was mediated, the lack of a sustained peace plan highlights the persistent risk to regional stability and sustainable development.

• Conflict Period: May 7 – May 10.
• Initiating Action: India’s “Operation Sindoor,” launched in response to an alleged terrorist attack in Jammu and Kashmir that claimed 26 civilian lives.
• Military Engagements: Included missile and drone strikes on cities, artillery fire, and cyber operations.
• Resolution: A United States-China-mediated ceasefire was established, but the situation remains volatile, undermining the core principles of peace and security essential for all development goals.

Economic Disruption and Setbacks for SDG 8

The conflict delivered an acute economic shock to both nations, directly challenging SDG 8 (Decent Work and Economic Growth) by impairing production, disrupting trade, and reversing developmental gains. The economic fallout threatens to derail long-term growth strategies and macroeconomic stability.

Impact on India

1. Initial Assessment: The Reserve Bank of India (RBI) reported a negligible impact on overall economic activity, confined to temporary disruptions in northern regions.
2. In-depth Analysis: A study by the Islamabad Policy Research Institute (IPRI) estimated India incurred losses of $88.712 billion. This figure includes $4.02 billion in lost output and $84.692 billion in direct costs such as military expenditure, infrastructure repair, and disruptions to tourism and aviation. This analysis reframes the conflict as a major impediment to sustained economic growth.
3. Fiscal Pressure: Increased defence spending could slow fiscal consolidation, diverting resources from development priorities in line with the SDGs.

Impact on Pakistan

• Vulnerability: The conflict occurred while Pakistan’s economy was in a fragile state of recovery, supported by an IMF bailout program.
• Derailment of Reforms: Sustained tensions threaten to derail crucial economic reforms, scare off foreign investment, and accelerate capital flight, directly hampering progress towards SDG 8.
• Sectoral Collapse: The tourism sector in sensitive areas like the Neelum Valley has collapsed, eliminating jobs and choking local enterprise, which are vital for inclusive growth.
• Financial Risk: Credit rating agency Moody’s warned that prolonged conflict could impair Pakistan’s access to external financing and pressure its foreign-exchange reserves.

Human and Social Costs: Reversing Progress on SDGs 1, 3, and 10

The conflict’s impact extends beyond economic metrics, inflicting significant human and social costs that reverse progress on key social development goals.

• SDG 1 (No Poverty): The IPRI report concluded that the economic shock “imperilled the social safety nets upon which millions depend,” increasing the risk of poverty for vulnerable populations.
• SDG 3 (Good Health and Well-being): The initial attack resulted in 26 civilian deaths, a direct contravention of the goal to ensure healthy lives. Furthermore, conflict diverts state resources from public health to military expenditure.
• SDG 10 (Reduced Inequalities): The economic fallout disproportionately affects border regions and vulnerable sectors like tourism, exacerbating regional and social inequalities.

Impact on Infrastructure, Trade, and Partnerships (SDGs 9, 11, and 17)

The military engagement caused direct damage to physical assets and severed crucial economic partnerships, undermining the foundations for a sustainable future.

• SDG 9 (Industry, Innovation, and Infrastructure) & SDG 11 (Sustainable Cities and Communities): Missile and drone strikes on cities and infrastructure cause direct damage, necessitating costly repairs and setting back progress on building resilient and sustainable infrastructure and communities.
• SDG 17 (Partnerships for the Goals): The conflict led to a halt in formal cross-border trade, valued at $1.2 billion annually. This breakdown in regional cooperation is a direct blow to SDG 17. Historical precedent shows such events can cause Pakistan’s exports to India to plummet, demonstrating the severe impact on regional economic partnerships.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

   • SDG 16: Peace, Justice and Strong Institutions

     This is the most central SDG addressed in the article. The entire text revolves around a military conflict between India and Pakistan, the resulting hostilities, a fragile ceasefire, and the high likelihood of the conflict resuming. The article details “missile strikes,” “drone strikes,” “cross-border raids,” and “artillery fire,” which are direct antitheses to the goal of promoting peaceful and inclusive societies.

   • SDG 8: Decent Work and Economic Growth

     The article extensively discusses the severe economic repercussions of the conflict. It highlights how the four-day war acted as an “acute economic shock” that “impaired production” and led to significant financial losses. Specific details include an estimated $88.712 billion in losses for India, a potential derailment of Pakistan’s fragile economic recovery, and negative impacts on sectors like tourism and civil aviation, all of which directly threaten sustainable economic growth.

   • SDG 9: Industry, Innovation and Infrastructure

     The conflict’s impact on infrastructure is explicitly mentioned. The Islamabad Policy Research Institute (IPRI) study cited in the article includes “infrastructure damage” and the cost of “infrastructure repairs” in its calculation of the direct costs of the war. This destruction of physical infrastructure is a direct setback to the goal of building resilient infrastructure.

   • SDG 17: Partnerships for the Goals

     The article mentions the role of international cooperation in mitigating the conflict. It states that a “United States-China-mediated ceasefire then unfolded on May 10, with Persian Gulf states also providing backchannel support.” This highlights the importance of global partnerships in achieving peace and stability, which is a core component of SDG 17.

2. What specific targets under those SDGs can be identified based on the article’s content?

   • Target 16.1: Significantly reduce all forms of violence and related death rates everywhere.

     The article’s focus on the military conflict, which included missile and drone strikes, and the mention of a terrorist attack that claimed “the lives of 26 civilians,” directly relates to this target. The entire situation is an example of the presence of violence that this target aims to reduce.

   • Target 8.1: Sustain per capita economic growth in accordance with national circumstances.

     The conflict is shown to directly undermine economic growth. The IPRI report describes a “$4.02 billion in lost output” and a “GDP contraction” for India. For Pakistan, the article warns that a prolonged conflict “would derail reforms, scare off investment, and accelerate capital flight,” thereby hampering its progress toward sustained economic growth.

   • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure… to support economic development and human well-being.

     The article’s reference to “infrastructure repairs” as a major cost component of the war indicates that the conflict caused significant damage to existing infrastructure. This destruction works directly against the goal of developing and maintaining resilient infrastructure necessary for economic activity.

   • Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology and financial resources, to support the achievement of the sustainable development goals in all countries, in particular developing countries.

     The successful mediation of a ceasefire by the United States and China, with support from Gulf states, is a clear example of a global partnership working to achieve a specific goal (peace), which is a prerequisite for sustainable development. This action directly aligns with the spirit of Target 17.16.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

   • Indicator for Target 16.1:

     The article provides a specific number for conflict-related deaths. The mention of “26 civilians” killed in the initial attack serves as a direct, quantifiable measure related to Indicator 16.1.2 (Conflict-related deaths per 100,000 population). The descriptions of military actions imply further casualties, though not quantified.

   • Indicators for Target 8.1:

     The article contains several economic figures that can be used as indicators. These include:

     • The annual real GDP growth rates for India (6.5%) and Pakistan (2.7%), which relate to Indicator 8.1.1 (Annual growth rate of real GDP per capita).
     • The estimated total economic loss for India ($88.712 billion) and the specific figure for “lost output” ($4.02 billion), which are direct measures of the negative economic impact of the conflict.
     • The collapse of the tourism sector in areas like the Neelum Valley, which serves as a sectoral indicator of economic disruption.
   • Indicator for Target 9.1:

     An implied indicator is the monetary cost of infrastructure damage. The article includes “infrastructure repairs” within the $84.692 billion direct cost estimate. This financial figure can be used as a proxy indicator to measure the extent of damage to infrastructure and the resources diverted from development to reconstruction.

   • Indicator for Target 17.16:

     A qualitative indicator is mentioned: the existence and successful outcome of the mediation effort. The article states that a “United States-China-mediated ceasefire then unfolded.” The establishment and temporary success of this partnership serve as evidence of progress towards this target, demonstrating effective international cooperation for peace.

SDGs, Targets, and Indicators Summary Table

Source: internationalbanker.com