Situation in Pakistan affects India the most. A weak Pakistan is not in India’s interest. Many Pakistanis feel that Indians want Pakistan to collapse, which is far from true. If Pakistan collapses, it would affect India the most.
There would be a huge refugee problem in India. Already millions of Bangladeshis are in India since West Pakistan and East Pakistan went to war in 71.
Neighbourhood woes threaten Indian boom
Email Printer friendly version Normal font Large font January 5, 2008
THE optimism on the streets of India’s cities is palpable. The economy is growing at more than 8 per cent a year and the Indian sharemarket has delivered returns of more than 40 per cent for three years running.
The streets of Delhi and Mumbai are clogged with gleaming new cars and a growing band of consumers can afford mobile phones, DVDs and iPods.
The Finance Minister, P. Chidambaram, this week boldly predicted growth would accelerate to 9 per cent this year, notwithstanding the dark clouds gathering over the US economy.
The runaway growth in India, and its huge neighbour China, means global growth is expected to be strong this year despite the uncertainty about America’s economic prospects.
Australia has a big stake in the continued success of these fast-growing Asian giants. The demand for resources triggered by India’s rapid economic expansion has helped underpin the surge in commodity prices, in turn driving Australia’s recent prosperity.
But events of the past week have underscored how vulnerable South Asia is to political turmoil.
When the Pakistani President, Pervez Musharraf, addressed the people on Wednesday night after Benazir Bhutto’s murder, Indians were able to tune in live on TV.
Several channels in the Indian capital of New Delhi carried the address in full and followed it up with lengthy expert analysis.
India’s vast array of cable TV channels provided viewers with many alternatives to watching Mr Musharraf’s speech, but his presence on prime-time TV shows how closely many Indians are watching developments across the border.
Ultimately, for India and South Asia, a stable civil government in Pakistan is the best guarantee of progress and prosperity. The volatile times in Pakistani politics heralded by Ms Bhutto’s death may prove a setback for India, and its economy, at least in the short term.
Pakistan’s economy has been growing at a healthy rate for several years, but the Bhutto assassination will take an economic toll on the country.
The World Bank recently praised the Pakistani economy for its “great resilience” in the face of the earthquake that devastated Kashmir in 2005. The current political crisis is another test.
Apart from the damage to infrastructure caused by riots following Ms Bhutto’s death, the political uncertainty it has caused is a significant blow to already shaky investor confidence in Pakistan.
The World Bank says the country needs to increase the quantity and quality of investments to sustain rapid growth over an extended period.
Strong political leadership is required to drive reforms that reduce the cost of doing business and boost productivity. Pakistan is also crying out for massive investment in public infrastructure, education and health.
The wellbeing of millions of Pakistanis is threatened by the current political crisis.
But Pakistan is by no means the only source of instability in South Asia.
The two-decade civil war between the Government of Sri Lanka and the Tamil Tigers has recently taken a bloody and unpredictable turn for the worse. On Wednesday, the Government said it had formally abandoned a ceasefire negotiated with the rebels in 2002. On the same day a roadside bomb attack in the capital of Colombo killed five people and injured 28.
There are reports of heavy fighting between government forces and rebels in the north of the island, and the Government’s announcement may be the precursor to a fresh offensive against Tamil strongholds.
The densely populated nation of Bangladesh also hangs in political limbo as an interim government works towards holding fresh elections.
Meanwhile, tensions in the troubled Himalayan kingdom of Nepal intensified this week after Maoist insurgents-turned-Government coalition members demanded the monarch, King Gyanendra, immediately abdicate. The Maoists say the Government will force him out if he does not go voluntarily, raising the prospect of renewed political chaos in Nepal.
India, too, is battling a swag of insurgents. On New Year’s Day, there was an apparently home-grown terrorist attack on a paramilitary base in the Indian heartland state of Uttar Pradesh.
Three men described as suspected jihadi terrorists killed seven security personnel in the pre-dawn raid.
India’s hardy investors and business people have learned to live with these lingering domestic and regional political hazards, and the economy has been able to perform strongly despite them.
The bullish predictions about India’s economic future assume it can continue to rise above the trouble in the neighbourhood.