New Delhi: India can withstand a possible short war over Iraq but a prolonged
conflict may dampen growth prospects, says a Confederation of Indian Industry (CII)
study.
Expressing concern over fiscal health of the Indian economy in case of a
long-duration war in Iraq, the CII said, "India is well equipped with enough foreign
reserves to withstand a short war of upto 20 days."
"A prolonged war may dampen the growth prospects... basically nipping the growth in
the manufacturing sector and reducing GDP (Gross Domestic Product) growth by
something like 0.75 to one per cent," the apex industry chamber said in a study in
which various war scenarios and their impact on the Indian economy have been
presented.
"War in Iraq seems inevitable. Only difference of opinion is on the possible date...
late February versus early March," CII said, adding the war would have impact on oil
prices and inflation in the domestic economy besides exchange rate movement.
In one of the scenarios assuming a short-duration war, the chamber said the impact
was limited to disruption of only two million barrels per day of oil produced by Iraq
with no other disruptions, increase in oil prices was not foreseen.
The movement in oil prices would depend on extent of duration of the war, CII said,
"We are factoring in only a moderate increase in oil prices in case of short
disruption in oil supply."
PTI
