Random Musings

This is not intended to seem commercial-minded at a time when our soldiers are battling it out on the warfront.

However, on the side of the battle that is on, there is an impact across various businesses – some positive, some negative. The purpose of this article is to visualize the nature of such impact. Of course, I write this, not being an economics professional, but simply as a businessperson or as a common investor.

Let’s start by looking at some of the areas that could see positive impacts of war.

Clearly, the defense industry sees demand! While most defense products are unlikely to be made overnight to supply into the current battle zone, however, replenishment orders will be placed, and which would see a boost to their revenues.

Some cases, like ammunition or gear could even be produced in a hurry, and there could be urgent orders to fulfil.

This war has seen the emergence of a strong indigenous industry of sophisticated armoury and which has now proven war worthy. The companies behind these products will be chased by buyers from around the world.

There is a contribution to the technology from various startups that have provided key elements to the final product, and which also would be recognized and get traction.

Overall, the Indian Defense industry will get a boost, and in the sector, from being buyers of tech from the world, we could emerge as a player that also sells. Defense is a huge category worldwide and getting a slice of that large pie will be interesting!

Then again, for the global players, be it Rafale or F-16, or others, the ones that come out of the war, with least damage, will flaunt their invincibility and attract more orders for themselves, from around the world!

Let’s look at the media space. And start with TV news media. In a world where on a normal day, news is usually consumed via social media sources, TV news channels generate their high, only around election season, and especially on that one results day. Rest of the year is a big struggle.

Now suddenly, as they get into 24×7 live reporting on war and there are viewers glued to the screens, their TRPs soar, and along with that, their advertising revenues as well. Yeah, so what if a war is on. There will always be advertisers keen to reach the audiences!

But then there is also the flipside of media – everything other than TV News. Suddenly, news takes away so much of the viewing share of the consumers, everything else suffers badly in comparison. Because the viewer only has 24 hours on the day, and TV news consumption has come at the cost of something else going down.

So, while IPL has now been suspended, even if it had continued, the advertising revenues on IPL could have taken a hit, with sharply reduced viewership. Likewise, other content on OTT or in theatres, and such, will all be impacted, as the focus will be on the war and nowhere else.

As an extension, other entertainment businesses like restaurants may see reduced volumes too. Several cities that are getting into blackouts will see an impact of all businesses in those cities.

Some like emergency supplies, with people choosing to stock up in event of a longer war, may see a boost.

Travel industry could see a hit as well. First of all, several airports have been shut and that will see a drop in ticketing business straight away. Anyone looking to visit any of those places for leisure will drop their plans. Those who needed to go for other important reasons may find a way to get there by other means, like road or rail. The fear of the unknown in terms of where this war will head further, might force people to stay put at home, rather than risk getting stuck at another location. Travel may hurt because of that as well.

Then there is an impact to businesses with a base in places that get directly impacted. Say, companies that have a factory in some of those areas, and which God forbid, gets hit, or even if not hit, gets impacted in operations, due to the situation in the location. Well, that will have a direct impact on those businesses.

Due to the overall impact of the cost of war and needing to service that cost and the extent of capital that gets wiped out, there is impact on the currency, on the credit worthiness of the nation, on the borrowing capacity as well. The currency may weaken, the stock and bond markets of the country could see stress, if the outside world perceives a heightened risk. Gold on the other hand, becomes sought after as there is a perception that in uncertain times, it is good to hold gold. So, gold prices could see a spurt.

But generally, post war, when things quieten down, there is a huge impetus associated with the rebuild. Besides replenishment of defense equipment and ammunition, there is also a huge extent of reconstruction. A lot of infrastructure work comes along and will provide new business to the companies in those fields. All kinds of infrastructure industry would see a lot of work. Also one tends to overbalance post war, and there will not only be repair or replacement infrastructure work, but also new first-time kinds, as one looks to cover more bases, after learning from this war.

In the same way, defense expenditure could also see a sharper rise, as it will not just cover replenishments but also additional spends to expand the coverage, with more equipment, and also fancier high-tech ones, to be even better prepared the next time around!

There can be a general business slowdown in times of war with order closures slowing down, new investments slowing down, consumers putting off larger purchases, including buying new homes. All because one is not sure how long the war will last, what larger impact it will leave us with, and with the uncertainty, one would then choose to wait and watch before committing on bigger decisions.

This article is just to give my sense of the economic impact of war.

I can only emphasize that I am extremely proud of our armed forces and so grateful to their sacrifices that keep us safe and sound and I would always pray for them and for their success.

Jai Hind!