TERRORISM AND ECONOMY

Terrorism may affect the Indian economy more than any other economic problem in the coming years. Give arguments For and Against this view. Every now and then there are instances where the stock market indices get affected by the events in the world which are either social, political or diplomatic in nature. Similarly, the performance of the economies also gets influenced by various events which are not related to economics. Politics is one such factor. Elections, political changes and uncertainties, wars, international relations, global non-economic events etc. are some of the events that influence the performance of the economies across the world. In the recent years, a spurt in terrorist attacks and activities in the world has turned out to be an important factor that influences the economic prospects of the economies. Arguments For the View (a) Terrorism poses threat to the human life and if continued for long, has the potential of driving the economic activity away from a country or a region, thereby affecting its growth. (b) A lot of terrorist outfits are operating in the country these days. Every now and then there is an act of terrorism which directly hits the trade and business in the local area. Not only innocents lose their lives but the trading community and businessmen area are also forced to shift their business or industry to some other place. (c) Metropolitan cities are the centres of economic growth in India. All high growth potential sectors are also located in these areas. The terrorists are purposely targeting the cities and growth centres to retard the process of growth. Arguments For the View (a) Non-economic factors influence the economies only marginally. It would be wrong to say that the terrorism, which is a non-economic factor, would actually influence the economy materially. (b) After 9/11 terrorist attacks in 2003, the US economy was only temporarily de-railed. But the current sub-prime crisis, which is purely an economic issue is likely to influence not only the US economy but also the other economies of the entire world. Only the economic factors have long term effect on the economies. (c) Terrorist attacks are localized in a particular place or area, while the growth of the economy encompasses the economic activities in all sectors/sub-sectors of the economy. The terrorist attacks cannot influence the performance of any economy on a long term basis