While ceasefire hopes in the raging war in the Middle East boosted market sentiment after the incessant selloff, the economists feel that it can simply be the calm before the storm. Speaking at Kotak Private Banking’s Take and Counter Take (TACT) event, Mishra sounded the alarm that all of this was part of a “grand war” between America and China.
“Until those equations settle, we should expect disruptions every one to two years,” he said, adding that the lesson for India is not to wait for stability but to build resilience into the economy while growth conditions still allow for hard decisions.
The economist focused on what he called the second-order effects of conflict, arguing that wars hurt less through headlines and more through supply chains. “This is bad for India, but it is terribly bad for the world,” he said at the event. Disruptions to energy, chemicals, fertilisers, logistics and aviation can quietly pause production far from the battlefield, he added, explaining that if 4% of global energy flows are disrupted, it effectively means 4% of global GDP is taken out, even before accounting for the spillovers into tourism, manufacturing and trade finance.
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However, Mishra feels that India is now better prepared to handle such situations when compared to previous episodes of global stress. “Compared to any other time in our history, we are much better prepared to deal with this,” he said, recalling a conversation with a senior policymaker who likened today’s environment to the turbulent 1989–93 period.
According to the economist, the pain now visible across markets and supply chains makes the current moment unusually conducive to reform. “This is very painful for the world,” he said, “but it will end.” When it does, economic momentum will return, and countries which acted during the slowdown will emerge stronger, he explained, although he warned that waiting for calm before acting would be a mistake.Electrification was singled out as a strategic priority by the economist, who added that India remains much more vulnerable to oil and gas shocks than its peers because very little of its end-use energy consumption is electric. Speeding up the process of electrification, along with better energy pricing, would lower India’s exposure to geopolitics while improving efficiency, he said. Housing and urban infrastructure were also areas where policy could move decisively, creating domestic demand that is largely insulated from global volatility, according to the expert.
Mishra highlighted that tourism and services reforms were also needed. According to him, India has “some of the most expensive tourism in the world,” driven in part by restrictive zoning and
floor-space norms. “It’s only when our backs are to the wall that we take tough decisions,” he said, arguing that reform windows rarely announce themselves more clearly.
The ceasefire may offer temporary relief, Mishra suggested, but not complacency. “This phase will pass,” he said. “The question is whether we use it.”
Recently, billionaire Ray Dalio also said that the current conflict may be part of a “World War” that is not going to end soon. In a lost post on X, Dalio on Tuesday said that near-term issues are diverting people from the “really big, even more important things”. Dalio said that it is indisputable that we are now in an interconnected world that has a number of shooting wars going on, including the Iran-US war, the Russia-Ukraine conflict and more, and most of these wars include major nuclear powers. “Together, these conflicts make up a very classic world war that is analogous to past ‘world wars’. For example, past ‘world wars’ consisted of interrelated wars that were generally slipped into without any clear start dates or declarations of war,” he wrote on X.
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The billionaire investor warned that while markets expect the war to end soon, reality may be far from that expectation. “Most people tend to have this short-term perspective: they now expect, and the markets are pricing in, that this war won’t last long and that when it ends we will get back to “normal.” Virtually nobody is talking about the fact that we are in the early stages of a world war that isn’t going to end anytime soon,” he wrote.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)