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Study puts economic impact of violence in India at $1.19 trillion

The economic cost of violence in India in constant purchasing power parity (PPP) terms in 2017 was $ 806.2 billion, or 9 per cent of the country's gross domestic product (GDP), says an annual analysis conducted by Sydney-based Institute for Economics and Peace (IEP).

twitter-logo Joe C Mathew   New Delhi     Last Updated: June 11, 2018  | 15:26 IST
Study puts economic impact of violence in India at $1.19 trillion

The economic cost of violence in India in constant purchasing power parity (PPP) terms in 2017 was $ 806.2 billion, or 9 per cent of the country's gross domestic product (GDP), says an annual analysis conducted by Sydney-based Institute for Economics and Peace (IEP).

IEP's Global Peace Index (GPI) 2018, which ranks 163 countries that represents 99.7 per cent of the human population, says that the real impact of violence, direct, indirect and an economic multiplier applied to the direct costs, could be much higher at $ 1.19 trillion for India.

Overall, the economic impact of violence to the global economy was $14.76 trillion in 2017, in constant PPP terms. This is equivalent to 12.4 per cent of world GDP, or $1,988 per person.

The single largest component of the economic impact of violence was global military expenditure at $5.5 trillion PPP, or over 37 per cent of the total economic impact of violence in 2017. Internal security spending was the second largest component, comprising over 27.4 per cent of the global economic impact of violence at $3.8 trillion. Internal security expenditure include spending on the police and judicial systems as well as the indirect costs associated with incarceration. Homicide, at 17 per cent, is the third largest component of the model.

According to IEP, India ranks 136th among the 183 countries in terms of overall peace and 59th, in terms of the economic cost as percentage of GDP. It recorded a slightly improved overall score due to the government's efforts to tackle violent crime, and falling levels of military expenditure, particularly on weapons imports, resulting in a slight improvement in its Militarisation score.

However, IEP faulted the alleged concentration of power in the office of Prime Minister Narendra Modi for deterioration in India's score on political instability, and the country's scores on the political terror scale and internal conflicts fought remain elevated.

Set against the he average level of global peacefulness, which declined for the fourth consecutive year, falling by 0.27 per cent in 2017, India's position looks better. The results of the 2018 GPI find that 92 countries deteriorated, while only 71, including India, improved.

The report finds that peacefulness has a considerable impact on macroeconomic performance. "In the last 70 years, per capita growth has been three times higher in highly peaceful countries when compared to countries with low levels of peace. The difference is even stronger when looking at changes in peacefulness, with the report finding that per capita GDP growth has been seven times higher over the last decade in countries that improved in peacefulness versus those that deteriorated.

Peacefulness is also correlated with strong performance on a number of macroeconomic variables. Interest rates are lower and more stable in highly peaceful countries, as is the rate of inflation. Foreign direct investment is more than twice as high in highly peaceful countries. In total, if the least peaceful countries had grown at the same rate as highly peaceful countries, the global economy would be almost 14 trillion dollars larger", it said.

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