War will affect India's attraction as an FDI destination

Ajit Ranade, senior fellow at Pune International Centre, tells Pushpita Dey that it is in India's interes to contain border conflicts. Edited excerpts

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How will India-Pakistan conflict influence investor sentiment towards India?

Whenever you have a flash point like this—a conflict or a war-like situation or border skirmishes—usually investors tend to get nervous.

So, whether we like it or not a conflict is something that investors are not happy about. It is in our interest to find a solution to this situation as early as possible because India's attractiveness as a destination for FDI [foreign direct investment] will be affected.

Of course, it is true that to the extent that this conflict is restricted to the Kashmir border investors understand that it will not spill out as a broader India-Pakistan conflict.

Here I must say that we need to constantly reiterate that this [conflict] was triggered by a terror attack. So, the first point is that India must be mindful of the fact that investors prefer to have conflict-free zones.

Any conflict causes investors discomfort. Since India needs sustained and high levels of foreign investments it is important that we keep the conflict circumscribed, focused and resolved quickly.

What will be the impact of this conflict on the Indian economy? Will it affect foreign trade?

Only 5% of India's foreign trade is with its immediate neighbours, which are Bangladesh, Sri Lanka or Pakistan. To that extent we are not affected as much but there is disruption in air routes and sometimes sea routes too.