Watch: How do protests impact GDP growth?
A few days ago, I noticed a Bloomberg newsletter with a headline that asked, 'Why don't US political protests hurt the market?' That inspires the question: India is a democracy and has seen its fair share of protests. What impact do major protests have on GDP growth and stock market sentiment?
The Bloomberg article says geopolitical events such as the Iran-Israel conflict had some dampening effect on US stock markets but local events didn't seem to have significant impact. It cited Boston Consulting Group economists as saying that to have an economic impact, political unrest has to actually constrain supply, demand or lending — or change how the government operates.
The International Monetary Fund has constructed a Reported Social Unrest Index. In a 2021 note, the Fund said that its economists had found a tight link between unrest and subsequent economic performance. Major protests are followed by a 1 percentage point reduction in GDP six quarters after the event. The note also points out that in countries with more open and democratic institutions, unrest events have a negligible impact on stock market returns.
Script & Presentation: K. Bharat Kumar
Production: Shibu Narayan
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