TODAY’S TALK ON EDITORIALS July 18, 2017
- ‘Hyperglobalisation’ has been used to describe the dramatic increase in international trade witnessed for about a decade and a half from the early 1990s up to the global financial crisis of 2008.
- The imagery intended is one of an increasing connectedness among nations leading to a virtuous cycle of economic expansion.
End of a phase
- The phase of high trade starting 1870 came to an end with the First World War and was to revive, slowly, only after the Second.
- Following the collapse of East European communism in the early 1990s, there was a resurgence in global trade.
- Now even this phase has somewhat abruptly ended with the global financial crisis.
Role of technology
- 9th-century globalisation was underpinned by technological advances that facilitated trade.
- The advent of the telegraph is alluded to along with the invention of the internal combustion engine.
- The former enabled the communications infrastructure intrinsic to trade and the latter enabled the fast, reliable and cheap transportation of goods across seas.
- This account of how advances in technology fuelled trade is of undoubted relevance but remain partial in that it leaves out the role of the growth in demand for these technologies.
- It was, after all, the growing market for British goods as Indian manufacturing was dislodged following military conquest and as British capital flowed into the laying of a rail network in parts of Latin America and Africa that provided the demand for the development of cheaper communication and transportation technology.
- Therefore, it may as well be said that trade expanded as the demand for goods grew
- However, it is yet true that when global demand expands, countries can exploit the trade route to grow their economies.
- This was the great promise of globalisation held out to the developing countries in the 1990s.
The slowdown and India
- Recognising the diminished tempo of globalisation, India’s economic policymakers must address the growth of the home market, which is the demand for goods and services emanating from within the country.
- The immediate points of action and the appropriate instruments can be identified without much strain on our ingenuity.
- In the short run or the present, when the global economy is sluggish, only domestic investment can move demand.
- In India, we have been witnessing slowing or depressed private investment for close to five years by now.There is a view that this has to do with tight monetary policy.
- It is true that the real lending rate for firms has been rising as inflation is falling.
- Much a policy stance can be justified only by resorting to the claim that the Reserve Bank of India knows something about future inflation that we don’t, in particular, that inflation is set to rise again soon.
- Given that they hold non-performing assets, the banks are extremely wary of lending.
- Any significant resumption of lending by banks may be hostage to their first resolving the bad loans problem.
On public investment
- Independent of the ‘twin balance sheet problem’, Keynesian economics has long recognised that lowering the rate of interest may not do much for private investment if the expected rate of return is depressed.
- In response to the argument heard at the highest level of policymaking that there are no viable projects to be had, one need only refer to a recent news report on the state of our roads and bridges.
- It is reported that 23 bridges and tunnels on India’s national highways are over 100 years old, of which 17 require rehabilitation or major maintenance.
- As many as 123 other bridges in the country require immediate attention and 6,000 are “structurally distressed”.
- Infrastructure is unique in that spending on it raises aggregate demand and when it actually comes on stream, it raises the productivity of investment elsewhere in the economy. ‘Roads and bridges’ are a metaphor for the public infrastructure that the Indian economy can fruitfully absorb today.
- For the country’s political leadership, the task is no longer to find trading partners to hug but to buckle down to the heavy lifting of expanding physical infrastructure.
- The government claims to have made substantial progress in the achievement of the Sustainable Development Goals (SDGs).
- In its Voluntary National Review (VNR) report, to be presented at the ongoing UN High-Level Political Forum (HLPF) in New York, it portrays a picture of ‘all is well’.
The ground reality
- India’s report, prepared by the NITI Aayog, attributes the sharp reduction of poverty from 45.3% in 1993-94 to 22% in 2011-12 to the economic growth after liberalisation.
- However, a shadow report on SDGs prepared by civil society organisations in India, led by the Wada Na Todo Abhiyan (WNTA), states that India’s growth story of the last two decades has accentuated inequalities, perpetuated poverty and limited the choices of historically marginalised communities.
- The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has lifted millions out of poverty since its inception in 2005. It created more than two billion person-days of employment in 2016-17 alone, states the VNR report.
- However, budgetary allocation to the scheme has slowed down in recent years, resulting in pending payments of Rs. 7,000 crore, according to the Centre for Policy Research
- To reduce hunger and malnutrition, the National Food Security Act aims to provide foodgrains to 66% of the population, covering about 800 million people. To ensure transparency, 77% of the ration cards have been linked to Aadhaar.
- “But field evidence suggests that mandatory linkage with Aadhaar is excluding the most-needy in interior tribal areas,” points out Rajkishor Mishra of Right to Food Campaign.
Helping the farmers
- The government, through its National Mission on Sustainable Agriculture, provision of soil health cards and crop insurance, claims to have helped small and marginal farmers, who form 80% of our farmer population.
- However, the claim falls flat in view of nearly 3,00,000 farmers committing suicide in last two decades.
- The NDA government may have promised to double farmers’ income, but the increase in MSP is strikingly meagre.
- Further, the Shanta Kumar committee’s recommendation of replacing PDS by cash transfer which will dispense with the procurement system, if it materialises, will sound the death knell to small-scale farming.
- India has made significant progress over the years on basic health indicators like Infant Mortality Rate (IMR), Maternal Mortality Rate (MMR), institutional deliveries and vaccination coverage.
- However, 62.4% of the total health expenditure is still out of pocket, putting a huge burden on the poor and the middle class, says the civil society report.
- In this regard, the aim of the National Health Policy, 2017 of providing affordable health care is welcome. Inclusion of a ‘gaps and lesson learned’ section in performance reviews will go a long way towards the attainment of the SDGs.
- The Centre’s briefing to the Opposition on the ongoing stand-off with China on the Doklam plateau was long overdue.
- The message the government sent, beyond the facts of how the stand-off began, was threefold:
- that Indian troops now sit across from Chinese troops for a second month at a part of the tri-junction claimed by Bhutan;
- that India is upholding its commitment to Bhutan with its military presence there; and
- that it is pursuing all diplomatic options in order to resolve differences with China on the dispute.
- China has so far rejected any talks until the Indian troops move back
- But New Delhi’s insistence on neither asking the troops to step back nor stopping the pursuit of dialogue is a mature response.
- It is to be hoped that National Security Adviser Ajit Doval’s coming visit to Beijing to attend a BRICS meeting hosted by his counterpart, and other engagements in the run-up to Prime Minister Narendra Modi’s scheduled visit to Xiamen for the BRICS summit in September will see this strategy bear fruit.
- However, India will have to do much more than controlling the message to resolve this stand-off.
- China’s continued belligerence, amplified by its state-owned media outlets, on the issue suggests that the ‘Astana consensus’ between Prime Minister Narendra Modi and President Xi Jinping to not “allow differences to become disputes” is a fragile one.
- It should be kept in mind that Indian troops stand not on Indian territory but on territory claimed by Bhutan, and at Thimphu’s request.
- China’s actions at Doklam are aimed as much at putting a spotlight on the Indian presence there as they are at compelling Bhutan to loosen the tight bonds that have historically held New Delhi and Thimphu together
- The government must ensure that every step it takes is in consultation with Thimphu, and make it clear that any final decision it takes will not be a “win or lose” for India, but dictated by what is in Bhutan’s best interests.
BRAZIL, RUSSIA, INDIA, CHINA & SOUTH AFRICA (BRICS)
- BRICS brings together five major emerging economies, comprising 43% of the world population, having 30% of the world GDP and 17% share in the world trade.
- As a formal grouping, BRIC started after the meeting of the Leaders of Russia, India and China in St. Petersburg on the margins of G8 Outreach Summit in 2006.
- The grouping was formalised during the 1st meeting of BRIC Foreign Ministers on the margins of UNGA in New York in 2006.
- The 1st BRIC Summit was held in Yekaterinburg, Russia, on 16 June 2009.
- It was agreed to expand BRIC into BRICS with the inclusion of South Africa at the BRIC Foreign Ministers’ meeting in New York in September 2010.
- Accordingly, South Africa attended the 3rd BRICS Summit in Sanya, China on 14 April 2011.