India’s economic growth has been complicated by China and Ukraine

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India’s economic growth has been complicated by China and Ukraine

In the decade before the global pandemic, India's economy experienced a favorable global climate for growth. The period saw two key developments: low global commodity prices and double the inflow of foreign direct investment into India to over $50 billion in 2019. Since the Pandemic, and now the war in Ukraine, vulnerabilities in the global economic system have led to insecurity in the flows of goods, people and ideas and have made governments increasingly less aware of external threats to economic security. Economic security refers to the ability to pursue its own developmental goals, regardless of threats, internal or external, or coercion. Economic security is a pillar of national security. A report by leading Indian think tank Gateway House released a report detailing various pillars of economic security and measures to strengthen it. The Indian government pursues this in several ways, including by seeking partners to aid India's economic growth, the U.S. Japan, the E.U. The report pointed out that the process has been complicated by the fact that the past two years China and China have thrown up several new challenges. The Covid 19 pandemic has hit global supply chains and caused economic hardship. India has a military confrontation with China, which complicates that relationship. Among India's immediate neighbours, Pakistan and Sri Lanka offer stark examples of poor economic policies that lead to internal turmoil, a reminder of the need for strong and uninterrupted growth in a country with a poverty rate of 10% and a highly aspirational population. The report further noted that the conflict in Ukraine is leading to a global commodity price shock for food, fertilisers, energy and raw materials. Covid and Ukraine have shown the importance of diversification, whether it be the supply chains for the manufacturing sector, energy imports, raw material supplies, technology or capital. This comes at a cost. For instance, investing in an oil field in South America can help reduce India's vulnerability to high oil prices, but it also requires capital and other resources like management bandwidth and technical capabilities to do so. There are times when markets fail when investing in natural gas and fertiliser manufacturing is more expensive than buying the fertiliser outright from the global market. The past two years have resulted in multiple such failures and consequent economic pain. The report with series of papers examines six important dimensions of economic security in India, the challenges they present, and the mitigation measures needed to set them right. The study was supported by The New Energy and Industrial Technology Development Organization NEDO Japan through their Representative Office in New Delhi.