India’s economic growth under threat

290
2
India’s economic growth under threat

In the decade before the global epidemic, 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 in Ukraine, vulnerabilities in the global economic system have created insecurity in the flow of goods, people and ideas, and have made governments more susceptible to external threats to economic security. In a developing country like India, economic security refers to its 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 brought out a report detailing various pillars of economic security and measures to strengthen it. The Indian government has pursued 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 past two years China and China have thrown up a number of new challenges, complicating the process. The Covid 19 epidemic 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 show how poor economic policies 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 conflict in Ukraine is leading to a global commodity price shock for food, fertilisers, energy and raw materials, according to the report. 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 don't work and 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 a 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.