economic policy – WISER WORLD http://www.wiserworld.in Connecting the world with knowledge! Thu, 19 Nov 2020 01:35:10 +0000 en-US hourly 1 https://wordpress.org/?v=5.8.2 http://www.wiserworld.in/wp-content/uploads/2020/09/Asset-1-10011-150x150.png economic policy – WISER WORLD http://www.wiserworld.in 32 32 INDIA’S TRYST WITH CENTRAL ASIAN ECONOMIES http://www.wiserworld.in/indias-tryst-with-central-asian-economies/?utm_source=rss&utm_medium=rss&utm_campaign=indias-tryst-with-central-asian-economies http://www.wiserworld.in/indias-tryst-with-central-asian-economies/#respond Sat, 15 Aug 2020 16:07:08 +0000 http://www.wiserworld.in/?p=2817 The strategic and economic ties between India and Central Asia can be traced back to the era of the Silk Road, which facilitated the flux of ideas in the Asian region. At the time, India’s territories, especially that of the Kushan Empire, reached up to the frontiers of the Central

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The strategic and economic ties between India and Central Asia can be traced back to the era of the Silk Road, which facilitated the flux of ideas in the Asian region. At the time, India’s territories, especially that of the Kushan Empire, reached up to the frontiers of the Central Asian plateau. This geographic relationship continued further until the 16th century when the Mughal reign had begun in India. According to historical research, economically, not only did Central Asian cities – such as Ferghana, Samarkand, and Bukhara – play an important role in the Silk Road connecting India with China and Europe, but also Indian merchants based in the region formed an integral part of the local economies. Furthermore, the cultural relationship was extended on other aspects as well. This can be seen in the spread of Buddhism from the Indian subcontinent to Central Asia and the ideas of Sufism reaching India therefrom. 

Historical Context

Observations have shown that with the onset of the Age of Discovery in Europe, increased interest of Russia and China in Central Asia somewhat led to the breaking away of India’s connections with the region. Even after Independence, India’s foreign policy majorly focused on its immediate neighbours, or solidarity-based relations with the African countries, or even robust economic ties with Russia — but, the partitioning of the Indian subcontinent and the distancing of the region geographically did play a role in the deterioration of the relations with the region from India.

Further, in the post-Cold War era, after the Soviet Union split Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan in the 1990s, India took upon the task of developing its relations with the resource-rich region while also undertaking its own domestic economic reforms of bringing about liberalisation, privatisation, and globalisation. Former Indian Prime Minister P.V. Narasimha Rao visited four out of the five republics – Uzbekistan and Kazakhstan in 1993, followed by Turkmenistan and Kyrgyzstan in 1995. In addition to the collective values that India shared with the countries, collective development and economic growth, as well as formulating approached to combating common threats such as terrorism, religious extremism, and crime that these nations shared with India. A few experts also believe that the stage which was set by these conversations was even reflected in India’s Look North policy of recent times. 

Despite the historical links with the Central Asian Economies and India moving quickly to establish diplomatic ties with Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan after their emergence as independent countries almost three decades ago, trade has not grown beyond $2 billion, with them. In recent years, foreign-affairs analysts have begun observing what they call the “New Great Game” in Central Asia — Russia, the US, European Union (EU), China, Turkey, Iran and India are all trying to assert their power and hegemony in the region. Not only does the region provide for a large market, but it also has prospects for developing hydropower, fossil fuel resources, and other lucrative prospects. According to experts, India, for its part, has so far chosen to take the ‘constructivist’ approach. This entails a strategy of, interests are not solely based on economic or strategic benefits but attempt to involve an intersectional and even culture-oriented involvement.

Current Developments

India’s continued interest in Central Asia can be attributed to the geopolitical relevance of the region due to three factors — Chinese presence and influx in the region through its expansionist infrastructure projects like the Belt and Road Initiative (BRI), a continued historical context of Russia’s dominance in the region, and the overall regional security dynamic. Keeping these in mind, India had unveiled its Connect Central Asia Policy in Bishkek in 2012 in order to draw attention to the expansion of the region’s economic interests in congruence with India’s plans of integrating its external neighbourhood.

The lack of connectivity of India with the region of Central Asia has been a long withstanding issue in this context. For instance, the long-delayed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, backed by the Asian Development Bank (ADB), was first proposed in the mid-1990s and all four actors officially signed an intergovernmental agreement in 2010. But, since then, the project has been stalled due to the status of Afghanistan and mistrust between India and Pakistan.

To combat this connectivity gap, India has undertaken positive action in the past as well quite recently. India, Iran and Russia signed the International North-South Transport Corridor (INSTC) agreement which aimed to offer connectivity between India and Central Asia through Iran. As is noted by this resource, while the INSTC is routed via Iran’s Bandar Abbas port, India has also explored the possibility of connecting with Central Asia via Iran’s Chabahar port and thereafter overland corridors passing through Afghanistan. The importance bestowed by India to the Chabahar port, despite the uncertainties which the US-Iran tensions bring to the conversation, can be accorded by the budgetary allocation to the project, which is amounting to INR 1 Billion in 2020-21 announcement.

Way Forward

Since China has been able to leverage its geography, finances and population to ensure that its projects can contribute toward making its dream of a new and improved Silk Road a reality, India is also committed to expanding the scope of its economic relations with the region. India has immense potential in developing small and medium scale industries in the region which is presently being provided through India’s program of ITEC (Indian Technical and Economic Cooperation). The ITEC programme covers information technology, management, journalism, diplomacy, entrepreneurship, and banking. New Delhi also signed the Strategic Partnership Agreements (SPA) with three of the five nations of the Central Asian Economies — Kazakhstan, Tajikistan and Uzbekistan — in order to stimulate defence cooperation and deepen trade relations.

As a report in a Russian newspaper observed, “Indian presence in the region should balance the growing Chinese influence and prevent it from becoming the region of Beijing’s undivided dominance.” This idea can be brought to effect by India by leveraging its membership at the Shanghai Cooperation Organisation.

India and the Central Asian Economies can prioritize energy, pharmaceuticals, automotive, agro-processing, education, urban infrastructure and transport, civil aviation, IT and tourism sectors to strengthen economic links. The Central Asian economies and India have had a long history of association which can be efficiently revived to mutual benefit by the means of strategic and economic cooperation and connectivity, both notions that can be leveraged by the stakeholders in a post-pandemic world.

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EUROPE: EAST, WEST AND THE GULF BETWEEN http://www.wiserworld.in/europe-east-west-and-the-gulf-between/?utm_source=rss&utm_medium=rss&utm_campaign=europe-east-west-and-the-gulf-between http://www.wiserworld.in/europe-east-west-and-the-gulf-between/#respond Sun, 09 Aug 2020 21:48:17 +0000 http://www.wiserworld.in/?p=2707 The eastern and western half of Europe have a huge gap in the socio-economic sphere. East European countries are plagued by the lack of a social security contract leading to high social inequalities, strong social disintegration, egotistic individualism and extensive destitution and poverty. There has been minuscule progress in addressing

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The eastern and western half of Europe have a huge gap in the socio-economic sphere. East European countries are plagued by the lack of a social security contract leading to high social inequalities, strong social disintegration, egotistic individualism and extensive destitution and poverty. There has been minuscule progress in addressing these problems since the early 1990s.

Talking of political culture, people in Eastern Europe are still characterized as having less personal autonomy, less responsibility as citizens and members of a global community. In some cases, people also struggle with seriously disturbing national and social identities.

Source: PEW FORUM

As far as economic efficiency is concerned, east European countries have made remarkable progress in the past years, but this progress isn’t enough. The differences in per capita income, productivity and efficiency, output, capitalization, savings, investment, integration into global networks are still huge.

Trading and Colonisation

One historical factor in the development of west European nations is the influx of wealth associated with its sea trade and exploration. Their favourable locations on the Atlantic and Mediterranean gave them advantages in trade and exploration through the sea route with minimal cost. The colonization of lands in America, Africa, Asia and Oceania by several Western European countries brought a huge influx of wealth and resources, which stimulated the economies of these countries. These resources made them global superpowers as early as the 16th century. The effects of colonisation are still being felt in these countries.

Division of Germany

In the aftermath of World War II, defeated Germany was divided into four zones by the allied powers. The Soviet Union occupied the east, while the rest of Germany was divided amongst the United States, Britain and France. With hundreds of thousands of wealthy American soldiers posted in West Germany and spending their American currency, the area flourished. The Deutsche Mark was introduced in 1948 which added to the region’s growth. In the 1950s and 1960s, West Germany experienced industrial growth and low inflation contributing to their prosperity. The security of private property rights and reliance on the price mechanism also contributed to the success of these economies.

Much of the European side of the Second World War happened in Eastern Europe, in today’s Poland, Ukraine, Belarus, the Baltic countries, the Balkans and Russia. These countries were utterly ravaged. Russia and Germany stole many assets. The Soviets literally dismantled many factories and took many industrial machines East. In addition to this, East Germany inherited highly specialised industrial districts, which were cut off from their major suppliers of inputs as well as their market which was in western Germany. This caused a departure of skilled labour and a number of small and medium-sized firms.

Communism

East Germany, under the authoritarian rule of the Soviets, saw much worse conditions than its Western counterpart. When the rest of the world experienced strong economic growth after World War II, the nations of eastern Europe suffered due to socialism which caused shortage of resources, a highly politicised system and a regressive attitude to progress. Soviets neglected the economy and focused on military power causing an economic crisis. Western Europe, not being the vassal state of the USSR for 40 years probably made a difference.

To start with, Eastern European nations weren’t that developed as they have mostly been the borderlands between various empires. Apart from some exceptions like Hungary, they were Russian hinterlands, not real centres of development, industrial or otherwise.

Communism was ultimately very inefficient. There was no incentive for work as individuals knew that the reward will be the same. Accumulating wealth was not really possible. It led to stagnation in economy, technology and culture. It was the mix of the intense poverty, injustice and the presence of absolute anarchy that crippled these economies.

Marshall Plan

America supported western European countries with aid to stop communism from spreading during the years of the cold war. Dollar aid enabled recipient nations to eliminate raw material shortages in exchange for trade liberalisation. The resource funds allowed governments to finance public projects without the need to cut back on welfare spending.

The U.S. provided $13.3 billion in assistance between 1948 and 1951 to 16 Western European countries through the Economic Cooperation Authority. The Marshall Plan helped in reviving the western economies by controlling inflation, reviving trade, restoring production and rebuilding infrastructure. The Soviet Union rejected the aid on behalf of eastern Germany.

When the Marshall Plan ended in 1951, industrial production, trade and exports had increased far above pre-war level. Employment and standard of living were rising. Politically, communist parties lost influence everywhere.

It encouraged the economic integration that led to the creation of the European Coal and Steel Community among six nations in 1950. It took a leap into a more integrated European Economic Community (EEC) after eight years. It finally became what is called the European Union today. This integration helped the nations to revive their economies through trade.

Demographic Dynamic

The population density in the 19th century was much more in Western Europe more than Eastern. In addition to that, across Western Europe, the casualties of war were offset by natural population growth and post-war mass migration. The impacts of the war and the post-war settlement were different for the eastern and western regions. The population growth was scanty in Eastern Europe which deprived it of flexible labour supply that has been recognised as an imperative factor in western reconstruction and development.

In the Eastern Front, millions fled west, running from the advancing Soviet troops. The effect of war casualties combined with the post-war settlement was devastating. The populations of Hungary, Romania, and Yugoslavia stagnated in the 1940s. Czechoslovakia, Poland, and the Soviet Union faced a population decline over the same period. The shortage of skilled labour proved to be detrimental. The province of Prussia was temporarily depopulated resulting in its industrial districts losing their pre-war labour force level.

The war left a distorted demographic structure with a shortage of able-bodied young men. Conventionally, they were the one who constituted the backbone of the industrial workforce. It all brought the region an excess of industrial and commercial enterprises without their original owners, the necessary skills and managerial know-how required to operate them.

The Fall of the Berlin Wall

The Berlin Wall was a concrete barrier that cut across and divided the city of Berlin from 1961 to 1989 and was constructed in the aftermath of World War 2. The fall of the Berlin Wall symbolised the fall of the ‘Iron Curtain’ that divided the Eastern countries from Western Europe during the Cold War.

East Germany was provided with aid of around €1.6 trillion by the government and private German businesses to bring it at par with the West. The dismantling of the wall had a profound impact on the neighbouring economies as well. Hungry and Czechoslovakia opened up their borders and allowed East Germans to take refuge in Austria. The influx of people meant the economies of neighbouring countries took a hit.

Shortly after the collapse of the Wall, the German Democratic Republic (GDR), the party which was in power in the East also came to an end. Unemployment escalated to extremely high level and the economy was thrown into uncertainty. Those who had government jobs found themselves suddenly out of work. The GDR economy also faced bankruptcy due to the change of currency. Before the reunification of the two regions, 1 Deutsche Mark was the equivalent of 4.5 GDR Marks.

When eastern countries joined the EU, it made it easier for the Western companies to buy up assets in the east. Some also took advantage of the cheap labour market and started companies. Eastern European companies found it challenging to compete with gigantic Western corporations who could afford to undercut prices. In certain industries, prices were set for a certain amount of time so that Eastern European companies could not undercut Western companies which took away their advantage and eventually many Eastern European companies went bankrupt.

Agrarian Economy and Raw Material Exporter

When Western Europe started on the path of capitalist development, the Eastern part of the continent was transformed into an exporter of raw material for the West and an importer of finished goods. The result was a never-ending loop that strengthened Western industries and system that promoted capitalism. Specifically, as the West became more urban, there was a growing demand for agricultural goods, animals and other raw goods. East European people satisfied this need by transforming their domains into farms that exported for the Western market. With the exception of what became the Czech Republic, most of Eastern Europe became more agrarian and therefore poorer than much of Western Europe.

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NORDIC ECONOMIC MODEL – IS THE GRASS GREENER ON THE OTHER SIDE? http://www.wiserworld.in/nordic-economic-model-is-the-grass-greener-on-the-other-side/?utm_source=rss&utm_medium=rss&utm_campaign=nordic-economic-model-is-the-grass-greener-on-the-other-side http://www.wiserworld.in/nordic-economic-model-is-the-grass-greener-on-the-other-side/#respond Tue, 04 Aug 2020 14:53:20 +0000 http://www.wiserworld.in/?p=2563 At the time when the world’s richest 1% own 44% of the wealth and the lowest 56.6% people own less than 2% of the global wealth (source), many of the scholars, economists, politicians and policymakers are looking for ways to remedy the situation. In this backdrop, the Scandinavian countries of

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At the time when the world’s richest 1% own 44% of the wealth and the lowest 56.6% people own less than 2% of the global wealth (source), many of the scholars, economists, politicians and policymakers are looking for ways to remedy the situation. In this backdrop, the Scandinavian countries of Norway, Sweden and Denmark have shown great performance not only in terms of income equality but also in creating high standards of living.

Academics have been seeing this region as a role model for making policies and providing social security. These countries are unique in the sense that they have adopted a socioeconomic model which combines the features of capitalism like free markets and efficiency with social benefits like free education, healthcare and pension payment for retirees. These social welfare schemes are financed through the taxpayers’ money and are administered by the government keeping in mind the interest of all the citizens. This system essentially minimises the gulf between the rich and poor through redistributive taxes. The model is popularly known in the world as the Scandinavian Model or the Nordic Model.

Social Democracy or Democratic Socialism?

The prevailing sentiment in the world is that the Scandinavian nations achieved what they did by adopting socialism. The truth is far from that.

  • The only element of socialism which seems to exist in the Scandinavian model is the rampant presence of welfare schemes provided by the state. Apart from that, the means of production are owned by private individuals and the resource allocation takes place through the forces of demand and supply, not through central planning.
  • It is important to point out that the Scandinavian nations developed their current economic system after years of free economy and trade. They were economic successes even before they built their welfare states. It was not the government benefits that created wealth, but it was the wealth of people that allowed the luxury of such generous programs by imposing high tax rates.
  • In contrast to the general perception about the Scandinavian economies, there is actually an absence of government interference. None of these Scandinavian countries have minimum wage laws. Instead, wages are decided by collective-bargaining between unions and employers, and not through government-imposed floors. In fact, the Nordic nations have some of the highest unionization rates in the world.
  • Sweden has complete school choice as the government provides its citizens with education vouchers. The vouchers provide funding to a student at any school whether public or private. This choice benefits the citizens and the future of the nations. If these nations were to be socialist, they wouldn’t have promoted free choice.

In addition to these facts, the Scandinavian countries rank quite high on the index of economic freedom given by the Fraser Institute. All the countries are in the top quartile in the rankings. In fact, all the three Scandinavian nations are among the top ten countries to start a business according to the Ease of Doing Business Ranking, 2020 given by the World Bank. The best proof of the free-trade background of Scandinavian countries might be Volvo’s buyout by Geely of Hong Kong in 2010 and the bankruptcy of Saab in 2012, in which the Swedish government did not interfere in any way even though they were two of its most iconic companies.

The Nordic countries offer government-paid healthcare, tuition-free education, and generous social safety nets for all. It is allowing businesses to be productive without interfering which in turn produces the high incomes that support the tax collections. The system prevalent in these nations is actually social democracy in which the government aims to promote the public welfare through heavy taxation and spending, within the framework of a capitalist economy. This is what the Scandinavians practice.

Is it Sustainable?

Though it is working wonderfully for the time, it is losing ground due to many reasons. There is two fundamental phenomena which come into play namely the “Wagner’s Law” and the “Baumol’s Law”. Wagner’s Law says that the demand for welfare services tends to increase faster than income. According to Baumol’s Law, productivity in the production of welfare services tends to increase at a lower rate than that in the production of goods and services. If we assume equal wage growth across all sectors, costs must increase faster in the production of welfare services than in the economy as a whole. These two taken together imply that the total spending on welfare services rise faster than GDP over time. As these services are tax-financed, the tax burden must also rise continuously with GDP. Starting from an already high tax burden, further increases in tax wedges will eventually cause serious harm to employment and growth. This is particularly imperative in view of the consequences of globalization and demographic change.

Globalisation is in general beneficial to economic growth as it provides an opportunity to increase the returns to factors of production through the international exchange of goods and services and factor mobility. Nonetheless, increasing international mobility of labour can jeopardise the welfare state and the Scandinavian model. As social welfare schemes belong to all citizens, it becomes increasingly possible for them to benefit from the services without paying the taxes (bearing the cost) due to international factor mobility. For example, citizens who have spent most of their working lives abroad may return to their home country after retirement to collect the benefits of free hospital care and care for the elderly.

The most serious challenge to the Nordic model is caused by the changing demographics given the extensive role of the public sector in providing age-dependent social services and benefits. The age composition of the population in most European countries have changed dramatically in recent years. The shift is driven by two factors: a “baby boom effect” as the generation has reached retirement age, and a continued increase in life expectancy. As a consequence, dependency ratios have been increasing since 2010 in all the Scandinavian nations and now stands at 57% in Denmark, 53% in Norway and 61% in Sweden. The balance between those contributing to and those benefiting from the welfare state is shifting to such an extent that the financial sustainability of the system is in danger.

How it evolved?

Till the 1950s, Nordic countries were the top free-market, competition-based nations in the world. In the ‘70s, however, intense social government and regulatory systems were put in place with high tax rates. All of the economic growth came to an end in the early ‘90s with the burst of the housing bubble and the advent of a recession. Sweden’s economic growth fell to 1% lower than the rest of Europe and 2% lower than in the United States of America.

By the ‘90s, government spending was up to 70% of GDP, and the debt to GDP ratio was 72%. Even the unemployment rate rose by 5%. The Scandinavian states were strained and were forced to increase taxes drastically to keep their model alive. As soon as policymakers saw the socialist approach failing, things changed. In 1991, parts of health care were privatized, schooling vouchers were first introduced, and some welfare programs were cut back. In 1993, the collapse of the housing bubble forced the Swedish State to scale down their generous welfare system in a context of lower growth, growing unemployment, and to manage public accounts. Between 1995 and 2000, the debt-to-GDP ratio was dropped down to 50%, and citizens earned more income owing to the new 28% tax rate. As of today, Sweden’s public spending has decreased to 49.3% of their GDP, and their corporate tax rate is 22%, below the OECD’s average of 23.9%. Denmark and Norway allow private firms to run public hospitals and Sweden has privatized part of its retirement system.

Conclusion

Are the Scandinavian countries a model for the rest of developed countries? We may answer in affirmation by looking at the top rankings achieved by them for most of the elements that make a country successful: education outcomes, health and life expectancy, happiness index and economic development. But a large part of the Scandinavian system is unique and reflects the Scandinavians’ long tradition of governance which emphasizes on consensus, compromise and trust. Also, the Scandinavian nations raised the taxation rate only after their economy grew and the citizens had high incomes. A government should never begin with enormously high rates and expect its citizens to keep pace. The population of the region is merely 21 million which is fundamentally homogeneous and thus any big and multi-ethnic state might not be able to adopt the Nordic model. Instead of adopting the model, nations should view it as an inspiration and customise their policies according to their needs and demographics.

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INDIA’S ROAD TO BECOMING A SUPERPOWER IN THE 21ST CENTURY http://www.wiserworld.in/indias-road-to-becoming-a-superpower-in-the-21st-century/?utm_source=rss&utm_medium=rss&utm_campaign=indias-road-to-becoming-a-superpower-in-the-21st-century http://www.wiserworld.in/indias-road-to-becoming-a-superpower-in-the-21st-century/#comments Sat, 25 Jul 2020 19:18:42 +0000 http://www.wiserworld.in/?p=2271 It’s been more than 70 years since India gained independence, the newly born Indian nation was struggling for its survival. This was a time when challenges were many but the resolute in the minds of those who fought for our independence was strong. They dreamed of an India that was

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It’s been more than 70 years since India gained independence, the newly born Indian nation was struggling for its survival. This was a time when challenges were many but the resolute in the minds of those who fought for our independence was strong. They dreamed of an India that was united, literate and a force to reckon with. The British had left India scarred, our arms were bleeding from the partition of Bengal and Punjab, our beloved brothers, sisters and children have torn apart from their land, the land we proudly today call India, that is Bharat. The ones sitting in the British parliament never thought India would survive its diversity, the very strength of India today was looked at as a nightmare for any newly independent nation but not only did we succeed in reaffirming the ideals of diversity rather today we are standing at a pedestal from where we can only rise to become a superpower in the 21st century. 

We’ve heard the word superpower in different contexts over media and academia, the word, superpower for most children across the world would mean an exceptional or extraordinary power or ability, mostly in the form of superman or superwoman, a fictional character that possesses the power to make a significant impact on the world, while keeping the very crux of the word alive, we will talk about a very specific nation, India, and its journey to be a superpower. However, we need to go back to the century that went by to understand how the idea of a superpower came about. 

The rise and fall of two superpowers 

Until the 20th century, the world knew only two superpowers, USA and the Soviet Union, the landmark emergence of two world superpowers stems from the end of  World War II marked by the bombings on Hiroshima and Nagasaki by the USA, critics over the world suggest that the US knew that Japan was about to surrender and that it was Unnecessary to bomb the two Japanese ports. However, the USA went ahead with its decision to stop the Soviet Union from making any military and political gains in Asia and prove that America is supreme. The end of World War II led to every newly decolonised country had two options in front of it, either be friends with the US or Soviet Union. At this time, countries in Asia and Africa had got independence and most of these countries wanted to claim their sovereignty and didn’t wish to side with either of two power blocks. One would say it was the emergence of Non-aligned movement (NAM) as India’s bid to stay non aligned that can be seen as a sign of non-adherence to power systems.

India’s economic policy from 1951-1991

India’s economy at the dawn of independence was in distress. For over 200 years, India served the purpose for the good of the United Kingdom, the good that was bought on the ruins of India’s economic tradition. Post-independence, one of the major questions in the mind of policymakers was if India’s growth should be agriculture or industry-led and we went ahead with industry-led growth primarily because there was almost no presence of infrastructure sector, i.e, power, transportation and communication, there was the negligible presence of the infrastructure industries like iron and steel, cement, coal, crude oil, oil refining and electricity, lack of skilled manpower, absence of a market of industrial goods.

However, the obvious choice for India would have been to go for the agricultural sector as the prime moving force because India had natural resources from Rajasthan in the west to Odisha in the east and the fertile plains to feed the country. By organising our land ownership, irrigation and other inputs of agriculture, India could have gone for better prospects of development, once we as a nation would have achieved self-sufficiency in food grains, food security, national healthcare infrastructure, a shelter for all and universal education we could’ve realised one of biggest goals in human development. The most prosperous countries in the world today are not the most industrial in their approach towards development, they mostly have an all-round approach to human development that focuses on improving the standard of living of its citizens by ensuring excellent health care system and education.

However, learning from these prosperous Scandinavian countries we must plan our future course of action. In 1991, the government in power under late prime minister P.V  Narasimha Rao led LPG reforms right after the Current account deficit wherein India was only three weeks away from welshing on its external balance of payment obligations. International Monetary fund asked India to go for the reforms in exchange for an emergency loan of 2.2 billion dollars. Reforms formally began on 1st July 1991 when RBI devaluated Indian rupee by 9% and by a further 11% on 3rd July. The economic policy reforms yielded good results, dramatically improving the quality of life in India and a new boast to the banking industry. However, like every action has equal and opposite reaction, trade liberalisation corresponded with a dramatic rise in inequality and associated social issues. The Indian GDP rose from $266 billion in 1991(inflation-adjusted) to $3 trillion in 2019 (1100% increase) while its purchasing power parity rose from $1 trillion in 1991 to $12 trillion in 2019. Now let’s move ahead and understand the challenges ahead of India in becoming a superpower. 

India’s strengths in achieving its goals

India’s demographic dividend 

India’s biggest strength lies in its demographic dividend. India is the youngest country in the world with 2/3rd of its population in the working-age group, the young blood in India should be channelised to achieve the goals India has set for herself. However, this aim can only be realised if our educational, manufacturing and service sectors are given a boost along with a steady medical infrastructure

The abundance of natural resources

Among India’s many other strength lies, its abundant natural resources and varied topography. Our land is endowed with a range of topographies ranging from the Himalayas in the north to the northern fertile plains, from the coal mines in Jharkhand and Odisha to gold mines in Karnataka and copper mines in Rajasthan. The fact that we’ve such a wide variety of natural resources puts us in a strong position to utilise our resources effectively while depending less on imports from our neighbours. The recent strides made by India in utilising solar, wind, thermal energy will only bring in long term dividends to India’s energy sector while cutting down our imports.

An ever-growing service sector

 One of the major advantages for India lies in its service sector. The service sector accounts for 53.66% of India’s Gross value-added product (GVA) while the industrial sector is at the second spot and contributing around 31% of the Indian GDP, this means that both service and industrial sector are contributing to the Indian GDP effectively. The only matter of concern here is, even though both service and industrial sector are the highest contributors to the GDP, the maximum number of people are still in the agriculture and fishery sector.

Strides in ease of doing business

India has continuously improved her position in the ease of doing business report published by the World bank year after year. The report measures the performance of countries across 10 different dimensions ranging from how easy or difficult it is to start a business, get access to construction permits, resolving insolvency, electricity availability, credit availability among others. India maintains its 1st position among South Asian economies which was 6th in the year 2014. Our performance in ease of doing business has created enough room for foreign investment in the country that will ultimately employ the youth, nurture their skill set and increase saving which will ultimately lead to economic growth. 

A growing economy

 At present, the Indian economy is passing through a rough time but it is expected to recover soon. As per the latest report of ‘World economic league table 2020; India has overtaken both France and the UK to become the world’s 5th largest economy in 2019. Well, that certainly is some good news. Isn’t it?

India’s weaknesses

Inadequate health and education infrastructure 

Every country has its set of problems and so does India. Our problems are varied, the most important being inadequate health and educational infrastructure. Our health and education spending is hardly 3% of our GDP, i.e one of the lowest in the world. It is indeed alarming that a country of almost 3 billion people are not given appropriate health and educational infrastructure and has aspirations of being a superpower. In most modern democracies, health and education fall under the wider umbrella of duties of the state and it is indeed the responsibility of the state to make sure that an appropriate share of GDP is allocated on the two primary pillars of human development. 

Red-Tapism

Bureaucracy in India has long been plagued with Red-Tape. Excessive regulation and paperwork in every department and delay in the processing of documentation to achieve the desired goal makes it an uphill task for a common man to get the work done in Indian offices, corporations and other large organisations. The foremost solution to decrease red tape is by bridging the digital divide between the have and have nots and along the process digitalise most government offices and grievance redressal mechanisms for the benefit of the citizens at large. 

High interest rate 

The central bank is infamous for asking Indian banks to charge high-interest rates from its customers especially when inflation is predicted to rise more than the target. However, even when inflation rates are rather in control we often see Indians under the gloomy cloud of high-interest rates, with the high interest rate, the payment of interest rate and loans become ever more expensive, this in return discourages people from borrowing and further spending. Those who have taken loans will have less disposable income at their end that will ultimately lead to less consumption. 

A growing divide between the rich and the poor

The Indian economy is among one of the largest in the world. Its free-market principles post-1990 has brought significant dividends for the economy but at the same time, wealth distribution has been highly unequal. It is alarming how the richest 1% of Indian’s own 58.4% of the wealth. With the trend only going upwards every year. The irony of the situation is that even to this day, 22% of Indians are below the poverty line. What is particularly worrisome in India’s case is that economic inequality is often being added to a society that is already divided into the lines of caste, religion and gender. Income inequality when analysed and understood in terms of caste, religious and gender lines bring to us a blurry picture of shattered dreams and dual reality. This dual reality is of an India that is indeed an emerging superpower but at the same time, 22% of her population still does not know where its next meal will come from.

What needs to be done

We’ve made significant strides in the years gone by and it won’t be an understatement to give ourselves a pat on the back, but it’s time we accept the challenges ahead of us and strategise our plan of action accordingly. For starters, India needs to focus on strengthening health and education infrastructure, the healthier and educated our young ones are, the easier it is to achieve the goal of holistic development. Along with boosting our infrastructure, we must realise the principle of sustainable development. Since last 30 years world has been ever more conscious about preserving the environment, even though India has been given certain advantages because it’s a developing country, we should not undermine the importance of developing our infrastructure and our way of life on the lines of environmental ethics. 

Analysis 

It’s been over 70 years since India achieved its independence, it was a hard battle but we won it our independence by our very conviction in self-reliance and will to hold the baton of self-rule in our very hands. What India needs to do now is work towards achieving economic growth that has its roots in human development at large. We have indeed come far, but there’s still a long way to go. Being a superpower is not merely about a number or a spot on the world map, it is battle to become a better nation for ourselves and for those who dreamt of a nation that was united in its spirit, ever-growing, ever-flourishing, in letter and spirit.

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