28th July 2019

Musings.......

The post Cold War period in the history of the world is characterised by the emergence of a different kind of war among nations.  You can call it the Cold War or the competition among nations for economic development. So from a bipolar world which prevailed during the Cold War period we saw a transformation into a unipolar world with USA emerging as the sole world power with dictatorial power over world trade policies and economics. 

The emergence of yesteryear third world countries like China and India has “toppled the Applecart” so to say. 

In the beginning of the 21st century what we are seeing is the transformation from a unipolar world into a multipolar one where multiple power centres are emerging. 

People’s Republic of China which was built on the lines of a successful model of Communism and socialism has emerged into a world power which recons respect. With the influence of Chinese commerce extending to far flung areas of the globe, US is no longer a loner right at the top and has company.  

Added to it , the self restricting and protectionist policy followed by Donald Trump means that USA is slowly receding from the Global player scene. Trump has to play to his vote bank who are the jobless peasants class and crisis ridden manufacturing sector. Along with the white class conflict facing USA in these times, Trump appears to them as their saviour.

This means that multipolarity is here to stay. As I write this article, there is the formation of the ‘Squad’ in the USA comprising four Congresswomen of colour who Trump insulted through his tweets and asked them to go back to their own country and got away with it. Though he was censured by the US Congress, it would actually go well with his voters in his upcoming re-election is something to be taken with a pinch of salt. 

The emergence of right wing politicians and parties into the mainstream holding power in many countries like India, USA, Brazil, Philippines, and even the UK with Boris Johnson becoming its new Brexit PM is something of interest. 

The phenomenon of the world leaning towards the Right, could be a reaction to the disillusionment it feels towards the Centre or the Centre- left who’s entitlement based policies have left millions in poverty with no improvement in conditions. However how different are these Right wingers in policy making remains to be seen but for now their formula seems to be winning. 

From US coming to India, and talking about the Economy, India had declared its policy aim - Making it a $5 Trillion dollar economy by 2024 from its present 2.8Trillion. 

The Economic Survey released prior to the Budget states the following - 

1. Calls for a sustained GDP growth of 8% which can be possible through a virtuous cycle of savings, investment and exports. 
2. Private Investment as key driver of jobs, growth, export and demand. Capital investment fosters job creation. Higher savings prevents domestic consumption and hence exports has a role to play in boosting growth. 
3. Social change through behavioural economics

The survey also emphasise the need of MSME growth in job creation and the need for deregulating labour laws for more job creation. Another area emphasised is the DATA sector , where government intervention is needed in  social sectors. e- National Agricultural Market ( e-NAM ) and the Direct Benefit Transfers are the governments successful initiatives in this regard.

The Survey notes scope of improving Ease of doing business. 

The single biggest hurdle towards Ease of doing business is delay in enforcement and dispute resolution. 

India is to reap the rewards of its demographic divident with sharp decline in population growth over the next two decades. The National Total Fertility Rate is expected to be below replacement levels by 2021. 

The Central Government is on the path of fiscal consolidation and fiscal discipline.

Climate change and climate financing wherin India played a major role in the Katowice Climate conference (COP-11)in Poland last year in fixing priorities of Developed countries was noted. 

As far as water is concerned, focus should shift from land productivity to ‘irrigation water productivity’. 

Water or the lack of it  is turning out to be major issue. We saw Day Zero in Cape Town, South Africa and thought that day may not come to our subcontinent soon. However belying expectations Chennai faced its biggest water scarcity in modern times. The main reason behind this is overexploitation of ground water and improper conservation of wetlands since the advent of piped water supply. 

Simla, Udupi and Mangaluru is in queue to be India’s Cape towns and the need for restraint while using water should is not overemphasised. 

Organic and natural farming techniques like Zero Budget Natural Farming can improve water use efficiency and soil fertility. 

Coming to much debated and criticised Union Budget which showed no initiative towards fiscal consolidation, rather was bland in toto.  

One decision that stood out was the proposed funding the fiscal deficit by borrowing from international markets in foreign currency. The government plans to raise $10 billion from its first overseas sovereign bond. 

This goes to show the governments desperation.  Public sector borrowing is putting huge pressure on market rates and liquidity in market. 

This is affecting the monetary policy. Large public borrowing can crowd out the private sector and increase interest rates. 

Low global interest rates means government was tempted to borrow abroad. Indians sovereign external debt is less than 5% of GDP, one of the lowest in the world. It remains to be seen if the government strategy of borrowing abroad will reduce the pressure on domestic market and will help keep interest rates at lower levels. 

If this governments  focus in its last term was to close the loop of basic necessities including house, toilet, LPG connection, electricity, health and crop insurance; in the second term the focus seems to be on piped water supply. Policy space of this government is occupied by piped water supply for all by 2024, electricity for all by 2022 and doubling farmers income by 2022. A New India ( whatever that means by 2022) is in the anvil. 

Strengthening self help groups (SHGs) access to financial resources is one of its biggest decisions this budget. 

Focus on targeted benefits will continue with the JAM trinity ( JanDhan, Aadhar and Mobile ). 

I have largely refrained from my usual style of criticising the Right wing Government under BJP since it won a reelection through a historic landslide in a largely one sided contest. The reason for the same is every government at its outset generates hope and its upto them to live up to its expectations.  With such a massive mandate this government has earned its time from criticism.  Now it’s upto it to prove skeptics like me wrong. If Facebook survives till the next General Election then you can expect my rebuttal or endorsement.  

In my promise of not boring people with multiple paragraphs of my thought process I beg to end this Musing even thought I have lots write.  I end this article with a feeling of incompleteness, however sans remorse because I will be back with more soon. 

Food for thought.......

RC