The darkening horizon
ON the surface, everything is going well despite the pandemic, past missteps and blunders. The IMF predicts that by 2027, India will be the world’s fifth-largest economy with a GDP of $5 trillion. When PM Modi took office, India’s rank was number 10.
India has much to worry about — inflation, large-scale unemployment, a new Cold War, Chinese aggression and the Kashmir insurgency.
According to The Economist, India is being powered by the creation of a single national market, an expansion of industry based on renewable energy, pre-eminence in IT and government’s vast welfare spending. The highway network has grown 50% longer than it was in 2014, air freight volumes have grown 44%, there are 783 million broadband subscribers and a national digital network has made tax evasion much harder.
Modi’s strategy seems to be a distant echo of South Korea’s creation of Chaebols. Here, Adani, Reliance Industry, Tatas and JSW Steel are encouraged to expand and there are few worries about the fate of small and medium industry. Further, India benefits from global businesses looking for more stable and resilient economies for investment opportunities.
But there is a tint of darkness on the horizon. The Indian economy was badly damaged by the Covid pandemic. According to an April 2022 report by the RBI, it will take another 13 years to overcome the losses it incurred. Output losses for the past three years amounted to over Rs 50 lakh crore. And, the pandemic is not yet over.
The inflation that began with the pandemic is now being pushed by the war in Ukraine and sanctions on Russia. Driven by high food prices earlier, it is now being pushed by high fuel prices. The rising prices of commodities and raw material around the world is also affecting India. Inflation is the invisible thief who steals your income and savings and is devastating for the poorer people of the country.
India will also have to confront a slowdown of global economic activity if, as expected, the US and Europe slide into recession. If the Russia-Ukraine war is prolonged, further sanctions are imposed and the situation draws other countries into the war, our growth story could face severe headwinds. But basic fundamentals of the economy are strong and we should be able to cope.
The big challenge is unemployment — among the highest in the world. The scale of the problem is evident from a government response to a Parliament question last week. It said the government hired just 0.3% of the candidates who applied for permanent government jobs in the last eight years. The number of those unemployed in the 20-24 age group is an astonishing 43.7%. The number of working women dropped to 19% from 26%. The labour force participation rate — people who are working or looking or work — has dropped to just 40% of the 900 million people of legal age. This means 60%, mainly the young and women, have given up looking for jobs in despair.
India’s demographic dividend is supposed to power us to the future, but it is looking more like a demographic nightmare. A lot of the problems are related to the poor quality of education and job training. To sustain the growth trends already visible, India needs a trained workforce.
Yet, another level of risks to our future lies in the instability of the global system which is adrift and system-shapers like the US, EU, Russia and China are locked in a new Cold War. Little is being done collectively to deal with issues like the pandemic, climate change and the world trading order, let alone world peace and security. To top it off, besides the as-yet-unfinished Russia-Ukraine war, there is dangerous talk of a Chinese attempt to take Taiwan by force, an event that cannot but have devastating consequences for the global system.
It is time, too, to worry about the nuclear situation. Russian threats to employ nuclear weapons in the Ukraine war represent a dangerous development. But the big lesson to many countries is that only nuclear weapons can guarantee your security, something that will promote the proliferation of such weapons.
But for India, the dark cloud on the horizon is China, which is now building up its forces in the Tibetan plateau and Xinjiang. India has strong defences along the LAC, and, as of now, an edge in air power. The crash programme to construct border infrastructure is making these positions stronger. But India’s military continues to suffer from inadequate budgetary support. Despite Agnipath, pensions will remain a burden on the defence budget for the next decade and more, and funds for modernisation will remain scarce. The Agniveer project could also end up in giving us a half-trained military in an environment which is demanding a much higher level of military skills.
Looking ahead from India@75, the security situation is not all that sanguine. Pakistan may be down and out, but it remains a threat, whether as a failed state or a successful one.
The really big worry is of internal security. There are problems like the Kashmir insurgency that are far from being settled. Having largely avoided the global Islamist radicalisation, Indian Muslims may now be pushed in that direction by the persecution they are facing.
We need to remember that among the key ingredients of a successful society are the equality of opportunity and a shared and coherent national identity that can help overcome the difficulties of political, religious and ethnic fragmentation.
