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'Critical nature of national economic interests invariably shapes foreign policy'
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Vishnu Makhijani (Source: IANS) | 14 Nov, 2022
Geo-strategic affairs commentator Saurav Jha likes to think of a book as
something that germinates within the writer, nourished by early
impressions, then feeding on new data and experiences, but ultimately
shaped by a crystallizing worldview. The interaction between
geoeconomics and geopolitics has always fascinated him and his
commentaries over the years have reflected this.
"I have
found that the analysis of so-called 'large affairs' does not really
lend itself to a siloed approach. No geoeconomic paradigm arises in a
geopolitical vacuum. On the other hand, the critical nature of certain
national economic interests invariably shapes foreign policy. It is at
the intersection of these currents that extant geostrategic trends may
be identified," Jha told IANS in an interview of his book, "Negotiating
The New Normal - How India Must Grow in a Pandemic-Ridden World"
(Hachette).
Noting that all those trends need to be analysed
without prejudice, he said: "In India, one finds that the public
discourse related to global power dynamics, such as say the competition
between America and China, or possible strategies for India's industrial
growth, is often tinged with concepts that have fallen prey to regime
change. Moreover, most analyses tend to focus on India's interactions
with the world. In 'Negotiating the New Normal', I have first sought to
understand the World Economic Order as it is and then examined India's
place in it."
"Obviously, this effort predates the pandemic and
the intervention of this colossal human tragedy required renewed
examination of all that I had worked upon. However, I found that the
pandemic has essentially hastened many pre-existing trends that date
back to the Global Financial Crisis (GFC) of 2008, which was a watershed
moment in world economic history," he added.
Considerable research has gone into the book.
"In
a word, the journey from conception to completion could easily be
described as 'tortuous'. In all, the book has gone through
two-and-a-half drafts over a course of six years. As you can see, the
book is heavily footnoted since I have not just referenced factual
assertions, but looked to provide added context and explanation to
assist the reader's process. Given my worldview, the book draws on not
just the discipline of macroeconomics, but industrial and trade policy,
economic history and international affairs as well. Specifically, I have
attempted to delineate how policymakers in the four main economic
centres of the world see things going forward before putting forth my
own thoughts.
To this end, the book:
* Offers realistic
solutions for India's economic slowdown, by uniquely combining
geopolitics and economics based on an analysis of the current global
context.
* Examines and explains from an Indian perspective the
current states of major economic centres of the world (the US, EU,
China, Japan, etc.) in the post-COVID world.
* Explains the real constraints India faces in trying to escape the middle-income trap.
* Discusses in depth the lessons that India must learn -- and avoid -- from the growth stories of Japan and China.
* Provides urgent and invaluable analyses for policymakers and interested laypersons alike.
In addition, it addresses today's hot topics, including:
* Is the world headed into stagflation?
* Should India be worried about a ratings downgrade?
* Will India face the same fate as Sri Lanka?
* Is the RBI's policymaking on the right path?
* Should India give importance to manufacturing?
* Is the US-China tech war for real?
* Can the Chinese Yuan replace the US Dollar?
* Did India do the right thing by leaving the China-led RCEP?
Pointing out in the book that "all eyes are on India to see if it can
overcome its challenges and deliver on its potential", Jha said: "Since
the GFC of 2008, the international investor community has hoped that
India would serve as a key engine of global growth. After all, it is in
an environment of rapid economic growth that one is likely to find a
range of financial opportunities with appreciable returns. Given that
India has been a chronic net importer (as reflected by its persistent
current account deficits), its economic growth driven by domestic
consumption was also seen as a major market opportunity for beleaguered
Western and Japanese firms."
"However, today India is being seen
as more than a market by the West. The decoupling with the Chinese
worker due to concerns about disruption, technological security and
military competition will lead to sustained inflationary pressure unless
the Indian worker steps up to the plate. The pandemic has laid bare
that the cost of disruption can outweigh the cost of a supposedly
efficient distribution of manufacturing capacity.
"This has also
convinced the advanced economies that they need to 'reshore' parts of
the supply chain and re-create domestic capacity for certain key
sectors. But as I discuss in the book, there are hard limits to
reshoring and a more resilient supply-chain will ultimately have to be
affordable. Moreover, America's and Japan's success in the fourth
industrial revolution is contingent upon the availability of a
manufacturing estate that can ultimately match China's scale for network
equipment. Despite its impressive performance, Vietnam cannot fulfill
that role and it in any case is very much in China's industrial and
geographic shadow," Jha maintained.
But before that, India has to overcome various challenges to serve as a key centre of global production.
"For
one, it has to improve its logistics performance, which currently puts
it at a disability vis-a-vis both China and Vietnam, through sustained
infrastructure investment. Even prior to the pandemic owing to policy
missteps like demonetization duly supplemented by a complex GST
framework and the RBI's own rate hikes of 2018, India was in a
structural growth slowdown.
"The Corona-shock further dented
domestic demand and the supply-side as well. The government will have to
focus on upskilling manufacturing workers previously employed in the
informal sector and make them ready for what promises to be India's last
window to industrialize rapidly," Jha elaborated.
How optimistic
is he of Finance Minister Nirmala Sitharaman's statement that India is
set to become the world's third largest economy by 2029, ahead of Japan
and Germany? Given the level of industrialisation in these countries
just how will India overtake them?
"On this count, I am actually
quite optimistic. In fact, there is almost an arithmetic inevitability
to it. The FM's statement is essentially a reference to India surpassing
Germany and Japan in terms of nominal GDP (i.e. the current market
value of goods and services produced in an economy for a particular time
period) expressed in terms of whatever the dollar exchange rates
prevail at the time i.e. 2029. Even at the moment, India's nominal GDP
is already around 70 per cent of Japan's and 80 per cent of Germany's in
dollar terms," Jha asserted.
Explaining that nominal GDP growth
rate is simply the sum of the real GDP (i.e. GDP adjusted for inflation)
growth rate and the rate of inflation, he said: "Despite India's growth
potential not being what it could have been, it is still a lot more
than that of either Germany or Japan. And though consumer price
inflation in Germany is currently running at a higher pace than India,
one can expect it to ease as weakening global demand pushes down energy
prices despite the Russia-Ukraine conflict and supply-chain disruptions
settle down. Naturally, I expect inflationary pressures in India to ease
as well, but it could well be that monetary policy tightening by the
European Central Bank pushes Germany's economy back into the
pre-pandemic lowflation mode."
"Japan, of course, had been near
deflation since the bursting of the Hesei Bubble in 1991 and the
subsequent lost decades of very low or not real GDP growth. The
pandemic-era disruptions have moved the consumer price inflation needle
but not by as much as elsewhere. It is currently only in the order of
two per cent or so as opposed to seven per cent or more in India and
Germany.
"So, as you can see, on both counts i.e. real GDP
growth and rate of inflation, India is likely to surpass Germany and
Japan going forward. So, if the relevant dollar exchange rates remain
where they are at the moment, India will emerge as a 'larger' economy in
dollar terms than either by 2029. Given India's relatively better
growth performance and possibly increased competitiveness, the rupee may
even gain strength vis-a-vis the dollar going forward relative to the
euro or yen and this will further contribute to India's relative
position with respect to Germany or Japan in the nominal GDP
sweepstakes," Jha elaborated.
"Having said that, it should it be
clear that Japan and Germany will both have much higher per-capita
incomes than India in 2029, and in that arena, India will require a
further two decades of appreciable growth to catch up with them.
Although in the interim, there is a lot of latent productivity growth
that India can tap to surpass them in overall economic size," he
maintained.
What next? What's his next book going to be on?
"My
next work is a joint effort with Dr V.K. Saraswat, former DRDO Chairman
and currently Member, NITI Aayog. It is a techno-economic history of
the Integrated Guided Missile Development Programme which laid the
foundations for India's military-industrial sector," Jha concluded.
(Vishnu Makhijani can be reached at vishnu.makhijani@ians.in)
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
|
87.50
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84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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