The world is in an age of disruption, whether in politics, economy or technology. In any such era, uncertainty rises. Among nations, there will inevitably be winners and losers. Business as usual or maintaining a status quo may seem like a safe option, but it is not. Only nations that embrace the disruptions and are nimble enough to capture the upside will succeed. What should India do?
Global politics is set for unusual times with Donald Trump helming the US. By all indications, his second term is likely to be more disruptive for the global order, whether on war, multilateral/bilateral economic frameworks or climate change. On his tail, there is Elon Musk, the most disruptive entrepreneur of the age who has now made it his mission to also be a disruptive global political influencer. Both men want to change not just the US but also mould the globe as per their worldview and interests.
The global economy is going through a tough phase. Even India, which is the star of the show, is slowing down. The predominant policy reaction across the world is to abandon the long-held consensus on openness and to look inward. Almost every major economy is strategising some version of self-reliance that doesn’t necessarily mean a complete rejection of the outside world. What it does mean is the need for greater reciprocity in concessions and a preference for politically-aligned partners.
An Uncertain World
At the same time, there is a hugely disruptive industrial revolution underway. The continued rise of AI and other automated technologies is putting a question mark on the future of conventional jobs. It is bringing to the fore new challenges, such as the need to secure supply chains of critical minerals that are the core of emerging technologies.
It is a tough world. But even in uncertainty, there are some certainties that can be leveraged, especially by India. Trump is unlikely to look at India’s high tariff barriers favourably. Nor is Elon Musk. But there lies an opportunity in their interests. Both Trump and Musk would look at India positively as a destination for American investment. And welcoming that would also open a door for greater market access for exports to the US. The best chance for India to make full use of the China-plus-one sentiment for manufacturing is during Trump’s time as president. However, it may require some disruptive policy changes in India, including a reduction in tariffs in some sectors where they are abnormally high. It may also require a drastic simplification of processes and clearances, moving towards self-certification, time-bound clearances and deemed clearances. Complexity and delays are an anathema to foreign investors.
The global economic slowdown affects India’s exports, but it need not be a downside to India’s 8% growth prospects. Again, disruption to business as usual may be required. An immediate loosening of monetary policy by at least 50 basis points and substantial tax relief to the middle class will spur domestic consumption, which has been sluggish for the last few quarters. A rise in demand will hasten the capex plans of corporations and lead to a rise in private investment, which has also been struggling.
The answer to technology disruption and its impact on jobs is not obvious. It will play out over time. But it is clear that the nature of future jobs will involve more, not less skill. In particular, numeracy, basic mathematics and science will be key. India’s school education needs a radical revamp with learning rather than enrolment as the primary goal. The Centre and states must get together to redo pedagogy in order to make the next generation future-ready.
Be Nimble
That said, there will still be more uncertainty in the world than certainties. Not all challenges can be predicted beforehand. In terms of nimbleness in response, there is no comparison between market forces and government. Countries that give a greater play to market forces and entrepreneurship will be more successful than those that put their governments in pole position. That is already evident in the widely divergent economic outcomes in Europe and the US. Europe, much more statist than America, is in real decline. America’s alleged decline makes headlines but is greatly exaggerated. East Asia has done better than South Asia because it has been open to market forces.
In India, the political economy still favours the government over the private sector. The biggest disruption needs to happen here if India is to continue its march to prosperity in a tumultuous and uncertain world.
(The author is Chief Economist, Vedanta)
Disclaimer: These are the personal opinions of the author
