I.WORLD ECONOMY AT A GLANCE
Global growth is firming, contributing to an improvement in confidence. A recovery in industrial activity has coincided with a pickup in global trade, after two years of marked weakness. In emerging market and developing economies (EMDE), obstacles to growth among commodity exporters are gradually diminishing, while activity in commodity importers remains generally robust. As a result, and despite substantial policy uncertainty, global growth is projected to accelerate to 2.7 percent in 2017, up from a post-crisis low of 2.4 percent in 2016,before strengthening further to 2.9 percent in 2018-19, broadly in line with January projections.Against an improving international backdrop, growth in Emerging Markets and Developing Economies has strengthened from a post crisis low of 3.5 percent in 2016. It is projected to reach 4.1 percent in 2017 and 4.5 percent in 2018.
Contributors to the world economy- Figure shows the country wise contribution to the world GDP.
Major contributors to the world economy are America, China, EU and Japan. India is also contributing 2.83% to the world economy in absolute terms.
Inflation rates in EMDE commodity exporters and importers are converging. Easing inflation among commodity exporters since mid-2016 has allowed a more accommodative monetary policy stance in some countries. Although the impact of the earlier drop in commodity prices on the government budgets of commodity exporters is dissipating, Fiscal space remains constrained in many EMDEs, suggesting the need for continued Fiscal adjustment. EMDEs will need to continue to pursue structural reforms to improve their longer term growth prospects, diversify their economies, and develop domestic as well as foreign markets.
These efforts include policies to improve the business climate, support investment in human and physical capital, and enhance regional and global trade integration of EMDEs.
II.INDIA ECONOMY OVERVIEW
With 1.2 billion people and the world’s third largest economy in purchasing power parity terms, India’s recent growth has been a significant achievement. Since independence in 1947, a lot has changed like grain importers to net exporter of food. Life expectancy has more than doubled, literacy rates have quadrupled, health conditions have improved, and a sizeable middle class has
emerged. India is now home to globally recognized companies in pharmaceuticals and steel and information and space technologies, and enjoys a voice on the international stage that is more in keeping with its size and potential.
The economy of India is the sixth-largest in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP). The country is classified as a newly industrialized country, and one of the G-20 major economies, with an average growth rate of approximately 7% over the last two decades. India’s economy became the world’s fastest growing major economy in the last quarter of 2014, surpassing the People’s Republic of China.
According to PWC’s Report “The World in 2050”, India’s nominal GDP could outpace the United States’, making India the world’s largest economy as early as 2040. The projection also sees India doubling its GDP from around $2.2 trillion to about $5 trillion by 2025.
India now stands at a critical juncture. It needs massive investments to create the jobs, housing, and infrastructure to meet its people’s soaring aspirations. Growth that lifts all boats will be key, for more than 400 million of its people–or one-third of the world’s poor–still live in poverty.
Contribution of service sector in Indian economy-
Indian economy is classified in three sectors — Agriculture and allied, Industry and Services.
Industry includes Mining, Manufacturing (Registered & Unregistered),Electricity, Gas, Water supply, and Construction. Services sector includes Trade, hotels, transport, tele-communication, Financial, real estate and other services.Services sector is the largest sector of India in terms of contribution to total economy. Gross Value Added (GVA) at current prices for Services sector is estimated at 73.79 lakh crore INR in 2016-17. Services sector accounts for 53.77% of total India’s GVA of 137.51 lakh crore Indian rupees (Refer Figure 3).
Over the years, the contribution of the service sector has been increasing (Refer Figure 4)
III.BECOMING A SUPERPOWER
Superpower is a term used to describe a state with a dominant position, which is characterized by its extensive ability to exert influence or project power on a global scale. This is done through the combined-means of technological,cultural, military and economic strength, as well as diplomatic international relations and soft power influence.
However, our idea of super power is altogether different from the above. The famous poem by Sh. Rabindra Nath Tagore is the true idea of the superpower to us-
“Where the mind is without fear and the head held high;
Where knowledge is free;
Where the world has not been broken up into fragments by narrow domestic walls;
Where words come out from the depth of truth;
Where tireless striving stretches its arms towards perfection;
Where the clear stream of reason has not lost its way into the dreary desert sand of dead habit;
Where the mind is led forward by Thee into ever-widening thought and action;
Into that heaven of freedom, my Father, let my country awake.”
We as a nation should first be self-reliant and then should work towards becoming an economic super power giving back to whole world in line with the concept of “Vasudhaiva Kutumbakam”. We as a nation do not want to influence other countries in negative manner but at the same time should be powerful enough to take a stand against other bullies.
IV.STRENGTH OF INDIA
With largest youth population in the world at 650 million with more than half the population below 25 years of age, it is indeed India’s greatest strength. As United Nation (UN) report stated, “Developing countries with large youth populations could see their economies soar, provided they invest heavily in young people’s education and health and protect their rights”
●Foreign language skills
English is still the best contender for “Global language” status. Incidentally, India has 2ndlargest population of “fluent English” speakers, only behind the United States, with estimates ranging from 150 to 250 million speakers, and is expected to have the largest in coming decades. Consequently, India has become the Service Sector Hub of the World.
India is world’s largest democratic republic, more than three times bigger than the next largest (the United States). It has so far been successful politically, especially considering its functionality despite its difficult ethnic composition. The fact that India is a democracy has improved its relations with other democratic nations and significantly improved its ties with the
majority of the nations in the developed world.
India’s current economic growth (as the world’s fastest-growing major economy as of 2015)has improved its standing on the world’s political stage, even though it is still a developing country, but one that is showing strong development. The growth rate in last two decades has been on a robust path.
In the future, the world is expected to decrease its dependency from fossil fuels &nuclear energy and most likely to increase its dependency on renewable energy. Being a region in the sunny tropical belt, the Indian subcontinent could greatly benefit from a renewable energy trend, as it has the ideal combination of both – high solar insolation and a big consumer base density.
India is seen as one of the key markets from where future growth is likely to emerge. The growth in India’s consumer market is driven by a favorable population composition and increasing disposable incomes.India’s robust economic growth and rising household incomes are expected to increase consumer spending to US$ 4 trillion by 2025. The maximum consumer spending is likely to occur in food, housing, consumer durables, and transport and communication sectors.
V.CHALLENGES IN INDIAN ECONOMY
As per Global Competiveness Report 2017, India has improved its position to 39th place which is a jump of 16 places consecutively in last 2 years (from 71 to 55 in 2015 and 55 to 39 in 2016, figure-6).
As per this report, financial market development is the pillar most dragging down India’s competitiveness. Here the efforts of the RBI have increased transparency in the financial market and shed light on the large amounts of nonperforming loans. The efficiency of the goods market has also deteriorated but is projected to be improved a lot after implementation of its long awaited goods and services tax (GST) which is seen as the biggest tax reform after independence. Another area of concern is technological readiness.
These three pillars will be the keys for India to prosper in its next stage of development, when it will no longer be possible to base its competitiveness on low-cost, abundant labor. Higher education and training has also shown no improvement. What areas should India prioritize today?The country’s biggest relative weakness today is in technological readiness, where initiatives such as Digital India could lead to significant improvements in the next years.
Tough regulations by RBI to set off the NPAs by banks are also a good initiative towards financial market development.
As per Asian development bank, approximately 21.9% of India’s population lived below poverty line. The growth has to be inclusive and needs to reach to the last person of the society. Also, the disparity in the distribution of wealth has been increasing.
The infrastructure such as roads, power grid, water, communications infrastructure, housing and education have shown the sign of improvements but still are often below standards.
There is growth without employment which is big concern as providing the employment to such a large population is indeed a big task and needs to be tackled on priority. Unless India finds a quick way to generate jobs, its population of unemployed youths could be a reason for instability.
India’s national literacy is only 74.04% (2011). At current rates India will take no less than 20 years for a literacy of 95%. We have come a long way in the literacy rate, however it is still lower than the world developed countries.
VI.CONVERTING CHALLENGES INTO OPPORTUNITIES
1.Automation and Employment
The pursuit for increased productivity, increased quality of goods, cost optimization and better working conditions drives the development and implementation of new technology. The Industrial Revolution earlier discovered the assembly line to manufacturers, creating employment for low-skilled workers and helping in their tasks. In the twentieth century, the computer revolution scraped middle-skilled manufacturing and clerical occupations, replacing repetitive production tasks with machines. Now, the twenty-first century’s digital revolution has unleashed a new wave of advanced machines, further automating complex tasks and jeopardizing skilled workers in positions once considered difficult to automate.
Research shows that disruptive technologies –artificial intelligence, the Internet of Things, nanotechnology, automation and robotics – are becoming better. Decreases in their costs and increases in their accessibility promise future prosperity and the creation of new jobs.
Simultaneously, these technologies challenge existing configurations of the workplace, forcing dramatic changes at alarming speeds. This is particularly true for developing and emerging economies.
Four economies—China, India, Japan, and the United States—account for just over half of the total wages and almost two-thirds the number of employees associated with activities that are technically automatable by adapting currently demonstrated technologies.
In our opinion, the world’s economy will actually need every erg of human labor working, in addition to the robots, to overcome demographic aging trends in both developed and developing economies. In other words, a surplus of human labor is much less likely to occur than a deficit of human labor, unless automation is deployed widely which is not likely to happen any time soon. However, the nature of work will change. As processes are transformed by the automation of individual activities, people will perform activities that are complementary to the work that machines do (and vice versa).
As far as India is concern, the reach of automation in India is quite low which results in lower productivity and thus the pace of automation can be increased for making it to grow as world superpower.
As far as the concern of unemployment is raised, it is obvious that there shall be issues for low-skilled jobs and focus shall be on high skilled jobs. Government initiatives like ‘Skill India’ shall help in converting low skilled workforce into high skilled.
2.De-globalizationand Indian Economy
De-globalization is the process of diminishing interdependence and integration between certain units around the world, typically nation-states.
Opportunities in De-globalization-
a.Globalization has increased the gap between the rich and the poor. Today rich and wealthy people have more control over the national resources, which is actually the right of every individual. By way of de-globlaizing, the distribution of wealth in India shall be equal.
b.Globalized businesses have extensively used the natural resources of the earth beyond the limit. De-globalizing shall certainly help in optimization of use of natural resources.
c.Globalization is making world a more homogeneous place. As a result, many countries failed to preserve their old tradition, custom, and culture. Being attracted by the culture of developed nations, many people in under-developed nations have shed their traditional dress, food, and rituals.
d.Local businesses, hand-loom industry, Cottage and small-scale industry suffered a lot due to globalization. The highly specialized and efficient multi-national companies take advantages of large-scale production and put products at throwaway prices. The local industries could not compete with their global counterpart.
Currently what is happening in the world cannot be termed as degloblisation but can be termed as protectism which was already there at the time of globalization.
India with its large workforce needs opportunities so that the same can be used to its full advantage. De-globalization like tougher visa terms by America, protecting the employment for their own citizens will bring the bright mind of Indian people who shifted to these countries back to India. These bright minds in turn will be contributing to the growth of Indian economy.
VII. GOVERNMENT OF INDIA INITIATIVES TO MAKE INDIA A SUPERPOWER
MAKE IN INDIA –
“Sell anywhere in the world but manufacture in India”.
The Government of India launched an ambitious campaign ‘Make in India’ in September 2014 with an objective of reviving the growth of manufacturing sector in India. Make in India initiative has imprinted a positive image of the Indian economy on the global platform. It has helped to increase the flow of foreign funds in India. The year 2015-16 witnessed 46% growth in Foreign Direct Investment (FDI) equity inflows and highest ever FDI inflows at $ 55.5 billion.
As per International Monetary Fund, post the launch of Make in India initiative, India has emerged as the fastest growing major economy with GDP growth rate above 7.6% in 2015-16 and projected growth rate above 7% till 2020.
“Sell anywhere in the world but manufacture in India”.
The Government of India launched an ambitious campaign ‘Make in India’ in September 2014
with an objective of reviving the growth of manufacturing sector in India. Make in India
initiative has imprinted a positive image of the Indian economy on the global platform. It has
helped to increase the flow of foreign funds in India. The year 2015-16 witnessed 46% growth in
Foreign Direct Investment (FDI) equity inflows and highest ever FDI inflows at $ 55.5 billion.
As per International Monetary Fund, post the launch of Make in India initiative, India has
emerged as the fastest growing major economy with GDP growth rate above 7.6% in 2015-16
and projected growth rate above 7% till 2020.
The initiative will connect rural areas with high-speed internet networks, boost electronics
manufacturing, transforming India into a digitally empowered society and knowledge economy.
The initiative aims at fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive to growth of Start-ups.
An initiative will aim at encouraging the development of skill force across India by including the National Skill Development Mission, National Policy for Skill Development and Entrepreneurship 2015, Pradhan Mantri Kaushal Vikas Yojana (PMKVY) scheme and the Skill Loan scheme. Over 400 million people will be trained in various skills by 2022.
India has the fifth strongest military in the world as per Military Strength Index based on the Credit Suisse report in September 2015 and is the sixth biggest defence spender. India is also one of the largest importers of conventional defence equipment as 60% of defence related requirements are currently met through imports. The ‘Make in India’ initiative by the Government is focusing its efforts on increasing indigenous defence manufacturing and becoming self-reliant. The opening up of the defence sector for private sector participation is helping foreign original equipment manufacturers (OEMs) enter into strategic partnerships with Indian companies and leverage opportunities in the domestic market as well as global markets.
Tax Reforms (Implementation of GST)-
India has implemented the long awaited GST (Goods &ServiceTax) from July 2017. GST is a destination-based tax that replaces 17 existing taxes. With the implementation of GST, India’s rating in ease of doing business is likely to improve. Moreover, GDP is expected to grow at a higher rate by implementation of GST as the tax net of the government is likely to grow.
India is seen as an emerging super power not only in Asia, but at world stage also. The growth of Indian Economy in last two decades has given firm beliefs that with sustainable and inclusive growth, India can certainly be the world super power. The only need of the hour is to make the full use of the leverages of its strengths and steadily work towards removal of its weakness. Continuous effort in the right direction can make all the changes and we are very much sure that India will be a superpower in future.