India has to grapple with difficult world economic prospects, not so bright domestic growth and inflationary situation as it prepares to present its new budget. The World Bank foresees more inequality leading to socio-political unrest. India needs to feel concerned and rethink about ending the global woes.
The domestic industrial (Index of Industrial Production) growth has slowed down in November to 1.4 per cent from 3.2 per cent in October 2021. It is a matter of concern but it is almost in sync with the World Bank global economic growth forecast. The WB projecting a prickly slowdown says that growth in 2022 will sharply dip to 4.1 per cent and 2023 to 3.2 per cent indicating that the pandemic lockdown is creating an unequal world.
The WB projection for India is 8.3 per cent in 2021-22, less than what Reserve Bank of India estimated. It is less enthusiastic about the future as it finds the Indian growth to be at 6.8 per cent in 2023-24. The present projections are over a negative minus 23.9 per cent contraction in 2020-21.
The ongoing third wave of pandemic, Omicron, is apparently to cast a long shadow. The National Statistic Office (NSO) finds retail inflation growing at 5.6 per cent in December but it is over 14.6 per cent wholesale price inflation. It means overall costs would be impinging government efforts at pacing up the economy with high deficit and borrowings. The cost of development, particularly infrastructure, is likely to go through the roof. For instance, the cost that was projected for Jewar airport in Noida in Uttar Pradesh has escalated in less than two years.
It calls for reviewing the economy with consideration of delinking with globalisation. India needs to insulate itself against global woes and misdemeanor for ensuring societal vibrancy. The global arbitration process is impacting the country on many deals and the latest is the Canadian court order attaching Air India assets.
The World Bank is concerned about growing inequality threatening to reverse historic development gains’ exposing millions of people worse off than they were three years ago. It is to close pathways to better education, health and professional opportunities what the its President says is a “permanent scar” on development and leads to socio-political unrest which governance structures, both domestic and global are ill-equipped to mediate.
The latest Indian numbers are a cause for concern as rising prices will put a greater squeeze on disposable incomes further affecting weakening aggregate demand. The third wave may add to the problems. The core inflation, almost constant at five per cent since early 2020, is above six per cent now. Non-core inflation has increased to five per cent from 2.5 percent between September and December. Food inflation has risen to 4.1 per cent from 1.9 per cent in November. Almost all food item prices, including vegetables, are rising. The manufacturing has the most muted growth.
The economy is in the midst of anaemic investment and consumer demand, observes principal economist, Sunil Sinha of India Ratings. It is indicated by fall in capital and consumer demand fall of 3.7 per cent and 5.6 per cent in November 2021. The growth is yet to touch the pre-Covid-19 level.
The WB finds this as per the global trend. In the past two years Gini coefficient, the metric used to measure income inequality, increased on average by 0.3 points in 2020 and extreme poverty in 33 of the 34 countries by the World Bank. The gap between countries has increased even more. By 2023, all advanced economies are expected to achieve a full output recovery, but output in emerging economies to remain below the pre-pandemic levels.
It is to accentuate with rising inflation, which hits low-income workers particularly hard—constraining monetary policy. The poor are the worst-hit by food inflation. Globally and in advanced economies, inflation is running at the highest rates since 2008. In emerging markets and developing economies, it has reached its highest. Many emerging and developing economies are withdrawing policy support to contain inflation, well before the full recovery, says WB. The global inter-personal inequality has increased for this reason. The situation in India is apparently no different.
This calls for a policy review and rejection of hackneyed global bodies’ suggestions that are under pressure of large economies. Such economies want developing economies such as India’s to subsist theirs. India has to take strong steps as per its policy of ‘swadeshi’ and ‘Make in India’ to stem inequality growth.
India has to review its policy of awarding projects to foreign companies while opening the door for competition so that local corporate do not revert to the licence-permit raj. But unless it takes steps to insulate the Indian economy from malignant global influences, it would continue to be in a situation of unwanted crisis.
It has to take steps to reduce inequality drastically. As per World Inequality Report the richest 10 per cent of the global population takes 52 per cent of the global income and 76 per cent of the global wealth, while the poorest 50 per cent earns 8.5 per cent of the income and owns 2 per cent of the wealth.
Indian numbers are more intriguing. The top one per cent earns 21.7 per cent of the income, while the bottom 50 per cent of the population earns a mere 13.1 per cent of the income. Gender inequality adds to the divide.
The corporate constitute the largest segment of the richest. In other words, the world being dominated by the corporate is heaping tremendous woes on the people. Unfortunately enough the corporate have grown in power more than the sovereign States. They are dominating the global policy formulations. This is what affects global situation. A strong message from India can change the global scenario.
India is at the brunt of witnessing social turbulence that is likely to decide the political outcome in the present Assembly elections to five States. The World Bank concern of turbulence in a more unequal world is an alert that India must listen to and take fast corrective steps to reduce inequality through better working conditions, wages and stability to the poor.
The growing unrest in the world has to be stemmed through drastic policy changes and thrust on welfarism, which is the message given by all religions. Let the world change as per innate concept of vasudhaiva kutumbakam. A change in India can alter the global course. India has to take the lead to show the path to a fair, just and dignified world.