India’s Covid-19 economic pessimism turned into depression this week, with news that its gross domestic product consistent with capita could simply be less in 2020 than neighboring Bangladesh. “Any emerging economy that is doing well is good news. Kaushik Basu, a former lead economist at the World Bank, tweeted after the International Monetary Fund updated its World Economic Outlook. But it is shocking that India, which advanced 25 % five years ago, now he’s lagging behind. “
Since it began opening up the economy in the 1990s, India’s dream has been to stick to China’s immediate expansion. After three decades of persevering in this campaign, Bangladesh’s slippage is damaging its global image. The West needs a significant counterweight for China, but this partnership will be based on the fact that India does not get caught up in a declining middle-income trap.
Low relative performance can also build self-confidence. If a country with wonderful ambitions for strength is defeated in its own garden through a smaller nation, it contributed to liberation in 1971 by going to war with Pakistan, its influence in South Asia and the Indian Ocean may simply diminish.
Where did things go wrong? The coronavirus pandemic is definitely the culprit. New infections in Bangladesh peaked in mid-June, while the number of cases in India is starting to decline only now, after reaching a record high for any country. With a population of 165 million, Bangladesh has recorded fewer than 5,600 Covid-19-related deaths. While India has 8 times the population, it has 20 times more deaths. Worse still, India’s severe economic lockdown to prevent the spread of the disease is expected to wipe out 10. 3% of real output, according to the IMF, that’s 2. 5 times the loss to the world economy.
Fiscal depreciation, an under-funded monetary formula, and multi-year investments would delay the recovery in demand in India after Covid. Worse, even without the pandemic, India has ended up wasting the race to Bangladesh. a new document through Pennsylvania State University economist Shoumitro Chatterjee and Arvind Subramanian, India’s leading former economic adviser, titled “India’s Export-Driven Growth: Example and Exception. “
Let’s first look at the exceptionalism of India’s expansion, Bangladesh is fine because it follows the trail of Asian tigers of the past, its percentage of exports of low-rated goods corresponds to its percentage of the population of poor working-age countries, Vietnam moves slightly But basically, take a sheet in China’s playbook. The People’s Republic has maintained maximum GDP expansion for decades by creating a much greater dominance in the manufacture of low-rated goods than the duration of its labor reserve.
India, however, took the opposite path, choosing not to produce what may have absorbed its working-age population of one billion people in factory work. India lacks production in the key textiles and clothing sector of $140 billion, or about 5% of India’s GDP, according to the authors.
If some of India’s PC software exports in 2019 ceased to exist, there would be a protest, but the loss of $60 billion would have been equal to annual exports of low-rated production.
It is real and yet no one can communicate it.
Lawmakers must recognize that footwear and clothing factories that were never born or forced to close may also have earned dollars and created massive jobs. They would have paved the way for permanent migration from the countryside to cities in a way that requires higher grades of schooling and schooling can never. Bangladesh has two out of five working-age women in the labour force, double India’s 21% participation rate.
A greater danger is to take corrective action, politicians can bend beyond error and seek salvation in autarchy: poorer than Bangladesh?Never mind. We can erect import barriers and make things for the national economy. We create jobs that way. Suddenly, the slogan of self-sufficiency of the 1960s and 1970s reappeared in economic policy.
It is through dispelling this pessimism that Chatterjee-Subramanian’s analysis is again useful: contrary to popular belief, India has been an example of export-driven growth, and has done better than all countries in China and Vietnam. The glass is more than partially filled.
Trade worked for the country. The composition is incorrect, due to a rare comparative merit that defies specialization, the researchers show. India exports many highly professional production goods and services, such as computer software. But as a global factory, China is now giving way to others. at the back of the spectrum. This is where India’s opportunity lies and the competitive merit of its reasonable and unhealthy or well-informed workforce.
Given the pressing challenge of creating at least 8 million jobs year after year, it is the country’s largest post-pandemic puzzle.
(Andy Mukherjee is Bloomberg’s opinion columnist)
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