The golden era of Indian economy

Special The golden era of Indian economy
The Border Security Force Camel Band parades on Republic Day at Rajpath, New Delhi, India, Jan. 26, 2015. (Wikimedia Commons)
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Updated 25 January 2023

The golden era of Indian economy

The golden era of Indian economy
  • The India of 2023 is very different from the India of 1947, and the India of 2047 will be different from the India of 2023
  • There is certainly much that is uncertain in the world, but there is also much of which we can be certain; within that band of certainty, it is impossible to dispute India’s inexorable economic rise

India recently celebrated 75 years of independence. The idea of “Amrit Kaal” builds on this with a road map for the next 25 years, taking us to 2047 when India will celebrate 100 years of independence.

The India of 2023 is, of course, very different from the India of 1947, and the India of 2047 in turn will be different from the India of 2023 in ways few can anticipate and project; if one casts one’s mind back, how many would have guessed the changes wrought in India over the past 25 years?

The world is an uncertain place, and in the long term even more so. While the future is always uncertain, the current state of the world has been permeated with an additional dose of uncertainty as a result of factors such as the COVID-19 pandemic, geopolitical tensions, the collapse of the multilateral system and regionalism, the retreat of advanced countries from globalization, and the dreaded warnings of “recession” in some of those countries.

These are external shocks that have been thrust on India, as they have on many emerging market economies, and underline the collapse of institutions that provide global public good, the Bretton Woods institutions included.

Global governance has yet to accept the rise of economies such as India. Lord Keynes is often quoted, usually out of context, as sharing the cliche: “In the long run we are all dead.” If one reads the complete text (“The Tract on Monetary Reform,” 1923), one will find his intention was not quite what this out-of-context quote might convey.

There is certainly much that is uncertain in the world, at present and for the long term. But there is also much of which we can be certain. Within that band of certainty, it is impossible to dispute India’s inexorable economic rise.

Much was made of the Goldman Sachs report “Dreaming with BRICS: The path to 2050,” when it was published in 2003. BRICS refers to the leading emerging economies of Brazil, Russia, India, China and South Africa.

It predicted an average real rate of gross domestic product growth in India of about 5.5 percent, with the rise in aggregate GDP and per capita GDP by 2050 explained by the nature of the exponential function.

The report did not include a projected figure for 2047 specifically but did give one for 2045: It predicted that India’s aggregate GDP would be $18.8 trillion, with per capita GDP of just over $12,000.

None of the reasons behind these optimistic projections have been nullified by the current global uncertainty — increase in savings/investment rates as a result of demographic transition and income growth, growth drivers in more efficient land, labor and capital markets and productivity enhancement.

To use an economist’s expression, India is still within the production possibility frontier, not on it. To put it another way, aggregate growth for India is a summation of growth in states, and states are within their respective frontiers, providing plenty of endogenous slack for growth.

Had events in the external world been more benign, India might have grown at 9 percent. Typically, one tends to extrapolate the gloominess of the present into the future. It is by no means obvious that global conditions will continue to be difficult for the next 25 years. But even if that were to be the case, India still might not grow at 9 percent. What growth rate seems reasonable, therefore?

The answer depends on the person making the projection and the assumptions that are made. A nominal figure depends on assumptions about inflation, which is why projections are often presented in real terms, in today’s dollars. A dollar figure also depends on assumptions about the dollar/rupee exchange rate, which is why projections are often based on the current exchange rate (the Goldman Sachs report assumed appreciation of the rupee vis-a-vis the dollar.) A prediction based on purchasing power parity is, naturally, different.

With inflation and exchange rate fluctuations out of the way, then, what trajectory of real growth in India sounds reasonable? The pessimistic forecaster will point to domestic inefficiencies and the state of the wider world and opt for 5.5 percent. The optimistic forecaster will point to empowerment through easier living and the provision of basic necessities, greater ease of doing business, supply-side reforms, and the government’s capital expenditure and opt for 7.5 percent.

That is the rough range of growth to consider, with recognition that as an economy grows, growth rates slow. As one moves up the development ladder, it becomes more difficult to grow as quickly, with the caveat that different states are at different levels of development and so there is plenty of slack.

To return to long-term uncertainty, one can plug in one’s own assumptions about real growth, say something like 6.5 percent, midway between the extremes of 5.5 percent and 7.5 percent. Based on that, India’s per capita income in 2047 would be something like $10,000 and the total size of the economy will approach $20 trillion.

These figures are broadly in the same range as the Goldman Sachs predictions, in which the role of exchange rate appreciation was relatively greater. In such projections, the role of real growth is relatively more.

If reforms succeed in driving economic growth higher than 6.5 percent — and such a “citius, altius, fortius” (faster, higher, stronger) possibility cannot be ruled out — the corresponding numbers will be higher.

Even with the relatively conservative figures, however, India would be the third-largest economy in the world, after the US and China, and this will naturally be reflected in India’s global clout. In a purchasing power parity ranking, India would be second-largest after China.

India’s annual rate of population growth has slowed and is now less than 1 percent. Nevertheless, in 2047, it will be the most populous country in the world, with a population of about 1.6 billion.

Expressions such as “developed country” are rarely used these days and the term no longer has a specific definition. The World Bank instead uses terms such as “middle-income.” India is currently classified as a lower-middle-income economy. By 2047, it will have moved to upper-middle-income classification.

When a country approaches a per capita income of $13,000, its status shifts to high-income. That will be when India can be said to be “developed.” In 2047, India will still fall short of this but the face of poverty in the country, as we know it, will have been completely transformed.

The measurement of poverty is based on the notion of a “poverty line” and, by using a multi-dimensional poverty index, the UN Development Program recently documented a sharp drop in the number of people in India categorized as “poor.”

As economies develop, the position of a poverty line of course shifts upward, beyond merely a subsistence level of consumption. Officially, however, the poverty line that continues to be used in India is still the Tendulkar poverty line. Unfortunately, consumption expenditure data, which is used to measure poverty, does not exist beyond 2011/12. Therefore different analysts now use different assumptions to measure poverty.

If, for example, one uses periodic labor force survey data and the Tendulkar poverty line, the poverty ratio (the percentage of the population below the poverty line) is currently about 17 percent. By 2047, it is forecast that this will have fallen to about 5 percent.

Sustainable Development Goal reports, among other analyses, have documented pockets of deprivation in specific geographical regions, which have been targeted by the government through its Aspirational Districts Program. India is a heterogeneous society and so despite the provision of basic necessities — such as physical and social infrastructure, financial inclusion, access to markets, technology and digital access — and an overall message of empowerment, there will continue to be pockets of poverty in the country, even in 2047.

But the nature of that poverty will be very different compared with today. India will have achieved universal literacy, or be pretty close to it. UNDP uses the Human Development Index, an aggregate measure, to gauge the development of people beyond poverty ratios. Currently, India is in the medium category of human development, based on HDI. By 2047, it will rank in the high category of human development.

There are five transitions underway and these will be even more pronounced by 2047. Firstly, there is a rural-to-urban shift, and urbanization correlates with development. By 2047, almost 60 percent of India’s population will be urbanized. It is predicted that Delhi and Kolkata will have populations of about 35 million, and Mumbai more than 40 million. The mind boggles at such figures and government programs are being developed with the aim of ensuring urbanization is better managed.

Secondly, there will be greater formalization of the economy. Such formalization is another factor that correlates with growth and development. Employees will have formal job contracts. Micro, small and medium enterprises will be legally registered. Indian companies will become larger, more efficient, and fully integrated into global supply chains.

Thirdly, the percentage of the population that earns a living from agriculture will decline. Agriculture’s share in gross domestic product will decline to something like 5 percent, and the percentage of the population earning a living from agriculture will not be more than 20 percent. Fourthly, there will be a shift in agriculture toward commercialization, diversification and larger farms.

Fifthly, there will be greater participation of citizens in governance, in keeping with the theme of “sabka prayas” (everyone’s effort). For years, there was a colonial chip on the nation’s shoulder. But present-day India is a proud India, a resilient India, an aspiring India. Amrit Kaal reflects that, and the country is making great strides on economic fronts, with greater confidence and entrepreneurship.

  • Bibek Debroy is the chairman of the Economic Advisory Council to the Prime Minister in the Government of India.

British workers stage largest strike in history of health service

British workers stage largest strike in history of health service
Updated 58 min 38 sec ago

British workers stage largest strike in history of health service

British workers stage largest strike in history of health service
  • Biggest strike in 75-year history of National Health Service
  • Government urges workers to call off walkouts

LONDON: Health workers in Britain began their largest strike on Monday, as tens of thousands of nurses and ambulance workers walk out in an escalating pay dispute, putting further strain on the state-run National Health Service (NHS).
Nurses and ambulance workers have been striking separately on and off since late last year but Monday’s walkout involving both, largely in England, is the biggest in the 75-year history of the NHS.
Nurses will also strike on Tuesday, while ambulance staff will walk out on Friday and physiotherapists on Thursday, making the week probably the most disruptive in NHS history, its Medical Director Stephen Powis said.
Health workers are demanding a pay rise that reflects the worst inflation in Britain in four decades, while the government says that would be unaffordable and cause more price rises, and in turn, make interest rates and mortgage payments rise.
Around 500,000 workers, many from the public sector, have been staging strikes since last summer, adding to pressure on Prime Minister Rishi Sunak to resolve the disputes and limit disruption to public services such as railways and schools.
The Royal College of Nursing (RCN) trade union wrote to Sunak over the weekend asking him to bring the nursing strike “to a swift close” by making “meaningful” pay offers.
“We’ve got one of the busiest winters we have ever had with record levels of funding going into the NHS to try and manage services,” Maria Caulfield, the minister for mental health and women’s health strategy, told Sky News on Monday.
“So every percent of a pay increase takes money away.”
The government has urged people to continue to access emergency services and attend appointments during the strikes unless they had been canceled but said patients would face disruption and delays.
NURSES LEAVING
The NHS, a source of pride for most Britons, is under extreme pressure with millions of patients on waiting lists for operations and thousands each month failing to receive prompt emergency care.
The RCN says a decade of poor pay has contributed to tens of thousands of nurses leaving the profession — 25,000 over just the last year — with the severe staffing shortages impacting patient care.
The RCN initially asked for a pay rise of 5 percent above inflation and has since said it could meet the government “half way,” but both sides have failed to reach agreement despite weeks of talks.
Meanwhile, thousands of ambulance workers represented by the GMB and Unite trade unions are set to strike on Monday in their own pay dispute. Both unions have announced several more days of industrial action.
Not all ambulance workers will strike at once and emergency calls will be attended to.
In Wales, nurses and some ambulance workers have called off strikes planned for Monday as they review pay offers from the Welsh government.
Sunak said in a TalkTV interview last week he would “love to give the nurses a massive pay rise” but said the government faced tough choices and that it was funding the NHS in other areas such as by providing medical equipment and ambulances.


Hong Kong’s largest national security trial opens

Hong Kong’s largest national security trial opens
Updated 06 February 2023

Hong Kong’s largest national security trial opens

Hong Kong’s largest national security trial opens
  • Rights groups and observers say the trial illustrates how the legal system is being used to crush what remains of the opposition
  • The trial is being heard in an open court but without a jury, a departure from the city’s common law tradition
HONGKONG: Hong Kong’s largest national security trial opened Monday with dozens of pro-democracy figures accused of trying to topple the government in a case critics say reflects the criminalization of dissent in the Chinese territory.
The 47 defendants, who include some of the city’s most prominent activists, face up to life in prison if convicted.
Sixteen have pleaded not guilty to charges of “conspiracy to commit subversion” over an unofficial primary election.
The other 31 have pleaded guilty and will be sentenced after the trial.
A rare, small protest erupted before the court convened, despite the large police presence.
One man was seen raising his fist in solidarity.
The defendants maintain they are being persecuted for routine politics, while rights groups and observers say the trial illustrates how the legal system is being used to crush what remains of the opposition.
Most of the group have already spent nearly two years behind bars.
They now face proceedings expected to last more than four months, overseen by judges handpicked by the government.
The case is the largest to date under the national security law, which China imposed on Hong Kong after huge democracy protests in 2019 brought tear gas and police brawls onto the streets of the Asian financial hub.
Wielded against students, unionists and journalists, the law has transformed the once-outspoken city.
More than 100 people had queued outside the court, some overnight, hoping to see the trial begin on Monday.
Chan Po-ying, a veteran campaigner and wife of defendant “Long Hair” Leung Kwok-hung, joined supporters carrying a banner that read “Crackdown is shameless” and “Immediately release all political prisoners.”
“This is political persecution,” she said outside the court.
Inside, Leung repeated his not-guilty plea, adding: “Resisting tyranny is not a crime.”
Those on trial represent a cross-section of Hong Kong’s opposition — including activists Joshua Wong and Lester Shum, professor Benny Tai and former lawmakers Claudia Mo and Au Nok-hin.
Most — 34 out of 47 — have been denied bail, while the few released from custody must abide by strict conditions, including speech restrictions.
Families of the accused have called these measures “social death.”
The group was jointly charged in March 2021 after organizing an unofficial primary a year earlier.
Their stated aim was to win a majority in the city’s legislature, which would allow them to push the protesters’ demands and potentially force the resignation of Hong Kong’s leader.
According to prosecutors, this was tantamount to trying to bring down the government.
“This case involves a group of activists who conspired together and with others to plan, organize and participate in seriously interfering in, disrupting or undermining (the government)... with a view to subverting the State power,” the prosecution said in its opening statement.
More than 610,000 people — about one-seventh of the city’s voting population — cast ballots in the primary. Shortly afterwards, Beijing brought in a new political system that strictly vetted who could stand for office.
The case has attracted international criticism, and diplomats from 12 countries including the United States, Britain, Australia and France were seen at the court Monday.
“This is a retaliation against all the Hong Kongers who supported the pro-democratic camp,” Eric Lai, a fellow of Georgetown University’s Center for Asian Law, told AFP of the trial.
“Beijing will go all out — even weaponizing the laws and court — to make sure democratic politics in Hong Kong cannot go beyond the lines it drew.”
The trial is being heard in an open court but without a jury, a departure from the city’s common law tradition.
“It is as if the national security law is now the new constitution for Hong Kong and the judges are playing their role in making sure that happens,” said Dennis Kwok, Hong Kong’s former legal sector legislator.
Weeks before the hearing began, Hong Kong’s Chief Justice Andrew Cheung defended the courts against accusations of politicization.
“Whilst inevitably the court’s decision may sometimes have a political impact, this does not mean the court has made a political decision,” Cheung said.

China accuses US of indiscriminate use of force over balloon

China accuses US of indiscriminate use of force over balloon
Updated 06 February 2023

China accuses US of indiscriminate use of force over balloon

China accuses US of indiscriminate use of force over balloon

BEIJING: China on Monday accused the United States of indiscriminate use of force when the American military shot down a suspected Chinese spy balloon Saturday, saying that had “seriously impacted and damaged both sides’ efforts and progress in stabilizing Sino-US relations.”
The US shot down a balloon off the Carolina coast after it traversed sensitive military sites across North America. China insisted the flyover was an accident involving a civilian aircraft.
Vice Foreign Minister Xie Feng said he lodged a formal complaint with the US Embassy on Sunday over the “US attack on a Chinese civilian unmanned airship by military force.”
“However, the United States turned a deaf ear and insisted on indiscriminate use of force against the civilian airship that was about to leave the United States airspace, which obviously overreacted and seriously violated the spirit of international law and international practice,” Xie said.
The presence of the balloon in the skies above the US dealt a severe blow to already strained US-Chinese relations that have been in a downward spiral for years. It prompted Secretary of State Antony Blinken to abruptly cancel a high-stakes Beijing trip aimed at easing tensions.
Xie repeated China’s insistence that the balloon was a Chinese civil unmanned airship that blew into US mistake, calling it “an accidental incident caused by force majeure.”
China would “resolutely safeguard the legitimate rights and interests of Chinese companies, resolutely safeguard China’s interests and dignity and reserve the right to make further necessary responses,” he said.
US President Joe Biden issued the shootdown order after he was advised that the best times for the operation would be when it was over water, US officials said. Military officials determined that bringing down the balloon over land from an altitude of 60,000 feet (18,000 meters) would pose an undue risk to people on the ground.
“What the US has done has seriously impacted and damaged both sides’ efforts and progress in stabilizing Sino-US relations since the Bali meeting,” Xie said, referring to the recent meeting between Biden and his Chinese counterpart Xi Jinping in Indonesia that many hoped would create positive momentum for improving ties that have spiraled to their lowest level in years.
The sides are at odds over a range of issues from trade to human rights, but Beijing is most sensitive over alleged violations by the US and others of its sovereignty and territorial integrity.
Beijing strongly protests military sales to Taiwan and visits by foreign politicians to the island, which it claims as Chinese territory to be recovered by force if necessary.
It reacted to a 2022 visit by then-US House Speaker Nancy Pelosi by firing missiles over the island and staging threatening military drills seen as a rehearsal for an invasion or blockade. Beijing also cut off discussion with the US on issues including climate change that are unrelated to military tensions.
Last week, a Foreign Ministry spokesperson warned Pelosi’s successor, House Speaker Kevin McCarthy, not to travel Taiwan, implying China’s response would be equally vociferous.
“China will firmly defend its sovereignty, security and development interests,” Mao Ning said. McCarthy said China had no right to dictate where and when he could travel.
China also objects when foreign military surveillance planes fly off its coast in international airspace and when US and other foreign warships pass through the Taiwan Strait, accusing them of being actively provocative.
In 2001, a US Navy plane conducting routine surveillance near the Chinese coast collided with a Chinese fighter plane, killing the Chinese fighter pilot and damaging the American plane, which was forced to make an emergency landing at a China naval air base on the southern Chinese island province of Hainan.
China detained the 24-member US Navy aircrew for 10 days until the US expressed regret over the Chinese pilot’s death and for landing at the base without permission.
The South China Sea is another major source of tension. China claims the strategically key sea virtually in its entirety and protests when US Navy ships sail past Chinese military features there.
At a news conference Friday with his South Korean counterpart, Blinken said “the presence of this surveillance balloon over the United States in our skies is a clear violation of our sovereignty, a clear violation of international law, and clearly unacceptable. And we’ve made that clear to China.”
“Any country that has its airspace violated in this way I think would respond similarly, and I can only imagine what the reaction would be in China if they were on the other end,” Blinken said.
China’s weather balloon excuse should be dismissed outright, said Oriana Skylar Mastro, an expert on Chinese military affairs and foreign policy at Stanford University.
“This is like a standard thing that countries often say about surveillance assets,” Mastro said.
China may have made a mistake and lost control of the balloon, but is was unlikely to have been a deliberate attempt to disrupt Blinken’s visit, Mastro said.
For the US administration, the decision to go public and then shoot down the balloon marks a break from its usual approach of dealing with Beijing on such matters privately, possibly in hopes of changing China’s future behavior.
However, Mastro said, it was unlikely that Beijing would respond positively.
“They’re probably going to dismiss that and continue on as things have been. So I don’t see a really clear pathway to improved relations in the foreseeable future.”


Landmark Hong Kong national security trial starts 2 years after arrests

Landmark Hong Kong national security trial starts 2 years after arrests
Updated 06 February 2023

Landmark Hong Kong national security trial starts 2 years after arrests

Landmark Hong Kong national security trial starts 2 years after arrests
  • The 31 who pleaded guilty, including former law professor Benny Tai and activist Joshua Wong, will be sentenced after the trial
  • Western governments have criticized the 2020 national security law as a tool to crush dissent in the former British colony

HONG KONG: Sixteen Hong Kong pro-democracy figures face trial on Monday, more than two years after their arrest, in what some observers say is a landmark case for the city’s judicial independence under a national security law imposed by Beijing.
The defendants are those who pleaded not guilty out of 47 arrested in a dawn raid in January 2021 and charged with conspiracy to commit subversion for participating in an unofficial primary election in 2020.
Thirteen of those arrested were granted bail in 2021, while the other 34 — including 10 who pleaded not guilty — have been in pre-trial custody on national security grounds.
Western governments have criticized the 2020 national security law as a tool to crush dissent in the former British colony. Chinese and Hong Kong authorities say the law, which punishes subversion, collusion with foreign forces and terrorism with up to life in prison, has brought stability to the Asian financial hub after huge pro-democracy protests in 2019.
Prosecutors have described the primary election — held to select the strongest candidates to contest an upcoming legislative election — as a “vicious plot” to subvert the government and to wreak “mutual destruction” on the city by taking control of the city’s parliament.
The lengthy, high-profile case has drawn international criticism, as government prosecutors repeatedly requested more time to prepare legal documents and gather more evidence.
“This trial is not simply a trial against the 47 opposition leaders but also a trial for the population who has been supporting the pro-democracy movement for decades,” Eric Lai, a fellow at Georgetown Center for Asian Law in Washington, told Reuters.
The trial is expected to last 90 days, with three defendants expected to testify against the others, prosecutors say.
Those who have pleaded not guilty include former journalist Gwyneth Ho, activist Owen Chow, former lawmaker Leung Kwok-hung, and labor unionist Winnie Yu.
“The actual people who need to go on trial are absolutely not us,” Chow wrote on his Facebook page in September. “We’re not guilty at all.”
The 31 who pleaded guilty, including former law professor Benny Tai and activist Joshua Wong, will be sentenced after the trial.
Among a number of departures from established common law procedures, Secretary for Justice Paul Lam refused the defendants a jury trial. The case will be heard by three High Court judges designated under the national security law: Andrew Chan, Alex Lee and Johnny Chan.
Pretrial proceedings were largely kept out of the public eye until Judge Lee agreed to lift reporting restrictions in August.

 


Putin promised not to kill Zelensky: Former Israeli PM

Putin promised not to kill Zelensky: Former Israeli PM
Updated 06 February 2023

Putin promised not to kill Zelensky: Former Israeli PM

Putin promised not to kill Zelensky: Former Israeli PM
  • Bennett said that during his mediation, Putin dropped his vow to seek Ukraine’s disarmament and Zelensky promised not to join NATO

TEL AVIV, Israel: A former Israeli prime minister who served briefly as a mediator at the start of Russia’s war with Ukraine says he drew a promise from the Russian president not to kill his Ukrainian counterpart.
Former Prime Minister Naftali Bennett emerged as an unlikely intermediary in the war’s first weeks, becoming one of the few Western leaders to meet President Vladimir Putin during the war in a snap trip to Moscow last March.
While Bennett’s mediation efforts appear to have done little to end the bloodshed that continues until today, his remarks, in an interview posted online late Saturday, shed light on the backroom diplomacy and urgent efforts that were underway to try to bring the conflict to a speedy conclusion in its early days.
In the five-hour interview, which touched on numerous other subjects, Bennett says he asked Putin about whether he intended to kill Ukrainian President Volodymyr Zelensky.
“I asked ‘what’s with this? Are you planning to kill Zelensky?’ He said ‘I won’t kill Zelensky.’ I then said to him ‘I have to understand that you’re giving me your word that you won’t kill Zelensky.’ He said ‘I’m not going to kill Zelensky.’”
Bennett said he then called Zelensky to inform him of Putin’s pledge.
“’Listen, I came out of a meeting, he’s not going to kill you.’ He asks, ‘are you sure?’ I said ‘100 percent he won’t kill you.’“
Bennett said that during his mediation, Putin dropped his vow to seek Ukraine’s disarmament and Zelensky promised not to join NATO.
There was no immediate response from the Kremlin, which has previously denied Ukrainian claims that Russia intended to assassinate Zelensky.
Reacting to Bennett’s comments in his widely reported interview, Ukrainian Foreign Minister Dmytro Kuleba wrote Sunday on Twitter: “Do not be fooled: He is an expert liar. Every time he has promised not to do something, it has been exactly part of his plan.”
Bennett, a largely untested leader who had served as prime minister for just over six months when the war broke out, unexpectedly thrust himself into international diplomacy after he had positioned Israel into an uncomfortable middle ground between Russia and Ukraine. Israel views its good ties with the Kremlin as strategic in the face of threats from Iran but it aligns itself with Western nations and also seeks to show support for Ukraine.
An observant Jew and little known internationally, he flew to Moscow for his meeting with Putin during the Jewish Sabbath, breaking his religious commitments and putting himself at the forefront of global efforts to halt the war.
But his peacemaking efforts did not appear to take off and his time in power was short-lived. Bennett’s government, an ideologically diverse union that sent current Prime Minister Benjamin Netanyahu into a brief political exile, collapsed in the summer over infighting. Bennett stepped away from politics and is now a private citizen.