Economist and Noble Laureate, Andrew Michael Spence in his recent interview praised India’s efforts in handling the economic changes happening around the globe and called it an ‘outstanding performer’. Spence also discussed the current economic global regime change, the factors driving them, and also the stand of leading economies on the same.
Jolts to Economy Post-Pandemic
The world economy saw a major setback during the global pandemic. Covid-19 took a major toll on the healthcare system, thus targeting the world’s leading economies. Trade, employment, and basic amenities were some of the major sectors that were heavily impacted during the pandemic.
Post-pandemic, the economies are still recovering from the effects of global catastrophe. According to Pence, some changes that the world is going through are –
From a demand-constrained economy during the pandemic, the world has now shifted to a supply-constrained economy. The pandemic saw a depression in demand with less inflationary pressure, due to the burst of productive capacity in emerging economies, which have entered the global market.
The behavioural change in the labour market is causing a rise in the supply-constrained economy. The industrial sector is having trouble recruiting young professionals to work in a hybrid environment. Those working in stressful or dangerous jobs pre-pandemic, do not want to return to the same. This shift is causing a major effect on the world economies.
At last, the fast pace with which the scientific and technological sectors are transforming will also shape the world with new rules.
Towards Digital Economy
Irrespective of the various negative consequences of the pandemic, one of the most significant positive outlooks it had on the world economy was Digital transformation. Heavy reliance on digital media has increased productivity with inclusive growth in the e-commerce sector. The digital revolution has given everyone an outreach, which once only big Multinational companies had.
Artificial intelligence(AI) algorithms have been a breakthrough in giving a better analysis of data, especially in the health sector. Through the latest AI technology, it has now become easier to detect cancer from pictures and also the diagnosis of diabetic retinology. The costs of potent tools in biomedical fields have now drastically reduced. For example – the cost of DNA sequencing has come down from $10 million a thousand dollars.
Also, the revolution in the energy transition will mitigate the problems of climate change. These include solar energy expansion, carbon capture, and minimal dependence on coal-based resources.
India Powerhouse of Digital Realm
Spence praised India for replacing the existing retail systems with digital ones. The integration of small retail businesses into the digitally enabled supply chains has made them more effective.
India’s largest network provider, Reliance Jio is credited with providing the lowest data rates in the country with data connectivity that reaches the remotest of Indian locations.
The major benefit that the digital revolution will bring to India would be in the employment sector. It will provide business opportunities and will replace the low and mid-skilled jobs with the high-skilled ones.
America will not be much affected by the regime change, just a mild recession. Although there might be a few changes considering the inflation statistics and the Federal Reserve Policies.
China might also face certain challenges in handling the change, as the country still does not have a solid Covid policy, an aggressive approach towards the digital economy, and also the major imbalances in its property sector. Although, we can expect certain changes in its policy regulation and Covid strategy in the near future.
Europe is also facing an acute energy crisis due to the ongoing Russia-Ukraine war, which is heavily affecting the nation’s economy.
India among emerging economies
Michael Spence has praised India for being an outstanding performer among the largest of the emerging economies. Its potential growth has been estimated to be more than 7 percent.
The liberal trade and investment policies have made India, among the most attractive investment destinations in the world. India has strengthened its position, especially in the areas which are advancing in economic power.
This is not the first time, that an international laureate or a foreign national has recognized India’s potential growth. Salvatore Babones, in his article ‘Indian Democracy at 75 : Who are the Barbarians at the Gate?’ has praised the efforts of our current government in shaping the Indian democracy.