Home / Opinion / Columns /  India is a good place to be amid global economic gloom

As one looks at the state of the world, it could well be a logical conclusion that among all the major economies, India is possibly the best country to live in right now. Unless, of course, you are filthy rich, when it doesn’t matter which harbour you park your yacht in, Monaco or Musha Cay.

See the numbers. The US is experiencing 40-year-high inflation. Its gross domestic product (GDP) has fallen for two straight quarters, and if I remember my Economics 101, this technically qualifies as a recession. It is incredible that the world’s wealthiest country is facing an acute shortage of products ranging from cars to baby food. And despite the US Federal Reserve raising policy rates to control inflation, America’s absurdly titled Inflation Reduction Act lays out spending that will send more money sloshing around the US system, which, unless sponged, could stoke inflation further. Economics 101 again. Monetary and fiscal approaches seem at odds.

Data released last week reveals that German inflation is at its highest level in more than a quarter century, driven by energy prices which are 43.9% higher compared with September 2021. Germany, Europe’s largest economy, used to rely on Russia for 55% of its gas requirements. Also last week, four leading German institutes published a report that the nation’s gross domestic product (GDP) could contract by 7.9% in 2023. Vladimir Putin has put the squeeze on Europe.

Britain’s economy is in serious turmoil. As soon as Prime Minister Liz Truss unveiled her plan for the biggest tax cuts in 50 years, mayhem ensued. The pound crashed, bond prices collapsed, sending borrowing costs soaring, and pushing some pension funds to the brink of insolvency. The Bank of England has now announced that it will use £65 billion to buy long-dated government bonds to protect the economy from the plan’s fallout.

Meanwhile, four major leaks were discovered in the Nord Stream 1 and 2 pipelines that carry gas from Russia to Europe. While the North Atlantic Treaty Organization (Nato) made a veiled accusation against Russia of “deliberate, reckless and irresponsible acts of sabotage", Moscow dismissed the suggestions as “predictable and stupid". The Russian foreign ministry said the blasts had occurred in “zones controlled by American intelligence". It does seem strange that Putin would want to blow up pipelines that Russia has built at vast cost. After all, if he wants to starve Europe of gas, he can just shut down the supply. And he did that in August, cutting off gas to Europe with no timeframe offered for reopening. Why would he damage these pipelines? Whose interests would this sabotage serve?

The US could gain from a massive manufacturing crisis in Europe—because industries depend on energy. The prospect of de-industrialization of Europe is a clear and present danger. At the very least, it is a fringe scenario that cannot be ignored. The European Commission still uses fax machines to coordinate pandemic action. The West’s level of digitization in providing public services is a joke compared with India and China. Last year, I spent two nights with a Silicon Valley-based friend in a bird sanctuary in Rajasthan at a three-star hotel. He was astonished to see their perfectly functioning wi-fi, QR codes and digital payment systems. Even our driver was fully digitally equipped.

Elsewhere in the world, China’s fanatical zero-covid policy has led to prolonged lockdowns in its biggest cities, ports and manufacturing hubs. The massive collapse in the real estate sector is hurting both savings and consumption. Mollycoddled by China’s state-owned banks, the property market accounts for 29% of the country’s GDP and 30-40% of total bank loans. This seems to be the perfect time for a nasty ‘big short’ operation, if China’s laws allow (which is unlikely). Add to that Beijing’s increasingly hostile geopolitical stance.

The country’s economy grew by just 0.4% year on year in the April-June period, and the World Bank, which had previously seen a 5% growth for 2022, has now cut its forecast to 2.8%. In fact, for the first time since 1990, China is expected to grow at a lower pace than the 23-country East Asia-Pacific region, which is predicted to grow by 5.3% on average, more than double of 2021’s 2.6% rise.

Consider India now. It seems set for 7% growth, the fastest among all major economies. The country is building infrastructure—roads, railways, airports—at a breakneck pace. We have given free food to 800 million Indians during the pandemic period. We have administered more than 2 billion covid vaccine jabs, and a vast percentage of them free—an enterprise of a scale hardly seen before in human history.

In a recent newspaper column, wealth advisor Somnath Mukherjee explained the government’s performance-linked incentive scheme for industry in simple terms. His view has been slammed by Indian-origin academics settled in the West, but that’s par for the course. India’s manufacturing productivity is 30% lower than China’s. So the government pays for the 30% efficiency gap for now, but the catch is that these companies have to measure up and start achieving their stated targets. The government contributions are closely linked to milestones. There is no free lunch being offered here.

Mukherjee sees it as a direct benefit transfer scheme on a giant industrial level. Policy makers understand that “China+1" or “China+2" has become a key discussion point in transnational corporation corner offices. Right now, as the world totters towards uncertainty and recession, India is a good place to be in.

Sandipan Deb is a former editor of ‘Financial Express’, and founder-editor of ‘Open’ and ‘Swarajya’ magazines

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