By Nitya Chakraborty
As a part of the tradition of the global CEO’s body World Economic Forum (WEF), the annual five day jamboree at Davos has started and the Global Risk Report 2023 has been released mentioning both the existing risks as also the new dangers threatening the global economy. As a journalist who attended Davos meet two decades ago as a journalist, I can vouch with confidence that nothing much has changed in the approach of the MNC CEOs and the top thought leaders of the western world in the last 25 years, the only difference is the participants talk more of inequality these days since Oxfam simultaneously releases its global inequality report.
Indian participation is sponsored by the Confederation of Indian Industry (CII). This year, Indian Prime Minister is not attending. The industry participants always talk of the success of the economic reforms in transforming the Indian economy and how they are contributing to the economic growth of the country. The Indian CEOs take the view that the present problems are due to halting reforms and in so many words, their thrust is that the very democratic character of the country’s political system creates the problem as the present government’s moves are getting stalled at different levels. In the last eight years of rule by the Prime Minister Narendra Modi, most of the industry bodies have fully identified with the Modi regime. This gets its full reflection at all the Davos conclaves in the last eight years.
The basic issue of the Indian economy is growth is taking place at the cost of employment and widening of inequality. The industry people have made full use of the pandemic period to streamline their operations through job cuts and lowering of wages. They have taken the facilities and the concessions offered by the Narendra Modi government but have not transferred the benefits to their workers. In 2022 and now in 2023, Indian labour is being mistreated even after the easing of the pandemic and the uptick in the economy.
As 2023 begins, according to the WEF report, the world is facing a set of risks that feel both wholly new and eerily familiar. We have seen a return of “older” risks – inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the spectre of nuclear warfare – which few of this generation’s business leaders and public policy-makers have experienced. These are being amplified by comparatively new developments in the global risks landscape, including unsustainable levels of debt, a new era of low growth, low global investment and de-globalization, a decline in human development after decades of progress, rapid and unconstrained development of dual-use (civilian and military) technologies, and the growing pressure of climate change impacts and ambitions in an uncertain world.
As the WEF’s Global Risks Report sees it, next decade will be characterized by environmental and societal crises, driven by underlying geopolitical and economic trends. “Cost- of-living crisis” is ranked as the most severe global risk over the next two years, peaking in the short term. “Biodiversity loss and ecosystem collapse” is viewed as one of the fastest deteriorating global risks over the next decade, and all six environmental risks feature in the top 10 risks over the next 10 years. Nine risks are featured in the top 10 rankings over both the short and the long term, including “Geoeconomic confrontation” and “Erosion of social cohesion and societal polarisation”, alongside two new entrants to the top rankings: “Widespread cybercrime and cyber insecurity” and “Large-scale involuntary migration”.
The Report observes that the economic afteraffects of covid-19 and the war in Ukraine have ushered in skyrocketing inflation, and started a low growth, low investment era. In the New Year, inflation is under control in India but the low growth and low investment era is continuing. Earlier, many think tanks have predicted that the investment from China will be shifted to India, but the latest opening up of the Chinese economy and the moves of Beijing to take extra measures for keeping the wages in China at lower level to attract the investors, may have to be reckoned by India. Already, many foreign institutional investors have shifted from Indian stock market to China. There is need for ensuring the flow of foreign direct investment in the areas of the Indian economy needing latest technology.
The WEF Report has talked of accentuation of livelihood crisis in the coming period and this is very relevant to India. The Report categorically mentions that even if some economies experience a softer-than- expected economic landing, the end of the low interest rate era will have significant ramifications for governments, businesses and individuals. The knock-on effects will be felt most acutely by the most vulnerable parts of society and already-fragile states, contributing to rising poverty, hunger, violent protests, political instability and even state collapse.
Further, economic pressures will also erode gains made by middle-income households, spurring discontent, political polarization and calls for enhanced social protections in countries across the world. Governments will continue to face a dangerous balancing act between protecting a broad swathe of their citizens from an elongated cost-of-living crisis without embedding inflation – and meeting debt servicing costs as revenues come under pressure from an economic downturn, an increasingly urgent transition to new energy systems, and a less stable geopolitical environment. The resulting new economic era may be one of growing divergence between rich and poor countries and the first rollback in human development in decades.
There is clear message from the Report to India which the Modi Government can transform into actual action in favour of the vulnerable sections of the population. India is among the most affected countries with minimum social security for the unorganized as also a section of organized. The acute distress of those who lost jobs during pandemic has only led to the further downhill journey of poverty level as also the fall in the living standard of the poor and middle class. This issue can be tackled effectively by implementing a minimum basic income scheme for the people below the poverty line and the jobless till they get jobs. This is being implemented in some Latin American countries. Leading economists like Amartya Sen, Abhijit Banerjee and Dr. Pranab Bardhan have supported this scheme.
The issue is in a country like India, where the social protection schemes are so limited, the basic income scheme can not only protect the millions, this scheme will lead to the pepping up of consumption and consequent demand. The 2023-24 budget makers can take signals from the WEF report and do something really substantial for the vulnerable sections of the country’s population by adopting the basic income scheme and simultaneously taking up measures for the crash generation of jobs. That is the prerequisite for a growth oriented budget for fiscal 2023-24. (IPA Service)