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Analysis

India should tap EU, East Asia to overcome ‘late convergence stall’

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The usual brouhaha around the Budget strips the Economic Survey of the attention it deserves. The Survey document, especially since Arvind Subramanian has taken over as the Chief Economic Advisor, has consistently pushed the envelope on economic thinking, providing exciting new insights for the Indian economy. The latest one, released three days before the Budget, introduced a new phrase into economic jargon: The “late convergence stall”. It is a phenomenon that the Survey fears might affect the growth process of the developing world.

The basic argument is this. Economic convergence, which is the process of low-income countries catching up with richer ones in standards of living, has been taking place over the last few decades at an accelerated pace; something which economists like to call “convergence with a vengeance”. To be precise, countries were on a divergence path before 1997, a period of convergence from 1998 till the financial crisis in 2008 and an era of accelerated convergence post-crisis.

However, with changing global economic scenarios, it might be more and more difficult for developing countries to narrow the gap. In other words, the economies that have been rapidly climbing up the economic ladder might face a “late convergence stall”.

The threat of a convergence stall might result from the development of four challenges that were non-existent during the formative stages of the developed world. The first and the most crucial one is the end of rapid globalisation that benefitted the East Asian economies and even China. High levels of export growth rates of these countries have been drivers of their economic growth stories.

Developing nations that are late to the global scene cannot expect to achieve such export levels in the current inward-looking shifts in trade policy, especially across the developed world.

Subramanian always remains careful in stating that it is the era of “hyper-globalisation” (or rapid globalisation) which has come to an end, and not globalisation per se. However, globalisation, if defined as a period when trade among nations is growing faster than the global GDP growth, can be seen to be growing rapidly from 1950 till a few years after the economic crisis of 2008. During this period, growth in trade was close to five per cent while growth in world GDP was close to four per cent.

After 2010, growth in world trade levels has fallen below GDP growth, marking an era of de-globalisation (3.5 per cent economic growth against global trade growth of 2 per cent). Therefore, even though the Survey takes a conservative approach in claiming that globalisation has come to an end, the data shows that the world is, in fact, de-globalising.

It can be the case such low levels of trade might not hold once the world economic growth is running in full throttle, but the fact of the matter remains that the developing world cannot reap the same gains that were received in the later part of the 20th century. This could bring about the historical divergence that world economies had experienced throughout much of modern economic history. This trend was famously evidenced by Harvard’s Lant Pritchett in his paper “Divergence, Big Time” in which he showed that between 1870 and 1990, the richest and poorest countries have shown considerable divergence between their per capita incomes. Therefore, the convergence has only been a recent phenomenon. It would not be a surprise if it returned.

To make matters worse, other avenues of economic development that had been open earlier are also closing down. While industrial expansion was the most effective means of achieving economic successes for poor economies in the past, high productivity has implied that economies in current times reach the pinnacle of industrial employment much earlier on their growth path.

Turkish economist Dani Rodrik, also from Harvard, calls this “premature deindustrialisation” and shows how most of the developing world is affected by it. Therefore, resources which earlier used to shift from the low-productivity informal sector to high-productivity jobs, now usually shift to sectors that are only marginally more productive. The economic gains from a shift of labour across sectors are thus not derived to an extent that was true for the countries that are now high up on the income spectrum.

The case for a slowing down of convergence or divergence is, therefore, quite strong. The developing world needs to be prepared for any such restoration of the past economic trend. The advent of automation and similar technological innovations will further accentuate the problem because the richer countries will be more capable of deploying them for production on a mass scale. It is comforting to realise that the Indian government is well aware of the threat in advance, but it remains to be seen if this awareness is followed up with appropriate policy action.

The Economic Survey gets it right in recommending rapid improvements in human capital to sustain growth at current levels, but takes a defeatist approach in suggesting that India can do very little about diminishing globalisation. On the contrary, there remains immense scope for the country to play an enabling role in further integration of the global economic order. If the US is currently a lost cause, there remain other large markets like the EU and East Asia where India can further the cause of higher trade openness.

(Amit Kapoor is chair, Institute for Competitiveness, India. The views expressed are personal. He can be contacted at [email protected] and tweets @kautiliya. Chirag Yadav, researcher at Institute for Competitiveness has contributed to the article)

Analysis

The US presidential elections and future of India-US relations

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Donald Trump Joe Biden

As the coronavirus pandemic dominates global news in the United States, progress toward the next presidential election scheduled to be held on November 3 moves slowly forward. President Donald Trump had no real opposition in the Republican party and is running for re-election. And it has now become apparent that former Vice President Joe Biden will be his opponent as the Democratic candidate for president.

What would a Trump victory bode for the future of US-India relations? What would a Biden victory bode? Let me answer each of those questions in turn.

Given the love fests of Prime Minister Narendra Modi’s ‘Howdy Modi’ event in Houston, Texas, in which Trump participated in September of 2019, and Trump’s ‘Namaste Trump’ event hosted by Modi in India in February of this year, it might be assumed that the future for US-India relations is a splendid one. This would be an incorrect assumption.

Both of these events were more symbolic than substantive. Trump’s participation in them undoubtedly helped to persuade some — perhaps many — Indian American Modi supporters who voted for Hillary Clinton in 2016 to cast their ballots for Trump in 2020. Trump’s campaign team took steps to ensure this by holding an event at his Mar-a-Lago resort in which a group of prominent Indian Americans announced their plans to work for his re-election and to mobilize Indian Americans on his behalf.

To understand the future potential of India’s relations with the US. with Trump as president, however, it is necessary to look beyond these political moves and to examine the present state of those relations and Trump’s personal style.

In a word, the best way to characterize the current relations between the US and India is “functional”. The relationship was relatively good for the first two years of Trump’s presidency. In fact, near the end of 2018, Alice Wells, the Acting Assistant Secretary of State for South and Central Asia, was quoted in the media s saying: “This has been a landmark year for US-India ties as we build out stronger relationships across the board.”

Then, in 2019, the relations went off the track in the first half of the year after the US and India got into a tit-for-tat tariff war after the US terminated India’s Generalized System of Preferences which allowed India to send certain goods to the US duty-free. There have been continuing efforts to structure a “modest” trade deal since then. It was thought there might be some type of deal done in September of 2019 while Modi was in the US by year’s end, and then during Trump’s India visit. But, as of today, there is still no deal.

This inability to get any meaningful trade agreement in place speaks volumes about India’s potential future relations with India with Trump as president. So, too does Trump’s style.

Trump’s campaign slogans this time around are “Keep America Great” and “Promises Made, Promises Kept.” Trump is not a policy wonk and most of his effort will go toward “America First”. This involves making the US more isolated by withdrawing from international agreements, restructuring trade agreements, emphasizing building walls to stop immigrants at the border, using tariffs to block trade with countries who are taking away American jobs, and confronting businesses who are allegedlly stealing American trade secrets.

This perspective suggests what India can expect for its relations with the US if it has to deal with Trump for a second term as president. The relations will stay functional at best. As I have said before, that’s because the words partnership, cooperation and collaboration are not in Trump’s vocabulary. Nationalism, isolationism and protectionism are.

Joe Biden stands in stark contrast to President Trump both professionally and personally. Biden is a strategic thinker and doer with a solid eight-year track record of leadership experience as Vice-President in forging alliances that have made a difference around the world and he has also been a long-standing friend of India.

He was chairman of the Senate Foreign Relations Committee and a leading advocate for the Congressional passage of the Indo-US civic nuclear deal in 2005. At a dinner convened 10 years later in 2015 by the Confederation of Indian Industry and the Carnegie Endowment for International Peace, Vice President Biden discussed the tremendous joint progress that had been made by the two countries in the past and declared “We are on the cusp of a sea change decade.”

Early in his campaign for the Democratic nomination for president in July of 2019, in laying out his foreign policy vision, Biden stated that the US had to reach out to India and other Asian partners to strengthen ties with them. The items on Biden’s foreign policy agenda for strengthening which are of importance for India include climate change, nuclear proliferation and cyberwarfare.

During his vice presidency, Biden worked side by side with President Barack Obama to do things that would contribute to achieving Obama’s vision stated in 2010 of India and America being “indispensable partners in meeting the challenges of our time.” In 2020, those challenges are even greater than they were a decade ago.

That is why it is so essential that India and the US develop a strategic relationship that enables them to become those indispensable partners. That can happen if Biden assumes the presidency on January 20, 2021. It cannot happen if Donald Trump remains as president for a second term.

The results of this upcoming election in the US matter greatly for the future of the United States. They matter greatly for the future of India-US relations as well. Time and the American electorate will tell what that future will be.

(Frank F. Islam is an entrepreneur, civic and thought leader based in Washington DC. The views expressed here are personal)

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Analysis

Covid-19 toll across world crosses 35,000

The COVID-19 is affecting 132 countries and territories around the world.

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Patients infected with the novel coronavirus

New Delhi, March 30 : The death toll around the world due to coronavirus crossed 35,000 on Monday evening, with Italy heading the list of 35,097 deaths with 10,779, while the number of cumulative cases rose to 737,929, with US leading with 143,055 of them, as per data from the Johns Hopkins University’s Coronavirus Resource Centre.

Spain was second with 7,340 deaths, followed by China with 3,308 (3,186 of them in Hubei where the outbreak was first recorded), Iran with 2,757 deaths, France with 2,606 deaths, the US with 2,513 (776 of them in New York) and the UK with1,228 deaths.

In number of cases, Italy was second with 97,689, followed by Spain with 85,195, China with 82,198, Germany with 62,435, Iran with 41,495 and France with 40,747.

Meanwhile, 156,652 people around the world had recovered, with nearly half of them (75,923) in China, followed by 16,780 in Spain, 13,911 in Iran and 13,030 in Italy.

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Analysis

45% of Indians do not back up their data, files: Survey

The survey was conducted among 728 Avast and AVG users between February 20-March 25.

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Data Privacy

New Delhi, March 30 : Nearly half of Indians do not back up because they think their data or files are not important enough and most of those who back up their data, do it once a month, a survey said on Monday.

Other reasons cited by the respondents for not backing up their data included not knowing how to do it, not having time and forgetting about it, according to the survey by cybersecurity company Avast.

“It could be that many aren’t aware they are backing up, as it could be happening automatically, in the background, however, others really might not be backing up at all, thinking it is not worth it,” Luis Corrons, Security Evangelist at Avast, said in a statement.

“Losing personal documents, photos and videos can be a painful experience and it’s not until this happens that they realize how valuable it actually is,” Corrons added.

Of those who do back up their data, nearly 42 per cent Indians back up to a cloud storage, 36 42 per cent back up their data to an external hard drive, 23 42 per cent back up to a USB or flash disk, 18 42 per cent back up their phone to their PC, and 10 42 per cent back up to a network storage drive, the results showed.

Corrons recommended to back up data to two different locations, like the cloud, and a physical storage, like an external hard drive.

When it comes to iPhone and Android phone owners, the percentage that backs up is nearly the same, 69 per cent and 70 per cent respectively.

The percentage of smartphone owners that don’t know how to back up their data does not vary much between iPhone and Android owners, with 13 per cent and 17 per cent claiming not knowing how to, respectively, the study revealed.

Data loss can be caused by users accidentally deleting their data themselves, hardware damage and failure, as well as malware, causing valuable data such as photos, videos, documents, and messages to be lost forever.

Ransomware and other malware, such as wipers, can either encrypt or completely destroy files, and there is no guarantee that files can be decrypted if a ransom is paid.

The survey was conducted among 728 Avast and AVG users between February 20-March 25.

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