(Sukhveer Singh, an IAS officer of 1997 batch)
Inflation has increased due to disruption in the supply of commodities, rising crude oil rates, and cheap loans. European countries are experiencing annual price rises in double-digits. At the same time, many emerging nations such as Argentina, Brazil, Turkey, Shri Lanka, and many more have a high band of 50 to 100 percent. While according to RBI, India is targeting an annual inflation rate of 6.7 percent in FY23. Central banks of high-inflation countries are trying to control inflation by hiking the policy interest rate, due to which the fears of recession have increased.
The dollar index is touching 20 years highs due to rising interest rates in the US, due to which other foreign currencies are falling against the dollar. As per the RBI report, during the current financial year, the dollar has appreciated 14.5 percent against a basket of currencies, while the Indian Rupee has depreciated by 7.4 percent only. Countries have emphasized social programs in
the last two years due to the lockdown and people losing their jobs due to the pandemic in many countries. The debt-GDP ratio increased during this period due to lower economic growth and higher government spending.
Challenging times impart an opportunity to capable countries; the same provesfatal for vulnerable countries. For example, before 1931, the currencies of various countries followed the gold standard. However, during the First World War, the United Kingdom and its allies had to obtain weapons and other items from America, and in return, they had to pay for gold. Due to the dependence of these countries on America, in 1931, the United Kingdom had to end the gold standard. The world’s currencies began to be measured by the dollar’s value, and the dollar became the world reserve currency, which started a golden era for the US.
Another example is that during the 1970s, America was going through a recession and a rising inflation rate. Meanwhile, China’s Deng Jiangping announced the Open Door Policy in 1979. After a decade of recession, America wanted cheap goods, and China had factories, which later proved to be a boon for China.
India is a stable democratic country whose strength keeps it separate from emerging economies like China, Russia, and Latin American countries like Brazil, Argentina, etc. According to one calculation, India is the factory of future talent of the world as it will have 20% young working population of the world by 2047, which will take India towards prosperity by its independence
centenary.
Economist Raghuram Rajan believes India has done a commendable job keeping the rising prices of goods and services in check. The GST system of collecting indirect tax is stable, and tax collection is also increasing continuously. Due to this, it seems that the budget kept by the Government of India for infrastructure in the financial year 2022-23 will not decrease. The
external Debt GDP Ratio has reduced from 21.2% in March 2021 to 19.9% in March 2022, showing improvement in macro parameters.
The banking sector has improved in the last five to six years. In this sequence, the CASA ratio and capital adequacy ratio of the banks have improved, and NPAs have gone down. It appears that due to the reduction in the net bad assets of the banks, there will be no inconvenience in providing finance to new projects in the future.
The Government of India has operated a production-linked scheme in 15 main sectors to promote production. This scheme encourages investment in textile, technology, automobile, electronics, speciality steel, and semiconductor industries. With a step toward self-reliance in the defense sector, India’s position will be strengthened strategically, and the import burden will also
reduce. The newly established India International Bullion Exchange at Ahmedabad is the world’s third exchange of its kind. It will provide jewellers direct access to import gold through the exchange mechanism.
The bond market is much larger than the equity market in most developed economies. Indian bonds may soon be included in the Global Bond Index, which mainly comprises JP Morgan and the Financial Times Stock Exchange. This process may facilitate a flow of $30 billion annually. It will provide balance and strength to the Indian economy.
The war between Russia and Ukraine has led to a radical change in the global strategic relationship. Similarly, in the Indo-Pacific region, the tension between Taiwan and China has presented challenges to the world. Due to its strong position in the defence and economic sector, and strategic presence in this region, India remains a vital force in the ‘Quadrilateral Security Dialogue (QUAD) group of countries. India has kept itself balanced and neutral in this
turmoil, strengthening its global standing.
According to a Bloomberg report, there is zero chance of India’s economy falling, while most of the economies of Europe and many emerging countries are in crisis. In times of severe economic and political turmoil, India stands firm for food, financial, economic, and political security. Steps like self-reliant India in areas such as production, digital, and defence strengthen its intentions. In a nutshell, India saw an opportunity in this difficulty, and India has built a door in
these challenging times.
In the current economic crisis, the world is moving towards conditional globalisation, in which countries are trying to become self-reliant and decentralise their production centres in such a way that the supply of goods and services is not interrupted. India provides an excellent alternative to the globe to invest in. Seeing its relative strength economically and politically, most multinational companies could be attracted to an emerging country like India. Subsequently, businesses can also become rupee centric. In the process, It can take India to a new high economically.
