Changing Economic Order

Context: India witnessed a phase of accelerated growth recovery in recent past but still there are underlying challenges.

India’s accelerated growth recovery

• More than expected progress in exports: India is on track to attain the $400-billion export target this fiscal year.
  • Exports jumped to $33.44 billion in September, registering 21.35 per cent year-on-year growth.
• India is benefiting from a stronger-than expected recovery in international trade: As per the United Nations Conference on Trade and Development, the value of global trade in 2021 is expected to be 28% higher than that in 2020.

Challenges ahead: This may not sustain for long

• Pandemic drag to continue: Pandemic was truly global crisis and the response was mostly national and inward-looking.
  • Pandemic exacerbated the fault lines: Which resulted in shortages of a variety of items like medical supplies, and, will shape economic and trade policies in large economies.
• Deglobalisation trend: Large economies are reconsidering their dependence on international supplies and would aim to build domestic capacity.
  • Cautious private sector: As Corporations are re-evaluating the resilience of supply chains.
  • Indian scenario: Rising import duties off late, withdrawal from RCEP and slogan of Aatmanirbhar.
• Slowdown and shift in China: China started looking inward, still a dominant exporter, but exports as a percentage of GDP have fallen from over 30% in 2008 to 20%.
• Trade tension between US and China: Strategic rivalry between the two and the evolving geo-political environment would continue to undermine economic openness.
• Institutions governing the global order are under pressure.

Way Forward: India will need to prepare accordingly, as it will not be able to attain higher sustainable growth without higher exports and policymaking should be guided by basic economic reality.