India: India’s challenge is to maintain economic growth in a geopolitical context: report

In the decade preceding the global pandemic, the Indian economy witnessed a favorable global climate for growth. This period has seen two key developments: weak global commodity prices and the doubling of the inflow of foreign direct investment into India to over $50 billion in 2019. Since the pandemic, and now the war in Ukraine, vulnerabilities in the interconnected global economic system have created insecurity in India. the flow of goods, people and ideas and has increasingly shielded governments from external threats to “economic security”.

For a developing country like India, economic security refers to its ability to pursue its own development goals, regardless of threats, internal or external, or coercion. Economic security is an essential pillar of national security. A report by India’s leading think tank Gateway House has released a report explaining the different pillars of economic security and measures to strengthen it.

The Indian government has pursued this in several ways, including seeking partners to help India’s economic growth – the US, Japan, EU and China. However, the past two years have raised several new challenges, complicating this process, the report points out.

The Covid-19 pandemic has hit global supply chains and caused severe economic hardship. India has a military confrontation on its borders with China, which seriously complicates this relationship. Among India’s immediate neighbours, Pakistan and Sri Lanka offer stark examples of poor economic policies leading to internal unrest – a reminder of the need for strong and uninterrupted growth in a country with a poverty rate of 10% and a very ambitious population. Finally, the conflict in Ukraine is leading to a global commodity price shock – for food, fertilizers, energy and raw materials, the report notes.

Covid and Ukraine have shown the importance of diversification – be it supply chains for manufacturing, energy imports, raw material supplies, technology or capital. However, this comes at a cost. For example, investing in an oilfield in South America can help reduce India’s vulnerability to high oil prices, but it also requires capital and other resources like management bandwidth and technical capabilities. to do it. Investing in natural gas and fertilizer manufacturing costs more than buying fertilizer directly on the world market – and there are times when markets fail.

The last two years have brought multiple such failures and consequent economic difficulties. The report with a series of articles examines six important dimensions of economic security in India, the challenges they present and the mitigating measures needed to address them.

This study was supported by the New Energy and Industrial Technology Development Organization (NEDO), Japan, through its representative office in New Delhi.

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