Prime Minister Narendra Modi’s concern about the global economy being largely driven by one-sided decisions with disputes felt by the entire system is well merited and, as he urged leaders of the grouping of BRICS nations on the sidelines of the G20 summit in Osaka, the World Trade Organization should focus on more balanced global growth.
Mr Modi’s suggestion that the WTO ensure that “growth is open to everyone” is just as valid but these are just a part of the problem. The greater worry is that the global economy seems to be going for a toss, as confirmed by the sentiments expressed by respondents to McKinsey’s June 2019 global survey on economic conditions. When the walls come closing in, it is difficult for economies to be fair and caring about the entire world, especially, when the leading players have been self-centred right from the outset. Now that they are more “downbeat” than they have been in years, with little expectation of improvement in the near future, matters are engulfed in greater gloom. Such despondency is seen across all geographies, amidst perceived declines in economic conditions both at home and globally; “a majority… expect the economy to worsen in the next six months”.
That USA’s trade jingoism would escalate the sense of unease was expected and the respondents provide substance to this feeling by emphasising that “the level of trade between their home countries and the world will decline over the next year”. Not all are equally worried and respondents from India and Latin America expect a better fate than their peers, even though the more developed regions in Asia are “particularly glum across a range of macro-economic and company-level issues”. Not just the risk of trade conflicts per se but fears of geopolitical instability following trade policy turmoil trouble respondents. India’s positivity may well be misplaced because one aspect of this Asian pessimism should resonate with Indians. Asia has the “most negative workforce-size expectations” with more than a third of the respondents predicting decreases in workforce in the coming months, compared with a global average of 23 per cent. India’s jobless present a problem of humongous proportions too and while the euphoria of the big Modi win may still dominate mindsets, this single issue will haunt the country that has thus far seen little signs of policy measures, sentiments or other significant numbers perking up, to deliver optimism
Worse, the farm sector, the biggest engager of people, even if in a state of underemployment, is in extreme jeopardy. These are hardly times that a minister, new to the finance portfolio, would enjoy working out the arithmetic that will eject India from a slough of economic slowdown with sliding GDP and earnings amidst demands from every deprived sector for higher allocations. Yet, this is when Mrs Nirmala Sitharaman should invest in building resilience in the economy, education, health care and social security.