Partnering with the International Development Research Centre (IDRC) and the Global Development Network (GDN), and with the active involvement of India’s G20 Sherpa, in July this year, Niti Aayog hosted an international conference on ‘A Green and Sustainable Growth Agenda for the Global Economy.’
The conference was an official side-event of India’s G20 presidency, timed such that the discussion could inform the forthcoming summit communique, which subsequently emerged as the landmark New Delhi Leaders’ Declaration. Leadership of the G20 passed from India to Brazil on 1 December, just as the two-week long 28th Conference of the Parties of the United Nations Framework Convention of Climate Change (UNFCCC) got going in the UAE.
As both gatherings indicate, global negotiations represent the art of the possible; progress is measured in inches rather than yards. Yet, they took place within the context of profound changes in the location of global economic activity, environmental challenges and technological change, not to mention an intensification of proxy wars between major combatants.
With the long shadow forward cast by covid, both for India and much of the emerging as well as developing world (the Global South), the G20’s core commitment to ‘Strong, Sustainable, Balanced and Inclusive Growth’ (SSBIG) in both its global and domestic dimensions requires fresh thinking on paths to inclusive growth.
At the conference, about 40 policy academics and practitioners from a wide spectrum of G20 and African countries debated six themes likely to determine inclusive growth over the medium term: energy, climate and growth; technology, policy and jobs; growth implications of a fractured trading system; reshaping global finance for sustainable growth; multilateralism: geopolitics, governance and the global commons; and adjustment, resilience and inclusion in an uncertain world. A publication based on the international conference has now been released by Niti Aayog. Drawing on the volume, what follows is an eclectic summary of the discussion on three themes relevant for India’s current ‘Amrit Kaal’: resilience, inclusion and uncertainty. These all need to be managed in India’s journey to becoming a developed nation by 2047, while maintaining, and indeed reinforcing the momentum of high-quality growth. Trade, technology and nimbleness will be key.
There are many definitions of resilience, as well as many dimensions: national, regional, local, personal. The multiple shocks suffered by the global economy in the last 15 years have generated considerable international discussion of resilience, while India’s own rapid post-covid recovery also provides some encouraging pointers.
A measure of resilience is the speed with which an economy returns to its earlier growth path. Resilient economies are flexible at both macro and micro levels, and there is abundant evidence that the Indian economy has become more resilient since liberalization 30 years ago. The discussions in the conference on industrial policy, trade policy, the financial system and social protection illuminate the issues involved as we plan for the future.
Will the future trading system continue to support integration as a cost-effective form of shock insurance, or has the world changed so that a higher degree of self-sufficiency is now more prudent? Increased investment rates would normally imply larger balance of payments and current account deficits. Is the global financial safety net adequate, or will it require even higher reserve holdings, adding to the cost of importing capital?
In a continental country like India, local shocks arising from extreme climate events, and indeed structural changes like the energy transition will entail greater labour market flexibility and mobility. This has implications for everything from transport infrastructure to housing markets. What lessons does international experience (and indeed the experience across Indian states) offer on the best design of social safety nets? There can be little doubt that creating fiscal space in good times is the right thing to do, at the level of both the Union and states, and Niti Aayog plans to strengthen its analytic capacity in state-level fiscal analysis.
While inclusion is partly about social protection, it is even more about the future of work. Conditions in India contain both positives and negatives. The positives include a young, technology-savvy labour force and a vibrant service sector. The legacy issues are a high proportion of the non- agricultural labour force in the unorganized sector and the proportion of women’s time devoted to the care economy. There is also a global trend towards a lower share of the labour force being employed in manufacturing.
India is still a large and fragmented domestic market, and there will undoubtedly be substantial gains from moving to a more unified single market, where both physical infrastructure and new technologies such as AI can make a big difference. But trade openness also matters, and protectionism in rich countries under the guise of environment leakage is an emerging risk, even as traditional supporters of a rules-based trading system seem less interested in defending it.
Finally, there is the issue of uncertainty. Here, the conference provided only indirect guidance, and I will draw upon my former experience as a chief economist of Shell to suggest an approach. Shell scans the horizon for long-term trends that seem likely to persist and overlays these with other developments which are more fluid. The axes of long-term scenarios are India’s own demography and demographic trends elsewhere in the world; the impact of climate change and technology; and the likelihood that two of the three largest economies in the world will not be among the richest.
As India’s G20 presidency has shown, India is already preparing for such a world. It is now time for academics and analysts to explore the range of alternate realities and how India can prepare for both positive and negative shocks.
