June 3, 2023

Great Indian Mutiny

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Why India will not be the new China?

Next year, India will be the most populous country on earth. It will have 1,429 million people, about 300 million more than China, and enough human capital to become a dominant country not only in Asia but also in the world.

Population strength and geographic expansion are the pillars on which hegemony is built. Thanks to them, China can beat America as the most powerful country, thanks to them, Indian subcontinent can also surpass China.

However, he didn’t want to. President Narendra Modi is shaping a high-tech India, but has shut himself out, with no ambition for global leadership and no desire to be the world’s new factory.

As humanity stagnates — a peak of 10,439 million people is expected in 2086 — in India, births outnumber deaths. Its population is very young, with a median age of 28.4 years, ten less than China and the United States.

India seems to be going for it. Not only is its labor force higher in number and age, and less dependent than China’s, but China is now starting a cycle of investment in infrastructure and housing that it has already exhausted.

Public investment in large urban, transport, communications and digitization projects has fueled China’s growth in recent decades, but no longer. GDP is not growing at the pace it used to. The IMF has forecast 4.8% this fiscal year, expecting India to end with 8.5% growth.

China is an authoritarian and interventionist country. It imposes party capitalism that stifles innovation and competitiveness. President G doesn’t trust big industrial companies. It stipulates individual initiative for the benefit of the Communist Party. It has also imposed a zero-covid policy with dire economic consequences.

China is the factory of the world. It dominates the production of labour-intensive goods. Consumers in all corners of the globe have benefited from cheap goods made in China. However, during the pandemic, it could not meet the demand and left behind 150,000 million dollars in this global market. So far, only 10% of this amount has been recovered.

Many international companies manufacturing in China are looking for other locations that are cheaper or closer to their customers. India would be a great alternative. It has a young and cheap workforce, but good English-speaking engineers and managers and is part of a thriving middle class.

Big companies like Reliance Industries and the Adami Group, and technology giants like Tata, Infosys and Wipro, have put the advances of the contemporary world in the hands of millions of people, from clean water and electricity to the Internet. , mobile phones and vehicles.

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India is the largest and fastest growing democracy in the world which seems to be going in the opposite direction.

The private sector produces unicorns every month. More than a billion dollars worth of companies appear every month in various sectors like education, computing, tourism, finance, digital payment systems, entertainment and tourism. Today there are more than 70 unicorns, none other than China and the United States.

President Narendra Modi has implemented market-friendly reforms such as privatizing Air India and reducing taxes on technology companies.

It has also embarked on a successful redistributive growth strategy. While the welfare state’s classic investments are concentrated in intangible public goods such as health and education, Modi prefers to invest in programs of tangible goods and services. They want to bring electricity, gas and drinking water to homes, pay for the construction of toilets to improve sanitation, open bank accounts for women and provide digital wallets where the government deposits the subsidies they need. It is in these activities that he has built his political success.

Modi fights inequality and has a very complicated legacy. The 2008 financial crisis halted three decades of structural change. Many companies were closed. Depression pushed social indices back. The children’s health deteriorated. Diarrhea and acute respiratory diseases again shorten the lives of the little ones. Women, despite policies favoring them, are rarely present in the labor market. In 1948, after independence, more women were working than today.

The impact of the epidemic is also huge. GDP fell 7%, and poverty has rebounded after years of decline, more than any other major emerging economy. 270 million people live in extreme poverty.

The second wave affected 70% of the population, one of the highest rates in the world. More deaths were between 2.5 million and 4.5 million. The children spent 18 months without school, which surely condemned many of them as a lost generation.

Households, still reeling from the effects of the 2008 financial crisis, continued to borrow. Consumption decreased. The automobile industry sold the same number of cars in 2020 as it did in 2012.

Modi supports oligopolies and protects them by changing the legal framework to his convenience

Modi is a Hindu ultra-nationalist whose actions are economic hegemony. This favors industrial concentration in a few hands, notably Gautam Adami (Adami Group) and Mukesh Ambani (Reliance Industries), two of Asia’s richest men.

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It promotes a self-sufficient India with great “national champions” whom it protects with protectionist measures.

It encourages the creation of highways and other infrastructure such as the New Delhi-Bombay freight corridor and increases investment in the digital economy. For example, it has developed a national and digital payment system to fight corruption and black money.

Land reform, another pillar of Modi’s policy, has failed. States do not use these measures because they distrust the central government. Farmers are also opposed because they believe the reform will benefit Adami, Ambani and other oligarchs.

Capitalism has never had a good name in India. Businessman politician and associated with corruption. Great fortunes are made with desire. That is why Modi’s proposed market reforms lack popular support.

Tariffs are high, averaging 18% and 70% tax on imports

His government promotes national manufacturing, especially electronics, pharmaceuticals and telephones. 70% customs duty on imports has been raised. The average tariff today is 18%, higher than its Asian neighbours.

Additionally, he refuses to close international trade deals. For example, India is not part of RCEP, the world’s largest free trade agreement, in which 15 Indo-Pacific countries including China, Japan, South Korea and Australia have participated since last January.

However, these measures, researchers Arvind Subramanian and Josh Fellman argue Foreign Affairs“They are not meeting India’s basic needs,” which employ the youth in companies that need more cheap labor and support the exports of the manufacturing sector.

Tariffs, for example, prevent these companies from importing the cheap components they need.

Modi wants to promote sectors that require more capital and less labour. Their products have high added value, but they do not generate the required wealth. It is an exhibition economy and oligopolies, favored by the inconsistency of the legal and financial structure.

Modi is changing the rules of the game in favor of his business partners. This insecurity deters the investments of international capital, which would develop the country’s full economic potential.

The tech sector can attract investors because it is poorly regulated, but industry cannot. It’s an industry that could make India the world’s new factory, but Modi is determined to keep it out of the world. It prefers to be limited to the internal market. That is why they are not interested in exporting or joining agreements like RCEP.

China did the opposite. It has leveraged its human capital to attract investment and technology from abroad, dominate value chains and become indispensable.

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India is one of the largest countries in the world and will now be the most populous country. However, this advantage can be a major drawback. A young and unemployed population, impoverished and without a social safety net, food insecure and under pressure from the climate crisis cannot be satisfied. Discontent creates social instability and is particularly acute in a country prone to political violence.

India did not condemn the invasion of Ukraine

India does not condemn Russian invasion of Ukraine. When it comes to the issue of voting in international institutions, he prefers to stay away. Says neutral. Friendship with Moscow dates back to 1955 and military dependence remains prominent today. India is a nuclear power and has the third largest army in the world. Russia is its main arms supplier and does not condemn it for this reason. For that and because it suits him not to marry anyone. China and Pakistan are its main adversaries, but the dangers they pose do not place it in the diplomatic and military orbit of the West. She is more comfortable with the old non-aligned movement. President Modi would like to sit at the tables that move the world, and if the UN is a modern organization, it will have a permanent seat on the Security Council. Its economy is larger than that of Italy and Canada. By the end of the decade it will be third in the world, surpassed only by China and the United States, but it is not in the G-7 and is not expected to be. India dreams of a new multipolar order and plays the card of bipolarity until it arrives. He believes that time is running in his favor. It believes its population dividends in the progress of its technological institutions. Indian spacecraft has been orbiting Mars since 2014. This is just an example of what you can achieve.
However, it is very dangerous to be without it. Neutrality in the Ukraine war means supporting the Kremlin. This may make strategic sense as Russia is an ally of China and Pakistan, but it is morally unacceptable. Without greater involvement in such a defining crisis of the 21st century, it is unlikely that India will one day help shape the world.