Skip to main content

Overcoming trade imbalance in South Asia and IMF's post-Covid 'extreme optimism'

By Prof Utpal K De, Dr Simi Mehta 

Covid-19 has resulted in a disruption of trade as well as market linkage across the globe. The responses of various countries have been observed in the form of a structural shift from participating in global supply chains to looking inwardly. Lockdown of the economies hit global supply chains by halting the process of production and output.
The world for the first time in decades experienced negative growth of over 7 percent. The International Monetary Fund (IMF) projects a bounce back by 2021 where the optimism is located in the potential of growth within South Asian economies.
There was an exponential reduction in trade across the countries and India experienced reduction in imports more than that of exports. This skewed response resulted in a belief that India had successfully responded to trade imbalance, and the understanding of today was the result of protectionism with both exports and imports being hit. However, there is a large potential for India and South Asia to grow both within global supply chains and building regional supply chains.

Trade as means for development

Prof Amita Batra, chairperson, Centre for South Asian Studies, Jawaharlal Nehru University (JNU), pointed out that trade is usually studied as a standalone economic variable. It is the development potential that should be looked at as a key motivation for growing inter- and intra-regional trade.
The South Asian region has been riddled with developmental concerns which only exacerbated during and after the lockdown. South Asia today houses the largest population of the global poor. Poverty is not just the absence of capital but translates into a losing the potential of demographic dividend due to concerns of hunger, education, skill development and health care.
It is common knowledge today that South Asia holds a massive potential of demographic dividend because of its large proportion of population within working age group. This has so far translated into failed potential due to development and sustainability concerns. How does trade which is traditionally seen as a marker of economic growth respond to these concerns?
Trade within it houses the potential to absorb this demographic dividend into production activity which would increase flow of capital and eventually progress to answering larger developmental concerns at micro level. The biggest concern with the demographic dividend in South Asia in her opinion, “there is an inability to match skills of working age group with demand for particular skills.”

Trade as an engine of growth

It has been argued that, trade is an important instrument of economic growth where there is percolation from the economic variable to individual life. Trade leads to prosperity from competitive advantage, and in order to sustain this advantage there must be an efficient allocation of resources. Effective and efficient allocation of resources results in ‘growth for all’.
This aspect of the benefit of trade as an engine of growth, when pointed by Prof Batra incapsulated within it an understanding of the inequities which are the result of trade. There would be industries which would become obsolete, and the role of State becomes important. The state must ensure that the population which is rendered unemployed as their working sectors becomes obsolete, must be re-skilled to meet the demands of the economy.

Trade’s global supply chains

Trade is not always responsive to income can be nuanced to trade is differentially responsive to income. This leads one sector becoming obsolete to draw an analogy service sector has taken over manufacturing sector as the lead traded commodity, even within manufactured products intermediary products lead the share in trade. These trade cycles has resulted in global value chains.
The concerns with these global value chains remain that a dominant player in these global chains remains the China. The reasons why China controls these global chains is because of the structural and economic benefits where it stands to be the second largest economy. Its expansionary trade and economic fiscal policies have resulted in a capital surplus economy where most of the countries stand at a disadvantage of increasing trade deficits.
Trade deficits are difficult to sustain and following the politics immediately with the Covid outbreak has begun a cycle to restore these global supply chains, looking at returning to North America and using ASEAN countries including India for their low cost of production. 
To capitalize on this opportunity, South Asia needs to revive their regional trade capacities. ASEAN has made itself a viable alternate which began with the foreign direct investment from Japan and resulted in a specialized segmented process where network production is led by the market.

Way forward

There needs to be a comprehensive response from South Asia in terms of strengthening regional value chains. Globally trade has grown exponentially by resulting from special trade agreements. South Asia as a region has not resulted in similar agreement-based integration. Regional integration has been bogged with socio-political concerns. Political and geographical conflicts which are the result of colonial history between the countries need to be actively responded with possible solutions.
After engaging with the political questions, there needs to be a focus on expanding the normative engagement with trade and its impact. Dr Ganesh Wignaraja, senior fellow, Institute of South Asian Studies (ISAS), Singapore, spoke on the need to evolve new trade policies following the unprecedented shock to economies. One needs to steer clear of extreme optimism because IMF projections can only be true if the vaccines result in a global immunity to the virus (including the new strain).
There has to be skeptical optimism, where the state does not become too complacent. They have to be more vigilant for second shock or interrupted pattern to economic growth. Covid-19 has also resulted in protectionist economic stands and if they do not change, economic and trade growth will not be possible.
Developmental questions can be responded to with an efficient understanding of problems that affect the population. Food insecurity is a key concern that continues to loom in the region. Analyzing the Indian capacity for both investment and infrastructure could build into a trade value chain for agro-processing.
New sectors can aid South Asia to begin the journey of development and trade. These sectors are financial services and digital trade treaties. These sectors hold within themselves the capacity to absorb tertiary graduate population in the country.
---
Acknowledgment: Sakshi Sharda, research intern at the Impact and Policy Research Institute, pursuing  MPhil from Centre for Political Studies, Jawaharlal Nehru University

Comments

TRENDING

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Liberating Bengal Hindus? Worst flames of communal division, lessons from the past

By Shamsul Islam*  The whole thrust of the RSS-BJP election campaign for 2021 state assembly elections in West Bengal has been to save Bengal from the rule of Mamata Bannerjee who is allegedly not a ‘Hindu’. Prime Minister Narendra Modi, a self-proclaimed Hindu nationalist, as usual set the polarizing agenda. While addressing the first election rally, he called upon the electorate to overthrow the ‘nirmam’ (cruel) rule of Mamata by showing a ‘Ram Card’. He did not name Hindus directly but there was no confusion about the religious identity of the electorate Indian PM was addressing to.

Pradeep Bhattacharya, who spent his life for the cause of working masses, rational thinking

By YS Gill*  At 11:30 pm on May 3, 2021, I lost my best friend and comrade Pradeep Bhattacharya. He spent his life dedicated to the cause of the working masses and rational thinking. A person of thorough scientific outlook and a well-read student of Marxian thought, he was a walking encyclopedia and could speak on a wide variety of topics from art and culture to science, philosophy, history and politics.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Rs 5 crore 'demand' for India Today anchor: What about 52 lesser souls who died in April?

By Vidya Bhushan Rawat*  A well known Hindutva protagonist masquerading as journalist passed away recently resulting in messages of condolences and tribute right from the Prime Minister and the Home Minister to progressive liberals expressing grief of his untimely death. It is said that he passed away due to cardiac arrest, though the fact is, he was also Covid infected. The Prime Minister and the Home Minister termed him a ‘brave’ journalist, insisting, his passing away has left a big ‘vacuum’.

Modi's Hindutva 'ensuring' empowerment of rich, disenfranchisement of poor

Bhabani Shankar Nayak*  The Hindutva socio-psychopaths are neither nationalists nor patriotic people. These medieval reactionary forces don’t understand the idea of citizenship, justice, liberty, equality and humanism. Indian democracy is merely an electoral transaction for the Hindutva forces. Hindutva forces neither follow science nor understand the sufferings of fellow human beings. These core qualities are common among the Hindutva forces in India.

Communal rhetoric? Hindutva preached by RSS-BJP is 'monolithic', not Hinduism

By Prem Verma*  I am a devout Hindu but not a believer of RSS Hindutva form of Hinduism which brings about hatred of other religions. My Hindu religion has not taught me to look down on other religions and neither has it instilled in me to go about converting others to my religion because my religion is superior.

India's Covid-19 'nightmare': A product of majoritarian Hindutva ideological praxis?

By Bhabani Shankar Nayak*  Indians struggle to find place and time to bury their dead due to the devastating effects of the second wave of Covid-19 in India. The crematoriums in the capital cities are overflowing with dead bodies. People are dying without oxygen and basic medical support. The cities like Delhi and Mumbai are struggling to cope with the rising number of infections and COVID-19 led deaths. The deaths and destitutions are products of a defunct BJP government led by Narendra Modi.

Despite crisis, Modi's Hindutva strategy 'increased' mass base in society and polity

By Bhabani Shankar Nayak*  Narendra Modi and his RSS brethren can qualify as masters of fake claims. There is a long lists of lies spread by RSS, BJP and their IT cell workers. It is not a personality disorder or lying with fear. They are trained to defend Modi and his government’s decisions in whatever possible way. They defended demonetisation by arguing that it is “an important step” in his fight against black money and corruption.

Indian media persons collapsing to Covid disease as fast as 3 per day, third highest

Yogesh Sharma, Shailesh Rawal  By Our Representative  The Switzerland based media rights and safety body, Press Emblem Campaign ( PEC ) has said that it is “alarming for Indian journalists”, who have lost at least 107 colleagues to Covid-19”, noting, Indian “journo-colleagues” have been collapsing to the Covid-19 complications now as fast as three scribes per day. In a statement, PEC said, “India with 107 media corona-casualties has already placed itself on the third position just below Brazil (181 dead) and Peru (140) in the list of Covid-19 victims among journalist.”