[op-ed snap] India and the new face of globalization

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Mains Paper 3: Economy | Effects of liberalization on the economy

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Fourth industrial revolution and how India can benefit from it


Context

Evolution of globalization

  1. Globalization itself is evolving, with changes in global trade flows, capital flows, and the Fourth Industrial Revolution
  2. Trade flows have attracted more attention than capital flows and technological changes as drivers of globalization
  3. Trade in services are now increasing at a much faster pace than trade in goods

Advantage India

  1. India’s trade characteristics are well aligned with the new face of globalization
  2. India’s global trade has been spearheaded by exports of modern services
  3. Technology has enabled services to be digitized and transported long distances at low costs without compromising on quality
  4. The internet has enabled firms to sell services without crossing national borders, and dramatically increased the size and the scope for exploiting cost differentials in services compared to trade in goods

Changes in capital flow

  1. Globalization of capital flows is also evolving with huge implications for macroeconomic management and growth
  2. Remittances, which tend to be more resilient, have been the dominant form of capital inflow into India
  3. They have often exceeded foreign direct investment and other capital inflows in the past
  4. Many long-term investors, such as pension funds and insurance companies, which are ideally suited for human and physical infrastructure investments, see India as an important investment destination
  5. There is increasing interest from global investors in solar power, water management, waste management, affordable housing and much more
  6. There is also increasing interest, both from philanthropic and private foundations, in promoting public-private partnerships and maximizing finance for welfare development

Impact of the technological revolution

  1. New technological revolution has huge spillovers and externalities
  2. Data and information technology is now the lifeblood of the global economy, fuelling ideas for new products and services, and advancing the transnational flow of trade, capital, and ideas
  3. The shift in value from physical to digital information services will only increase
  4. The new era of innovation, in which cutting-edge technologies are replacing old production methods has impacted everybody
  5. India faces the challenge of how to capitalize on their comparative advantage, benefit from new technology, and create more jobs

Need to build human capital

  1. While investment in physical infrastructure has attracted the attention of policymakers in the past, investment in building human infrastructure has become even more important
  2. Given India’s young population, and to benefit from its demographic dividend, India needs to dramatically scale up investments in human infrastructure
  3. India’s demographic dividend suggests that 7-10 million people will join the labour force every year

Gaps in system

  1. Less than 4 million receive skill training
  2. Early learning and stimulation interventions for children under three are virtually non-existent
  3. Less than 17% of government schools provide one or two years of pre-primary education
  4. Less than 15% of rural children in grade 2 can read at the expected level

Way forward

  1. India faces a dual challenge—demographic dividend and rapid technological change
  2. Technological progress is placing a higher premium on skills, and any failure of countries to lay the groundwork for their citizens to lead productive lives will not only carry a high cost, but it will also generate more inequality and conflict
  3. India needs to invest in people—through education, health, nutrition, social protection, and skills
  4. Scaling up investments in human capital to promote growth and prevent digital divide is an easy call for the policymakers
Skilling India – Skill India Mission,PMKVY, NSDC, etc.
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