Nuts and bolts of an Economic Reprieve

Asoke K Laha
resident & MD, InterraIT

These days, there are more doomsayers than ever before. The first among the lot are the economists. Happily, there is no certainty about what they say since they believe in the dictum that opinions are not the ones inscribed in stones. These can change, swing from one extreme to another. Of course, one cannot blame them since economics is not like Mathematics, where one plus one is two. In economics, it can be three or even eleven. Does it mean economists have the right to predict anything and everything, no matter they are right or wrong? One should grant them that freedom since they predict only probabilities of something happening. The higher the probability, the greater is the chance of that happening. Admittedly, it can be termed or dubbed as a science of chance.

I like economists because they do not disappoint you unlike in any other subject. In the case of Mathematics, if you are given to solve some problems, there are two certainties: you can do right or wrong. You cannot be partially right and partially wrong. But in the case of economists, there is nothing called hundred per cent right or wrong. One can hedge the answers or responses with various assumptions like, if that happens this will be the case and if that does not happen, that will be the rollout of a situation. 

My first prediction is that, against all predictions of an economic turmoil, I forecast the year 2017 will be an unusually productive year for the world economy. I have clear reasons how it will happen. Whatever that is happening in Afghanistan, Syria, North Korea, etc will not pull the world economic growth. Nor the current spate of protectionist measures followed by the developed world, be it in terms of putting restrictions on imports, or granting visas will not deter  growth. My take is that the defence industry will nudge all other sectors into the backburner. Defence is the only industry that survives when countries fight amongst themselves, during civil wars or when pangs of nonviolence sweep across. The first two world wars are silent and mordent examples of war-led growth. In the aftermath of these two world wars, science had progressed, hegemonic tendencies erupted entrepreneurship proliferated and medical science leapfrogged. The end of the Second World War led to the acceleration of development of rocket science leading to men landing on the moon. 

Riding on the back of a booming defence sector, manufacturing is poised to accelerate. I have used the word accelerate since manufacturing is already on an upswing in the US, going by the macroeconomic variables. If the US is demonstrating buoyancy, the Euro zone is gradually coming out of the prolonged sluggishness. Looking at the individual countries in the euro zone, economic pickup is encouraging. Available statistics indicate that euro zone is growing a solid 1.6% in 2017. The predictions for 2018 maintain that the tempo of growth will remain the same. That means for the next two years Europe is growing in a healthy manner, which will have a positive impact on the job market. In the coming time, there are high probabilities of India engaging more with Europe than with any other market.

In economic parlance, every assertion has to be substantiated with facts and figures. The foremost reason that will catalyze India’s economic engagement with the EU is the demographic one. A nation having 65% of its population in the productive age group is India’s USP. As against this, Europe is graying fast. It may need more people, talents and care. There is a limit to automation and digitization to replace the human capital. Also, there is a lurking fear that is gripping these countries that too much dependence on machine may make things complex. Rampant hacking, lack of personalized touch in availing services that are automated, incursions into privacy of individuals, etc are being pointed out as negative spinoffs of digitization. 

Does it mean Europe will turn out to be a major destination for Indian professionals? It could be possible in the coming years if one goes by the latest trends. 
India’s strength in the services sector is unique. More than 60% of our GDP comes from the services sector. A lion’s share of employment is created in the services sector and the sector also contributes smartly to the exports. A German, who happens to have spent a long time in India, pinpointed the uniqueness of India in a casual conversation. He said that Indians are the most entrepreneurial class. He remarked that, unlike in Germany or for that matter any developed country, people in countries like India would never wait for the governmental help, which is hard to come through. Even if it comes through, there will be a lot of conditionality. If one becomes unemployed in a developed country, it is the responsibility of the state to look after the person. He or she will continue to enjoy that facility till properly employed. Also, after retirement, the state looks after every citizen, his medical treatment, children’s education and what have you. In India, it is just the opposite. One has to fend for eking out a living. The person sells peanuts, vegetables in a cart, cold water during summer, cleans up houses for others, washes cars, cleans and irons dresses and an assortment of activities to make both ends meet. He is proud enough to bow his or her head in front of others, including before the government. That is the true entrepreneurship and that is why every Indian who is not employed has turned into a service sector entrepreneur in his or her right. 

On hindsight, I find a lot of merit in what the German has said. Those who are being referred to as informal workers or underemployed people are entrepreneurs in their own right. I often think that had luck favoured them or their risk-taking capacities paid off, they would have been icons or legends, celebrated and honoured. Let us celebrate those millions who are faceless, less expecting from the society and fend for themselves by the sheer dint of their work, rather than asking for help and accommodation. Watch out these unsung and unseen people. They only can make India big. They only can usher a new purpose and direction in our destiny. They only can transform India. Friends, this is my last prediction as an economist.