Harnessing demographic dividend amid geopolitical tensions key challenge for policymakers: PM’s top aide

“We can do many things in the Budget and also as a policy. But there are challenges, which we must be aware of and try to address. Some of those I would like to mention, like, for example, harnessing demographic dividend. Though we talk about demographic dividend and we’ll be having this for the next many years. Geopolitical tensions, declining globalisation and rising economic nationalism, impact of emerging technologies and of course climate change. These are some of the challenges we should try to address both in our policy and our action,” Mishra said.

Mishra said there is a need for India to be Atmanirbhar (self reliant) critical areas. “We should achieve economic, social and environmental sustainability, in order to withstand disruptions of the supply chain. India needs to become Atmanirbhar in critical areas,” he said.

The Principal Secretary to Prime Minister Narendra Modi cautioned how export-led growth won’t be easy amid the ongoing geopolitical tensions in the world. He enlisted the recent trends in challenges by citing instances of how amid geopolitical tensions, governments are pursuing onshoring and friend-shoring of production, which have consequent impact on transportation, logistic costs, resulting in increased price of production.

“Recent events in the Red Sea have caused concern for reliance on the global supply chain. In other words, export-led development will not be easy because many East Asian countries had the benefit of export-led growth, which in today’s context will have some challenges,” he said.

Mishra also outlined the risks from use of technology and energy transition on growth. “Artificial Intelligence poses challenges for growth in service trade and employment because technology might affect the cost competitiveness of countries exporting digital services. Third, the challenge of energy transition in the context of focusing on reducing carbon emission, achieving trade off between economic growth and energy transition is not going to be easy because when we talk about reducing emission, reducing coal, there will be challenges for our growth,” he said.

With development of technologies that are to a large extent, labour saving, there is a need to look at employment potential of economic growth, Mishra said, adding that it is important in order to maximise India’s demographic dividend. “It is essential to ensure employment of the largest possible section of the population, especially the youth,” he said.

Making a reference to the Washington consensus concept by John Williamson that was widely followed as a set of economic policy recommendations for developing countries for two decades, Mishra pointed out the need to revisit some policy approaches in the current concept of globalisation.

“Many people argue that globalisation, as we know it, will have to be replaced by a new understanding that rebalances national needs and needs of a healthy global economy that facilitate global trade and long-term foreign investment. Possibly the new globalisation model will be less intrusive, acknowledging the needs of all countries, not just major powers. So some of the recommendations and policy approaches based on globalisation, probably have to be revisited,” he said.

Citing the experience from COVID-19 pandemic, Mishra said that many referred to it as a Black Swan event and there is a need to bridge the gap between traditional disaster and risk management, and risk management in an uncertain environment. “The traditional disaster risk management paradigm is attuned to using analysis of past events, their frequency, intensity and impact, to quantify a risk and devise risk management strategies for the future,” he said.

Giving reference to Nassim Nicholas Taleb’s 2012 book ‘Antifragile: Things that Gain from Disorder’, he said the concept of antifragility is important as it is beyond robustness and resilience, especially in times of Black Swan problems. “…proliferating global networks, both physical and virtual, lead to more interdependent and fragile systems. Not only risks such as pathogens, but computer virus, hacking of information networks, reckless actions of financial institutions, or particular acts of terror can also make a system fragile. Any adverse event can cause a rolling and widening collapse, a Black Swan event. The failure of a single transformer can collapse the electricity grid,” Mishra said.

He further said that with increasing digitisation and global interdependence, there is a risk of a small incident developing into a Black Swan event. “As we are developing the technology, developing the interdependence globally, everything depends on digitisation. So that can also cause Black Swan events and any small incident can do that,” he said, adding that there are suggestions to decentralise systems and to have separate subsystems and these conceptual factors have to be addressed if India wants to have sustainable development and become a developed country.

Mishra said the role of analytical models is important noting the uncertainty in today’s times. “The whole concept of globalisation is probably changing. It is in this context that the role of economists, role of analytical models are also important because very often the word academic, when we talk in the bureaucratic context or political context, in a meeting, suppose, you talk about some concept, somebody will comment — it is all academic. That term academic is used in some sense, as something not practical, but I feel that unless you are able to conceptualise right from the beginning, because many of our policy measures do not get the intended results because we have not analysed all the aspects, all the scenarios, all the uncertainties which are there,” he said.