India's Need for a New Economic Paradigm

The pursuit of communal and caste issues has eclipsed India’s economic agenda. However, the rising class split is quietly altering the Indian vote, with economic progress leaving more than half of the population behind. It is critical to address the economic problems of all citizens, regardless of caste or religion, and to embrace a new economic paradigm.

The Global Solutions Summit

Global Solutions Summit, 2023 held at Berlin.
The theme at the Global Solutions Summit this year, was a new paradigm for the economy.
It took place against the backdrop of escalating tensions between the United States and China in the east and a war between NATO and Russia in the west.
The powerful G-7 countries, which account for only 15% of the global population, apply undemocratic pressure on other countries, increasing concerns about global democracy.
At the summit, the G-20 think tanks and other countries drew attention to global issues such as climate change, increasing economic inequalities within and between countries, and the effects of the most powerful nation’s financial and trade sanctions, which disproportionately affect the other 85% of the world’s population.

Political and economic differences are common in communities all throughout the world.

Political Divisions

Political ideologies such as conservatism, liberalism, socialism, and populism can cause sharp divisions in society, with opposing views on the role of government, individual rights, and social policies.
Political parties and their supporters frequently display substantial differences, particularly during elections and policy discussions, based on party loyalties, policy preferences, and competing interests.
Identity politics: Political landscapes can be shaped by divisions along the lines of race, ethnicity, religion, gender, and other social identities, with factions arguing for their special interests and rights.
Disparities in economic development, cultural values, and historical grievances can lead to political splits, with calls for more autonomy or regional representation.

Divisions in the Economy

Income inequality: Unequal wealth and income distribution can generate disparities between the rich and the poor, affecting access to resources, opportunities, and social mobility.
Disparities in economic possibilities, infrastructure, and public services between urban and rural areas can lead to economic splits and political conflicts.
Global economic disparities: The gap between industrialised and developing countries, as well as within countries, adds to economic divisions, which affect trade, investment, and development policies.
Divides in the labour market: Differences in employment prospects, pay, and working conditions can result in divides between distinct sectors of the economy, such as skilled and unskilled workers or formal and informal sectors.

Economic System Evolution

Economic Tradition: Production in traditional economies is built on customs, traditions, and barter systems. Subsistence agriculture, hunting, gathering, and small-scale craft activity are common. This is a common system in agrarian and indigenous societies.
Command economies arose with the rise of centralised governments and planned economies. The state takes control of production, distribution, and resource allocation. Economic activities and resource distribution are determined by central planning and government directives. A command economy is an example of the Soviet Union under communism.
Market economies are distinguished by decentralised decision-making and the interaction of supply and demand dynamics in setting prices, resource allocation, and manufacturing decisions. Private property ownership, individual liberty, and competitiveness all play critical roles. Adam Smith’s free-market capitalism is a major model of a market economy.
Most modern economies are mixed economies, combining features of both market and command systems. The government intervenes in a mixed economy to regulate markets, provide public goods and services, and solve market failures. The degree to which the government intervenes varies by country and might range from social welfare programmes to industry laws.
Socialist economies place a premium on social ownership and communal decision-making in economic operations. The state or workers’ collectives often own the means of production. The goal is to minimise inequality and ensure equitable resource distribution. Examples include the former Soviet Union and Mao Zedong’s China.
Market Socialism: Market socialism combines market economy features with socialist concepts. It permits private ownership and market mechanisms while attempting to ensure social equality through state involvement, wealth redistribution, and public ownership of critical industries. Some Scandinavian countries, like Sweden and Norway, practise market socialism.
The post-industrial economy is distinguished by a shift away from manufacturing and heavy industry and towards service-based businesses, information technology, and knowledge-based sectors. It is propelled by technical improvements, as well as the growing importance of intellectual capital.

Need to reform the GDP-centric model

GDP (Gross Domestic Product) is an insufficient measure of well-being because it measures the monetary value of all final goods and services produced within a country’s borders. However, it overlooks essential dimensions of happiness, such as wealth distribution, social indices, environmental sustainability, and quality of life.
Overemphasis on Economic Growth: The GDP-centric approach overemphasises economic growth as the key measure of success. While economic growth is vital, it should not be used as the main indicator of a country’s progress.
Ignoring Income Inequality: Economic progress does not always imply a fair distribution of wealth and income. It frequently reinforces income disparities since the advantages of growth may accrue disproportionately to a few favoured persons or groups.
Unsustainable Resource use: The GDP-centric approach frequently supports unsustainable resource use and production habits. It fails to account for the environmental costs and natural resource depletion connected with economic activity.
Non-Monetary variables Are Overlooked: The GDP-centric approach ignores non-monetary variables that contribute to total well-being, such as health, education, social capital, cultural heritage, and quality of life. These aspects are important for human development and should be included alongside economic statistics to create a complete picture of progress.
Inaccurate Reflection of Informal Economy: The GDP-centric model struggles to reflect the contributions of the informal economy, which frequently accounts for a sizable share of economic activity in many nations. Workers in the informal sector and their economic contributions are usually ignored in standard GDP calculations.
Alternative Metrics: Alternative metrics and indicators that capture a larger variety of elements affecting well-being, such as the Human Development Index (HDI), Genuine Progress Indicator (GPI), Sustainable Development Goals (SDGs), and well-being indices, are in high demand. These measures take into account social, environmental, and economic elements to present a more complete picture of progress.

India requires a new economic paradigm.

Rising Inequality: India suffers substantial income and wealth disparities, with economic growth leaving a large segment of the people behind. The current economic system has failed to resolve inequities and provide equal opportunity for all citizens.
Unemployment and work Creation: India has been battling with high unemployment rates and a scarcity of work possibilities, particularly for its rapidly growing youth population. To effectively leverage the demographic dividend, the current economic paradigm must be rebuilt to prioritise job creation, skill development, and entrepreneurship.
Sustainable Development: India faces severe concerns such as environmental deterioration, climate change, and resource depletion. A new economic paradigm should place a premium on sustainability and incorporate environmental concerns into economic decision-making.
Economic expansion is necessary, but it must be supported by investments in social welfare and human development. Citizens’ well-being is dependent on access to decent education, healthcare, housing, and social security. To ensure the holistic development of the people, a new economic paradigm should prioritise human development indicators alongside economic ones.
Agricultural despair: The agricultural sector in India is facing a number of issues, including farmer despair, low productivity, and a lack of market access. These concerns should be addressed by the new economic paradigm by supporting sustainable agriculture, improving rural infrastructure, increasing farmer income, and assuring food security.
India is undergoing a digital revolution, with rapid technical breakthroughs and a booming digital economy. The new economic paradigm should capitalise on the promise of digital transformation and innovation to drive inclusive growth, strengthen governance, and boost global competitiveness.
Governance and Transparency: Improving governance, increasing transparency, and reducing corruption are critical for long-term economic progress.

@the end

India urgently requires a new economic paradigm that answers its inhabitants’ concerns. Instead of reinforcing economic inequities, the emphasis should shift to inclusivity and social justice. Reforms must prioritise everyone’s well-being, and economists must reconsider their current assumptions in order to achieve a more equal and sustainable future for India.

Source: https://sustainabledevelopment.un.org/content/documents/617BhutanReport_WEB_F.pdf