The current economic paradigm in India is insufficient in providing solutions to the country’s three main economic challenges. Economists must break free from their self-referential box and investigate the science of complicated self-adaptive systems.
India is experiencing a poly-crisis
The Indian government is grappling with three economic challenges at the same time:
- Management of inflation,
- Trade agreements, and
- Employment
Economists lack a systemic answer to the poly-crisis. Consensus has broken down among them even on solutions to its separate components.
China and Vietnam Have Taught Us
- Chinese foreign investment: Around the same period, 35 years ago, China and India opened their economies to global trade. Since then, China has attracted many times more foreign investment than India, and its citizens’ incomes have grown five times faster.
- Vietnam is becoming a more appealing investment destination: In order to attract investors, India must compete with other nations. Vietnam is frequently mentioned as a country that is showing to be more appealing to western and Japanese investors than India. When they look at Vietnam, they relearn what they learned in China.
- High levels of human development: When both countries opened their doors to foreign investors, China first and Vietnam second, they had already achieved high levels of human development, with universal schooling and well-developed public health systems.
The Issue with the Current Model
- The present economic paradigm has some fundamental flaws.
- Tinbergen’s theory, which asserts that the number of policy instruments must equal the number of policy goals, is frequently cited by economists. This is a mechanical and linear representation of how a complicated system operates.
- Root causes influence many results in complex organic systems. The system’s behaviour cannot be described by linear causes and effects. Causes and effects interact, and outcomes become causes as well.
The Crisis and the System’s Inadequacy
- Policies that work in one nation may not work in another: Macroeconomists seek global solutions, but trade and monetary policies that work for one nation may not work for another. Their requirements stem from their personal experiences.
- Emphasis on data trends: Economists arrive at solutions by comparing data trends across nations, and individuals are numbers in their models. Economists do not heed to ordinary people, whereas politicians do.
- For example, several crises in this century have exposed the inadequacy of the current paradigm, including the 2008 global financial crisis, inequitable management of the global COVID-19 pandemic, and the looming global climate crisis.
@the end
To solve India’s poly-crisis, a new economics is needed. Even in the West, a movement has started to shift the paradigm of economic science in order to incorporate perspectives from the sciences of complex self-adaptive systems. India’s economists must take the initiative and drive the transition to a new economic paradigm founded on the sciences of complex self-adaptive systems. India’s policymakers will need to find a method to strengthen the roots of the economic tree while also harvesting its fruits, and the present economic paradigm cannot provide solutions.
Source: https://m.economictimes.com/news/economy/indicators/why-is-an-emerging-economy-like-india-doing-so-badly-on-human-development-index/articleshow/13765613.cms