Date: 08/12/2022

Relevance: GS-3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development, and Employment.

Key Phrases: predictions of the economic growth, BRICS, Confederation of Indian Industry (CII), systems thinking, India and the World: Scenarios to 2025, India Shining, BollyWorld, Atakta (stalling) Bharat, Pahale India, local systems solutions.

Why in News?

• Making predictions of the economic growth of nations — long-term, annual, and quarterly — is a lucrative industry employing many economists, researchers, analysts, and commentators.
• The fast growth of BRICS (Brazil, Russia, India, China, and South Africa) economies was forecast by economists at the turn of the millennium.
• The prediction had a large impact on the public imagination and on corporate investments.

A tale on forecasting:

• Some industry leaders in the World Economic Forum (WEF) were wary and they recalled that economists in the 1980s, extrapolating the remarkable post-war performance of Japan, had predicted that the 21st century would be Japan’s century.
• Few economists then had predicted the quick collapse of the Soviet Union or foresaw China’s remarkable ascent.
• In the next decade, Japan’s growth was limping, the Soviet Union was history, and China was the country investors were being directed to.
• China was the economic powerhouse in the BRICS projection: India, Brazil, Russia, and South Africa were the other four.
• Collapse of USSR:
  • Economists’ forecasts do not compute the effects of social conditions and domestic politics on economic policies, strategic thinkers in the Shell Oil company, using methods of “scenario planning”, had forecasted the collapse of the Soviet Union and integration of the Russian economy with the West.
  • Shell redirected billions of dollars of investments beforehand and gained a strategic advantage over its competition.
• Scenario Planning for BRIC:
  • Responding to its members’ needs, WEF commissioned a “scenario planning” exercise for the BRIC countries in 2004.
  • WEF collaborated with the Confederation of Indian Industry (CII) to prepare scenarios for India’s growth because CII had supported a similar exercise internally in 2000 and knew the methods of scenario planning.

How ‘scenario planning’ is different from other forecasting methods?

• The foundational discipline of scenario planning, which distinguishes it from conventional forecasting and planning, is “systems thinking”.
• Scenario planning does not begin with the data and starts with listening to diverse points of view about what is going on within a complex system at present to understand the undercurrents that will surface and disrupt predictions of economists’ models.
• Scenarios depict shapes that a country’s economy may take in the future depending on changes in social and political conditions with economic growth.
• Systems’ scenarios include subjective perceptions of poverty and inequality and mistrust in governance institutions, which are “externalities” to economists’ quantitative models.

Looking ahead:

• The WEF/CII report, ‘India and the World: Scenarios to 2025’ (published in 2005) projected three scenarios of India’s future depending on the country’s economic policies.
• India was in an “India Shining” mood at that time: it was celebrated as “the world’s fastest growing free market democracy” to tempt western investors away from autocratic China’s even faster-growing economy.
• First Scenario: BollyWorld
  • The first scenario looked deeper into India’s current reality at that time. Evocatively labelled “BollyWorld”, the scenario revealed forces that would dampen growth in the future if not responded to in good time.
  • The opening of India’s economy created more opportunities for private enterprises and rapid increases in the wealth of the top 1%. Millionaires were multiplying.
  • The imported cars they owned, the expensive clothes they wore, and the champagne they drank at their parties were celebrated on “page 3” of daily papers.
  • While entrepreneurial spirits were unleashed and young people aspired to become wealthy, signs of their increasing frustration were also visible.
  • Violence was not restricted to rural, “Naxal” areas; petty urban crimes, many violent, were also increasing.
  • Glamour and violence can be mixed for the entertainment of viewers of Bollywood movies. However, India’s “BollyWorld” economic growth is a real story that was becoming painful for millions of citizens living in it.
• Second Scenario: Atakta (stalling) Bharat
  • The second scenario was called “Atakta Bharat”. It showed how increasing inequality and insecurity could compel the government to impose controls on politics for security, and also compel it to play a larger role in the economy without adequate resources.
  • A heavy-handed government would dampen India’s democracy and stall its economy.
  • In both scenarios, BollyWorld and Atakata Bharat, the “theory of change” is top-down. Change is led by leaders on top of large organizations in government and businesses.
• Third Scenario: Pahale India
• Here, the changes that people need are produced by them: by local leaders of women’s self-help groups; cooperatives for water conservation, farming, and dairying; and profitable business enterprises based on local production and consumption.
• Such “enterprises by the people for the people”, using local resources and local energies, are more sustainable than top-down, large-scale programs.
• The scenarists projected that if India’s policymakers pursued this model of change, economic growth would be more inclusive, more environmentally sustainable, and faster too. They called this scenario “Pahale India”.

The rise of reactionary forces:

• These scenarios were made in 2006 before the global financial crisis, to recover from which governments of the G-7 took actions to save the “too large to fail” financial institutions.
• The G-7 enlarged to the G-20 to stabilize global financial and economic institutions.
• There are tensions within the “BollyWorld” model of top-down, and wealth-driven, economic growth the world has pursued in the last 30 years.
• Increasing inequality and insecurity around the world, rising along with “free market” globalization, have resulted in reactionary forces in many countries, including China and Russia amongst the BRICs and they have appeared in India too.

Way forward:

• Inequalities have further increased; top-down solutions to the global environmental crisis are producing only more hot air.
• Violence between powerful countries deploying the latest technologies harms millions of innocent people worldwide.
• The Indian scenarists had pointed to a choice before public policymakers when societal tensions increase in a “BollyWorld”-like scenario the world seems caught in.
• Top-down approach:
  • One choice is the concentration of power in governments and large business monopolies for imposing more security and pushing faster GDP growth. This leads to further unrest and “Atakta” (stalling) economies.
• Bottom-up approach:
  • The other choice revolves around local systems solutions for environmental and economic problems, cooperatively implemented by communities. This model solves global systemic problems and creates a more harmonious world.
  • India must promote this model in the G-20 it is hosting this year. It must also adopt this “Gandhian” approach more determinedly to make “Pahale India” a reality for all Indian citizens.

Source: The Hindu

Mains Question:

Q. India, especially in its year of G-20 chairmanship, needs to promote a ‘Gandhian’ approach of using solutions that depend on local systems to help the world get out of the present economic growth scenario it is caught in. Discuss.