Date: 10/12/2022

Relevance: GS-2: India and its neighborhood- relations; bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Relevance: GS-3: Indian Economy, inclusive growth and development.

Key Phrases: World Trade Organization (WTO), Organization for Economic Co-operation and Development (OECD), OECD Development Assistance Committee (DAC), Characteristics of Developed country, Role of citizenry in development of nation.

Context:

• Recently, the Indian Minister of External Affairs during his United Nations General Assembly speech revealed India’s ambition to become a developed country by 2047, a century after the country’s independence.
• It seems a Nobel vision but what amounts to being a “developed country” is still nebulous.

How to define a developed country?

• There is no clear or exact definition / standard of a developed country.
• The World Trade Organization (WTO) has no technical classification for a country’s stage of economic development.
  • Although the WTO expects countries to define themselves as developed or developing.
  • Usually, countries with high GDP, per capita income and high-quality infrastructure are considered developed.
• Multilateral agencies such as the IMF, World Bank and ADB consider per capita income as a basis of classification.
  • Usually a country with a per capita income of $12,165 and sometimes $ 20,000 is considered developed.

OECD is the marker

• In the present times a country with a membership of the Organization for Economic Co-operation and Development’s (OECD) development assistance committee is considered among the developed nations.
  • The OECD development assistance committee currently comprises 31 member states and is the marker of being among the world’s most developed.
• As per OECD mandates these members by virtue of being wealthy, must make their resources available for the economic development of the rest of the world.
• Currently, these countries are required to make available an equivalent of 0.7% of their respective GDPs for global development assistance.

The present characteristics of a developed country

• Home to the world’s largest multinational corporations
  • Most of these countries are home to the world’s largest multinational corporations, taking advantage of global movement of capital.
  • In the era of international outsourcing, gross national income becomes more relevant for companies headquartered in these countries, as their global operations allow them to earn multiple income streams, irrespective of the actual location of production.
• Net exporters of high technology, high value goods and services
  • These countries are net exporters of high technology, high value goods and services.
  • This helps most of them run a current account surplus and invest in research, improving their factor productivity and profits.
• Presence of large multinational banks
  • Commercial bank balance sheets are often as large or sometimes even larger than their home countries’ GDP.
    • For instance: Switzerland, which has a GDP of $0.9 trillion and its two largest banks, UBS and Credit Suisse, have a combined balance sheet of over $1.8 trillion.
    • Similarly, in the Netherlands, whose GDP is about $1 trillion, the balance sheet of one of its banks, ABN Amro, is almost half that size.
  • While these banks run hundreds of billions worth of treasury and investment banking operations, they are instrumental in reducing the overall cost of capital.
  • This in turn leads to high standards of living, as households can enjoy credit-powered consumption.
  • Governments and firms can also raise cheap debt for capital expenditure and fashionable restructuring exercises.
• Powerful currencies and powerful central banks at the helm
  • The currencies of these countries contribute to a bulk of international currency trading and are used as ‘valuer currencies’ in international commodity trading.
  • This feature makes their central banks influential money magnets, controlling global capital flows through interest rate modulations.
  • This is why irrespective of their economy’s core competence, whether they host high-tech industries or commodity trading, their currencies are primary drivers of global capital markets.
• Active citizen groups that help organize their economies
  • Developed countries have active citizen groups that help organize their economies.
  • This means that the ‘right to responsibility’ ratio is stacked such that citizens take pride in giving precedence to ‘responsibility’ while building their nations.
  • Citizens of these countries have understood that ‘entitlements’ and ‘rights’ are mere offshoots of a responsible citizenry and that they are equally responsible for their countries.
• Successful in eradication of absolute poverty
  • Developed countries have successfully eradicated absolute poverty and provide some form of minimum living standard to their citizens.
  • Safety nets in terms of basic healthcare, minimum state-sponsored education and unemployment benefits are universally available.
  • The state is supplemented by active citizen groups in this endeavour and the direction of public policy is typically set through democratic processes at all levels.

Collective efforts are the way fṣorward for India to become a developed nation

• Given India’s growth prospects and the zeal of its citizens and policymakers alike, it has a realistic chance of meeting these goals over 25 years.
• But there is a need for sincere reflection and identification of the strategies needed to take up this challenge of making India a developed nation.
• While policymakers are already working on it, the citizen groups must come together and support the endeavour wholeheartedly through inputs and policy participation.

Conclusion

• India’s ambition to be a developed country can be a catalyst for national rejuvenation and change at every socio-economic level.
• However, this will not be possible until we realize that it must be a collective effort.

Source: Live Mint

Mains Question:

Q. Development is about transforming the lives of people and not just transforming economies which requires collective efforts of government, civil society, corporates and common citizenry. Elucidate (250 words).