Ans-
What is the Issue ?
In the last 5 years
● The world has seen 3 successive waves affecting global growth and shaking the confidence of people.
● The world has seen 3 successive waves affecting global growth and shaking the confidence of people.
● Governments, administrators and
policymakers are still struggling
with various policy options to
minimise the impact of the waves
of challenge to growth.
1. WAVE #1
US-China trade war (2018-2019)
● Trade dispute between two of the
world’s largest economies — the US
and China With both sides imposing tariffs and
retaliatory tariffs.
● Donald Trump's steel and aluminium tariffs.
In May 2018, Trump (then president) announced a
25% tariff on all steel imports, and 10% on aluminium.
● Reason: Taxing foreign steel and aluminium will
mean US companies will buy local steel instead.
Protectionism in a Globalised World :
● Protectionism is the economic
policy of restricting imports from
other countries through methods
such as tariffs on imported
goods, import quotas, and a
variety of other government
regulations.
● Objective: Boost your country's
industry + shield it from foreign
competition.
Argument on Protectionism -
Protectionism is Good
● Protectionism policies can help to
create domestic jobs
● Increase gross domestic product
(GDP), and
● Make a domestic economy more
competitive globally.
Protectionism is Bad
● Over the long term, protectionism
often hurts the people and entities it
is intended to protect by slowing
economic growth.
● Lack of competition leads to
increase in price inflation,
● Leads to fall in quality of service
delivery due to lack of competition.
Positive Impact of Protectionism: Example
● US-China bilateral trade conflict
allowed US importers and Asian
exporters to gradually adapt to
the new trading environment
even in very new sectors.
● Example: Semiconductor trade
is a case in point.
➔ No one wins a trade war
➔ Some diversion of trade may
temporarily benefit some
countries.
➔ But Tariff reversals usually
take years to unwind
especially in a slow growth
environment.
What is Currency manipulation ?
➔ Currency manipulation is a
policy used by
governments and central
banks of certain countries
to artificially lower the
value of their currency (in
turn lowering the cost of
their exports) to gain an
unfair competitive
advantage.
Impact on the Macroeconomic Stability of India
1.Inflation
● Both Currency manipulation and
Protectionism limits the choices of
consumers.
● Global competition is a key factor
in keeping the price of numerous
goods and products down and
gives consumers the ability to
spend.
2.Economic growth
● Protectionism leads to increased
import costs as manufacturers and
producers have to pay more for
equipment, commodities, and
intermediate products from foreign
markets.
● This will lead to decrease in real
GDP.
3.Impact on Industries
● Protectionism may promote
inefficiencies as industries will
have no motivation to make
itself efficient through use of
technology and long-term
investments.
4.Impact on Export & Employment
● In 2018-19, RBI said that
protectionism poses challenge to
India’s growth rate, because it affects
the demand of Indian exports,
especially in the textile,
pharmaceutical, gems-jewellery and
service sector.
● This will lead to employment generation capacity of the sectors.
● This will lead to employment generation capacity of the sectors.
What must India do as a Developing Country ?
Way Forward -
● India is balancing between
liberalising India’s economy &
Protectionism policies
(Aatmanirbhar Bharat)
● Reason: We need to nurture our
domestic industries as well as
promote our liberal economic
policy.
2.WAVE #2
Covid-19 pandemic (2020-2021)
● Covid-19 Pandemic not only led to a global
health crisis but also devastated the
economic well-being of individuals and
nations.
● National lockdowns
● Restrictions on movement of
people
● Alarming dislocation of global
shipping and transportation
● Disruption in supply chains
We saw massive loss of human lives,
loss of jobs and incomes, closure of
businesses, stalled investments,
contraction in trade and sharp
de-growth of economies.
Steps Taken:
● Govts and central bankers
initiated a series of fiscal,
monetary and administrative
measures
● Life began to normalise in the
second half of 2021
● A sense of gloom gradually gave
way to cautious optimism
3.WAVE #3
Russia-Ukraine Conflict (2022)
● Russia-Ukraine conflict polarised nations
● Sanctions imposed on Russia but Europe is
constrained to trade with Russia given its
dependence on Russian supply of natural gas.
● The Russia-Ukraine war has
caused major disruption in
supplies of energy, fertiliser,
food and metals from the Black
Sea region.
● There is now a supply-demand
mismatch in several key
commodities leading to
heightened levels of inflation in
developed and emerging
nations.
Global Impact of all the Three Waves
● Central bankers have faced the classic
growth versus inflation dilemma.
● Major economic challenges including
high inflation, high energy prices,
sharply rising interest rates and
unprecedented dollar strength.
● The dollar is now at a 20-year high while
emerging market currencies have
depreciated.
● A weaker currency makes imports so
much more expensive.
Growth slowdown will have consequences for global demand, trade and investment.
Thank you sir for this type of important topic 🙏 please make more like this 💐💐💐🙏
ReplyDelete