The global risk landscape has become increasingly complex. How much at threat is India or will we ride this storm relatively unscathed as we did the global slowdown of 2008?
The global risk landscape is one where anthropogenic risks collide with natural risks due to which we are experiencing some profound and unprecedented changes. Urban migration, the nuclear age and natural hazards have generated problems that don’t have any conventional solutions. Related to these is the idea of risk-agility: the ability to find unconventional solutions to our current problems. India is very much a part of this landscape, and its ability to meet its growth objectives depends on being able to solve these problems.
A few years ago in Canada, lightning caused a fire that resulted in 25 per cent of the country’s oil exports being shut down. In the US, two major nuclear plants were shut down in anticipation of the disaster to be caused by Hurricane Irma.
There were only a few mega cities in 1950, but in just about 10 years from now, there will be dozens and dozens of mega cities in Asia, mostly in China and India. The effect of this growth on agriculture or the landscape in general will be tremendous. The world is inter-connected in the social, economic and political spheres, and these connections manifest in the “wheel of misfortune”, as crisis in one region has the potential to snowball into a global disaster.
According to a survey by the World Economic Forum, some of the greatest concerns about doing business around the world are unemployment, asset bubbles and inter-state conflicts. For India, social instability, terrorist attacks and state of critical infrastructure might be major areas of concern. The WEF also asked people from around the world the co-relation between these factors and whether their economy is struggling. The good thing about India is that most Indians do not feel that their economy is struggling. But the question is how will India create jobs for the millions that will join the workforce in the coming years, especially in the age of artificial intelligence and automation?
International relations are changing like never before, as alliances are being forged and renegotiated. Despite being a NATO member, Turkey struck an arms deal with Russia. The Philippines, a traditional US ally, is allying with China.
Regional powers are pursuing supremacy and they are competing with one another like never before. The Asian Development Bank has competition from the Asian Infrastructure Bank. Aung San Suu Kyi’s puzzling stance on the Rohingya crisis, the polarisation of US politics after Donald Trump’s win, the influence of Vladimir Putin and the rise of China show how unpredictable international affairs are. China’s tendency to rewrite international norms and Russia’s covert power, as evident in the alleged rigging of the US presidential polls, will be a challenge for India and other countries.
India, though, is to be commended for a realistic, flexible and foresightful approach to its foreign policy. Vis-à-vis China, it is admirable that India has said that it doesn’t care much for the One Belt One Road (OBOR) project. To my knowledge, no other country has said that. India’s non-aligned movement also puts it in a position to take an honest stand in international politics.
On the economic front, ever since Mr Modi has come to power, India has become more competitive, with dramatic improvement in infrastructure or labour market. If we look at the WEF’s Global Competitiveness Index, India is at 39th position out of 138 countries. Yet, India is in the middle range for most of the indices of the overall index and it can certainly do better. The WEF also asked the business communities around the world what they thought of investing in India and the biggest impediments of doing business here. The positives were access to financing and an educated workforce, while taxation and corruption were areas of concern.
But India hasn’t fared well on World Bank’s ease-of-doing-business rankings, being placed at 130 among 190 countries. In terms of GDP, India compares more or less with Brazil and Italy. But India ranks ninth in the world in terms of nominal GDP and the Economist Intelligence Unit believes that by 2050, India’s economy will be the third largest in the world. How judiciously India utilises the revenue generated from this growth will determine its future.
India has also had to contend with terrorism for decades. Since 2007, there has been a five-fold increase in terrorism in India. Naxalism and the Kashmir insurgency have been major impediments for the country’s growth in spite of the best efforts of the government. In terms of business climate, potential investors do consider such situations.
Virtual terrorism is only next to physical attacks in terms of its impact, considering the digitisation of all aspects of trade and commerce. The more we interact in the virtual word, the more vulnerable we become to cyber-attacks. With the increased incidence of such attacks, companies and banks have had to make separate provisions for cyber security. Individuals are particularly at risk, given how we have become addicted to baring our private selves on social media. In this context, the Aadhaar project assumes particular importance because of the size and significance of the data. It would be relevant to point out that in 2011, the entire biometric database of the people of Israel was stolen.
India is also at risk of natural disasters. As per OECD data, coastal cities like Kolkata and Mumbai are among the top 10 cities of the world whose physical assets and people are at most risk from natural disasters like cyclones and earthquakes. According to OECD, cities like Mumbai being financial centres, the impact of a major natural disaster can have far-reaching consequences on the country’s economy.
Ultimately any country’s ability to innovate and turn good ideas into something transformational is going to make a difference in this hyper-competitive world. Certainly India is very well-placed to do this, with its expertise in science and technology. India has every reason to be proud of where it is and where it is going. I am optimistic about India’s future, and with some transformational thinking, there are reasons to believe that India will be an economic and political power-house in the next century.
About the author:
Daniel Wagner is the managing director of risk solutions for Risk Cooperative and author of the new book “Virtual Terror”. He was previously the CEO of Country Risk Solutions, a cross-border risk advisory firm. He has also published more than 500 articles on current affairs and risk management.