- Renewed risks on the Economic Outlook for 2023-24
- Moral anchoring for a global climate policy is a must
On October 6, the Reserve Bank of India (RBI) maintained its GDP growth projection for the year at 6.5%. This outlook was based on a balance of factors. While there were risks stemming from geopolitical tensions, economic fragmentation, volatile financial markets, and an uneven monsoon, these were offset by the strengthening domestic demand.
Do you think that fresh global turmoil could cloud the economic outlook of India for rest of 2023-24? Support your argument with relevant illustrations. (15 marks, 250 words).
Relevance of the growth projection now
- In the weeks following this statement, new uncertainties have arisen. The Israel-Hamas conflict, which started just after the monetary policy review, has escalated, and concerns have been raised about its implications for global food, fuel, and fertilizer supplies, which could affect India’s macroeconomic framework.
- Additionally, rising U.S. bond yields, mixed data, and signals from central banks around the world have introduced further uncertainties. This unease was reflected in a significant stock market sell-off in India during the week.
- While the RBI’s outlook for growth was previously described as “evenly balanced,” there is no guarantee that this perspective will remain the same.
Stance of the government on the above uncertainties
- The Finance Ministry, despite acknowledging global uncertainties, appears to be relatively optimistic about the country’s economic outlook for the time being.
- In its monthly economic report published on Monday, it affirms that economic growth is still progressing as planned.
- Inflation is subsiding following a temporary surge in July and August, and there is a strengthening in both consumption and investment demand.
- Addressing concerns about the imminent rise in crude oil prices, it points out that prices in the July to September quarter are considerably lower than the averages of $109.5 and $97.9 in the first and second quarters of the 2022-23 fiscal year.
- The unfavorable foreign trade situation is expected to improve, and there are optimistic prospects for job creation in the industrial sector over the next two quarters.
- The increased demand for housing and vehicle loans reflects growing confidence among households.
While India’s macroeconomic fundamentals seem resilient in the face of the current global challenges, the government should delve deeper into trends in consumption and employment. In the last quarter, there has been a significant decline in small car sales, and producers of consumer non-durable goods have reported weak demand in rural areas. IT companies have also scaled back their growth and hiring expectations. There is still much work to be done to rectify the uneven recovery, which could ultimately impede a more comprehensive investment resurgence.
In the face of the climate crisis, it is imperative that we reassess our approach to development and reject anything that harms the environment. We have a profound connection with our planet, as the intricate web of life continues to unfold with each breath we take and every step we take on its soil.
- GS3- Environment
- GS4- Ethics
The moral anchoring for a global climate policy today is a must for India. Comment. (10 marks, 150 words).
Morality in a world faced with climate change
In a world where climate change poses an existential threat that transcends borders, it raises questions about whether the moral constructs of nation-state order in the modern world, the philosophical foundations of political systems, the concepts of rights, freedoms, and justice that underpin the world’s constitutions, and the principles of economic theory used in contemporary policy-making are robust and persuasive enough to inspire a unified response from humanity.
Philosophical Understanding of the Environmental Issues:
A New Perspective for a Warming Planet:
- The bedrock of modern political thought, which emerged during the Enlightenment and subsequent eras, was shaped by influential thinkers like Thomas Hobbes, John Locke, Rousseau, Adam Smith, John Stuart Mill, John Rawls, and others.
- The ideas of rights, liberty, and justice, which aimed to nurture human lives, were built on the premise that ethical behavior, avoiding harm to others, forms the foundation of our social systems.
- The utilitarian perspective, which emphasized maximizing the greatest good for all as a goal, evolved to consider the fairness of means as well.
Emissions as Externalities
In economics, the concept of externality refers to the unintended side effects or consequences of an activity that affect third parties who did not choose to be involved in that activity. Moreover, externalities are not factored into the cost of the goods or services involved.
Guiding the “Invisible Hand”
- Free markets are celebrated for their ability to self-regulate, a concept referred to as the “invisible hand” by Adam Smith, where individuals pursuing their self-interest contribute to the overall well-being of society. However, Smith’s proposition relies on the moral foundations of individuals participating in market activities.
- The recent subprime crisis demonstrated that, at times, government intervention is necessary beyond the invisible hand. Additionally, the timing of such interventions is crucial.
Issues with the above perspectives
While these ideas have greatly contributed to shaping modern political theory, they are primarily anthropocentric and struggle to account for the well-being and interests of non-human entities. Furthermore, they fall short of explaining humanity’s relationship with its environment.
Way Forward based on the above philosophies:
- A political philosophy for a global system grappling with climate change must adopt a framework where utility is defined in a broader sense, inclusive of the impacts on both living and non-living elements of the environment.
- The right to life, a key element in the majority of the world’s constitutions, needs to be redefined to encompass threats arising from emissions, and a global legal framework is urgently needed to ensure fairness and justice for all those affected by climate change.
- Given the world’s pursuit of time-bound targets for achieving net-zero emissions, governments must intervene to create market mechanisms conducive to climate action.
- Left to their own devices, markets may be slow to respond, a luxury the already warming world cannot afford. As John Maynard Keynes famously stated, “In the long run, we are all dead.” He advocated for government spending during the Great Depression, rather than relying solely on markets to correct course.
- The climate impacts of consuming goods and services must be taken into account for climate change mitigation.
- A robust system for carbon pricing is essential, and until such a mechanism matures, the introduction of emissions labels on products would convey the right signals.
Since the Industrial Revolution, the world has been tirelessly striving for wealth and prosperity, undoubtedly leading to improvements in our lives in many ways. However, with the planet facing the climate crisis, it is imperative that we reevaluate our motivations for development, and the world’s institutional mechanisms tasked with addressing the climate crisis should be guided by humanity’s inherent moral instincts.