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The Indian Economy 2010 to 2017: A study of the Spectacular Jig-Saw

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Authors: Krishna Raghav Chaturvedi & Vikas

Economics is a strange subject. There are many ways to define economics. The father of Economics Adam Smith characterized Economics as “An inquiry into the nature and cause of wealth of nations”. However, there is no concrete definition as no single definition is globally accepted.

So it’s prudent to have an idea about what Economics is rather than looking for a definition. The stretch of economics is vast. It may talk about some rare yet valuable source like diamond and also vastly abundant resources like air. By virtue of its scarcity, a diamond is priced high and as air is abundant so it has no price. But while we can live without diamonds, can we live without air? No doubt, this is why air is priceless and people are yet to put a price on air. Adam Smith’s studies showed that “the things which have greater value in exchange has almost negligible value in use and vice versa”. Another example water, it has great value for us. We can’t live without it, but hardly can we buy anything by bartering it. But as the human tendency is to care for scarce more so Economics and by extension, economists talk about scarcity more often than not. This is where sometimes, even a learned Economist falters in his quest to understand “real economics” and finds the need to go back to his books. At other times, even a less literate chai-walla comes up with the most ingenious of the solutions to the most typical of challenges. This may be because we tend to see “Economics” as a subject, like Physics, Chemistry or Biology with some rigid laws and theorems. However, even the laws of Physics seem to change in certain cases. Economics, on the other hand, can and should never be seen in isolation. There is caste economics, political economics, regional economics, behavioral economics, national economics, sub-divisional economics and much more. This is where many economists fail and this is where some from the real grass roots really shine.

There has been a lot of buzz about the recent slowdown in the Indian GDP growth. While the GDP growth slowdown can certainly be linked to the twin shocks of Demonetization and the implementation of the Goods & Services tax (GST), critics of the present dispensation are presenting it as an Armageddon. Yes, Economy is Economics at play in a certain region, the certain region here in question being India. Demonetization was a behavioral change and the GST, a structural change. Such radical and far reaching changes are going to have an impact on the economy and yes, they have had their pound of the flesh. But to decry the entire process and denounce the present ruling dispensation as inept requires a special kind of narrow mindedness and selective criticism, a behavioral trait that is common with the critics of the ruling political party of India, the Bhartiya Janta Party (BJP) and its leader, Shri Narendra Modi.

True, as the critics claim, the economic growth has slowed. True, jobs are been created at an abysmal rate. True, present government measure’s aimed at boosting manufacturing (Make in India) and promoting job creation (Start-up India, MUDRA etc.) have failed, some quite spectacularly. True, these signs do not bode well for the Indian economy, nor in the short term and certainly never will in the long run. Yes, the ruling National Democratic Alliance (NDA) is at fault here. But not for making a mess of the economy, for which their predecessor, the United Progressive Alliance (UPA) deserves full credit but for failing to bring out a white paper on the state of the economy when they took the reins of the Indian Government in 2014. For failing to show the public the true grim picture of which the UPA government left us in and the hell hole we had dug for ourselves with continuous tax evasion, black marketing and numerous scams which had dominated the public discourse (2G, Coalgate etc.) before 2014. And this is why, their defense of this lag in growth is being questioned and this is why, the present ruling dispensation and the prime minister, Shri Narendra Modi and his finance Minister, Shri Arun Jaitley must provide answers.

While this article can be far from a white paper on the state of the Indian economy in 2014 at time of the transition from the UPA to the NDA, it will no doubt portray the truth of the times and endeavor to expose the fallacies of both for the time period 2010-2017.

While GDP growth has often and more often, wrongly, cited as the criteria for growth of a country, such a calculation is far from perfect and there is a pertinent need to align growth with human parameters like living Indexes, Education, Distribution of Wealth rather than only the gross domestic value of all products and services in a country. Recently, a quarterly GDP “Growth rate” of 5.7% is cited as a slowdown (true, it a slowdown but only temporary) or a “crash landing” recession (though I doubt the critics claiming this even know the meaning of a recession).  Such irrational and biased thinking is uncalled for and while, there is truth that the GDP growth has slowed, it is nowhere near the Armageddon being projected by the critics, prominent among which is the former Prime Minister of India and a very noted economist, Dr. Manmohan Singh-ji. He claimed and quoted that the GDP will suffer a contraction by atleast 2% points in wake of the Demonetization exercise. The Demonetization, an exercise in which the current Indian Prime Minister, Shri Narendra Modi-ji effectively made approx. 85% of the Indian currency redundant in a bid to attack black money hoarders, formalize the economy, cripple naxalism & terrorism, promote a cash-less economy, a digital economy and send out a strong message to the common people of India that the present ruling dispensation is serious in its bid to curb corruption.   

While complete picture of the after-effects of the exercise is yet to be revealed, one thing is clear. Dr Manmohan Singh-ji was wrong. NO, the economy did not decline. No, it is neither prudent nor good economics to declare Demonetization a failure. But yes, as per the IT returns data, more taxpayers are now part of the formal economy. Certain news (unverified) emerged that poor people hired as mules to convert ill-gotten cash of some corrupt folk defrauded them of their wealth. Some mules completely decamped with the money of the corrupt. In my hometown, the state capital of India’s most populous sub-division, for the entire 50 day duration of cash exchange, not a single laborer was found in want of work. All had been hired to exchange cash from multiple banks in lieu of a daily wage. Shri Arun Shourie-ji, a noted economist and a past supporter of PM Modi has called the demonetization as the world’s biggest money-laundering scheme, I have no qualms in saying that it is indeed the world’s biggest public redistribution of wealth. While there is no reliable parameter to gauge corruption, one thing is for certain, the wrong doers will now have to think twice before thinking about stashing away their ill-gotten cash.

Inflation is an important parameter in a country’s economic growth. While the word may ring some negative connotations in our mind when heard of, it is not all bad. Like everything, too much of inflation is bad. It retards growth as buyers defer or cancel purchases as the products are too expensive, strangling the manufacturing and slowing the economy. Too little of inflation or negative inflation (Deflation) is also bad, as purchasers for various goods and services are hit by complacency, postponing purchases in hopes of more fall in prices, further constraining the demand and causing more fall in prices. Lower-than-expected inflation furthers the actual burden of debts. The lenders may benefit. However as they are more likely to save than borrowers, demand is overall reduced. It also increases rigidity in the human resources market. Workers are resistant to wage cuts in their wages, but inflation lets firms cut real wages by freezing pay in nominal terms. Deflation, by contrast, makes this problem worse (The Economist, Jan 2015).  Hence, there is a need to hit the sweet spot, the right value of inflation that will ensure not only growth but also, cost less of the citizens of the state.

It is evident here from the presented data that the inflation under the UPA government was high (at least twice and possible more in the double digits). This is a cause of concern. Here this is why it is cause of concern. Suppose you earn a hundred rupee per month (GDP). Your expenses are also a hundred rupees. Now, if in the next your wage registers a growth of 8% (GDP Growth) i.e. it becomes a 108 rupees, is it a cause of jubilation? Certainly yes but then you realize that your expenses have risen by 10% (inflation). Simply said, nominal growth reduced to the base year is the real growth. This is where the current critics, especially, the former Finance Minister, Shri P. Chidambaram are wrong. In his time under UPA, the growth rate of April-June quarter of 2014 (the transition from UPA to NDA), the existent gap between real and nominal GDP was as high (by some calculations, as high as 6.5% (Jagannathan, Jun 2015, Firstpost)). Simply put, half the growth under UPA was pure inflation. This gap started to narrow every quarter after the NDA took charge, falling to 5.2 percent in Q2, 1.5 percent in Q3 and finally to a minuscule 0.2 percent in Q4 of 2015. This Narrowing of the gap between the real and the nominal growth rates tells us exactly two stories – a positive one about the NDA’s and Modi’s big success in killing inflation even when the monsoons were weak and a comparatively less positive one on the industry’s inability to raise prices – which is good for consumers, but bad for profitability, investment and market wealth creation.

Share markets are a virtual representation of growth of the top companies of the country. Seen here is a growth of the Indian Bombay Stock Exchange for the period of 2012-2017. It must be noted that fluctuations in the stock market can have a profound economic impact on the country’s economy and everyday lives of people. A collapse in the share prices has the potential to cause widespread economic disruption. Most famous of this all is the stock market crash of 1929 which triggered the great depression of the 1930s. In everyday terms, the stock market directly impacts the people’s wealth creation, pension funds, investor confidence and further critical investment. The Indian stock market has bloomed and touched new heights under the present ruling dispensation. The critics have been quick to point out that such a growth is meaningless until it is evident on the ground. Yes, exports have reduced. But unlike what the critics portray, exports have not been hit as hard by the twin shocks and while data for 2017 is yet to come, it is a general feeling that growth will observed as already, the numbers are too low to fall any further. There are reports that Indian exports have risen for the 12th straight month, touching just over USD 21 billion in the month of September (partially propelled by the phenomenal growth of Petroleum products and Chemical products export). Pessimists, however, in their bid to defame the ruling government would also like to point that our imports are increasing too. True, our imports have reached a near high of approx. USD 33 Billion (again a major chunk of the import is crude oil and gold). But on the bright side, our foreign exchange reserves have reached an all-time of USD 400 billion.

Such a huge cash pile is enough to cover for all imports for over 10 months and possibly more.  Also, while it is true that the current account deficit has widened in the past four months, it is nowhere near as severe as the royal mess we were in the past. Even in the recent months, the CAD anomaly is mainly due to a sharp uptick in Gold imports (thank you Indian Aunties, who allegedly own more gold than most sovereign nations).

Pessimists are also pointing towards a lack of private spending and need for investment from alternative sources. Private investment in the country is hampered by the twin balance sheet problem (courtesy the past regime) and ever worsening NPA crisis, which restricts a financial institution’s lending ability (again, Thank you UPA). Yes, merchandise exports have fallen a bit and lending has taken a minor hit but this is reaction of the system adjusting to the changes, nothing more.

As stated earlier, GST was a structural change, revamping and overhauling the entire Indian indirect tax system. Modi deserves full points for his efforts to get a country as politically and culturally diverse as India on a single table and pass a radical bill like GST. While he was a chief minister in Gujarat, he found the UPA proposed form of GST indigestible for his state, a major manufacturing powerhouse. As the Prime Minister, he has ensured that even after the implementation of GST, the states losing revenue will be compensated for a short-period to accrue additional sources of revenue. His critics call him a hypocrite but all he has shown is a true maturity. He took a radical idea, ironed out the rough edges. He made it practical for implementation and went out of his way to get his rivals onboard for the passing of the GST bill. The implementation, like all things rest, is full of glitches but the official mechanism is tackling the problem both reactively and proactively. The situation will only improve in the coming future. It’s hilarious how the critics of Modi and an army of online trolls venerate any and every source that speaks against the ruling dispensation but even calls a venerable organization like the World Bank “biased” because of its favorable outlook of the GST. Furthermore, the sales of two wheelers, certain cars has already been recorded higher than before and collections under GST are improving and meeting their targets. Yes, GST is working.

 The Demonetization was a necessary exercise. One can argue that the Indian economy was weak, or dead or hale & hearty but the timing was so perfect. With anyone even catching wind of his intentions and holding fast even when all seemed lost, in one stroke and by mere words, Modi had put the fear of law back into the corrupt. People were encouraged to come forward, report their ill-gotten cash, pay a stiff penalty and let bygones be bygones. Some did take this easy way out. This was a carrot. Now, it times for the stick. Shell corporations are identified. Action has already been taken against the directors of multiple shell companies established only to launder money. Any disproportionality of income and deposits if established, leads to a notice from the income tax department notice and further inquiry. It is painful. The Indian Income tax department like all its counterparts across the globe is despised and for good reason, it is a broadsword, not a scalpel. But we need a broadsword, now that corruption and tax evasion has become an everyday part in an Indian lives.

To conclude, while the Indian economy is slowed by the twin shocks, it is resilient and in capable hands. The pessimists may have their trends but things were bad, even worse before (in the UPA as evident by the data presented here) and now that things are finally starting to smoothen, we are bound to regain our top spot as the world’s fastest growing nation. The Indian economy is a jig-saw, complex pieces dominated by regions, cultures and festivals. It is a folly to see one in isolation or use the data of a 1-2 quarters and portend grim warnings. Diwali, the Indian festival of light is fast approaching. Let this occasion be the mark of a new India, an era of economic growth and prosperity for all. The UPA government, it too had its moments of glory and yes they were aplenty, had made a grand mess of the economy and its effects persist till this date. The lack of investment in roads and railways is costing us today in terms of time, lives and growth. Their numerous scams had bankrupted the country and virtually emptied our coffers. Modi is lucky. He only has to outperform a three legged donkey. It is up to him whether he will turn the Indian Economy into a prancing pony or a galloping steed. By the looks of it, we already are a prancing pony. But can he make us the galloping steed. Unfortunately, only time will answer this, with any certainty.


The author is neither an economist nor claims to be one.

Vikas is pursuing his PhD from the Department of Management Studies, Rajiv Gandhi Institute of Petroleum Technology, Jais

The views expressed by the authors above are personal. The authors declare that all sources used in the above article are freely accessible on the internet. The images are snapshots of existing accessible data, sources of which have been acknowledged beneath every image. The authors declare no competing financial interest.

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Economy

Omicron Variant: Implications on Global Economy

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The prolonged battering of the Covid-19 has been considerably hitting the world economy. While vaccination and a receding in the cases of the cases in virus transmission has provided   brief respite to   the countries that are grappling with the recurring surge of the virus, the resurfacing of another virulent   mutation termed as  Omicron sounds ominous for the future of the world economy .Against this backdrop, this article projects the plausible economic ramifications of the new strand of the virus on the global economy.

The economic downward trajectory occasioned by the Covid-19 has been unprecedented in recent global history. While the economic depression of 2007-08 proved disastrous for the world economy, the toll   emanating from Covid-19 pandemic and consequent   economic stagnation has surpassed all the previous   economic plunge .In fact, some analysts have gone to the extent of   comparing the Covid-19 induced economic depression with the great depression of the 1920s.However, whether the far reaching repercussions of the Covid-19 on the global economy will be as momentous is still remains to be seen. Nevertheless, the   profound   economic jolt triggered by the Covid-19 pandemic is poised to reverberate across the world through shaping socio-economic and political events

The scar inflicted by a protracted economic recession owing to Covid-19 is apparent in the arduous path of economic rejuvenation in the western countries and eastern countries alike. Virtually every country is grappling with the toll that Covid-19 has incurred in the economy. The western countries are finding it   difficult to retrieve the losses that Covid-19 has precipitated. Although the swift vaccination of the western countries at the expense of the developing countries has provided a fleeting lull in their battle against Covid-19,it seem however the virus has resurfaced with increasing virulence in order to offset whatever gain these embattled countries managed to garner in their fight against Covid-19.

The skyrocketing and unprecedented inflation of the western countries coupled with a plummeted consumer confidence has meant a prolonged period of stagnation of their economies. However, in the wake of vaccination induced temporary respite in the viral cases, the economies rebounded strongly from the pits of economic recession. However, these hard-earned   gains will be reversed in the event of the advent of any new strand of the virus. Already, the delta variant which originated in India had triggered a spate of Covid-19 flare-ups in the United   States and United Kingdom. Against this backdrop, the Omicron variant is set to aggravate the   economic woes of the western countries and in turn the world.

While the western countries are reeling from economic stagnation, the developing and underdeveloped countries are confronting many abysmal realities due to their prevailing economic backwardness. Their economic plight has been lingering in want of adequate vaccination due to the apathetic stance of the western countries and global governance institutions .Therefore, while the western countries has rebounded from the Covid-19 induces economic predicaments, the difficulties confronted by the developing countries has continued unabated. While the influence of advanced countries and their less advanced counterparts in world-economy is inextricably tied, the callous attitude of the developed countries to the vaccination of countries in Asia and South Asia turn out to   be sheer lack of economic prudence.

While western countries are considered as the economic hub of the world, it is however the developing countries on which the vital supply chains of the world economy hinges on. Therefore, the tardy pace of vaccination in these countries is prejudicial to the global economic stability. The economic ramification of the slow pace of vaccination is twofold for the world economy. Firstly, the slow vaccination hinders the revival of the economic activities in the developing countries thereby obstructing the supply chain of the commodities .This supply chain crisis has ripple effect in the western economies. The recent predicament of inflation and attending macroeconomic woes in countries like the United States and United Kingdom is manifestation of the supply chain crisis plaguing the world economy. Due to the paucity of commodities and raw materials, the prices of necessary goods has escalated in the western countries which has plummeted consumer confidence and triggered a vicious cycle of stagflation in the economy that is reminiscent of the 1970s when a similar crisis in oil supply has  precipitated economic downturn in the western economies.

Secondly, the slow rate of vaccination also run the risk of allowing the virus to mutating to newer and much virulent variants and due to the unfettered communication as a result of globalization the emergence of any new variant doesn’t remain in the confines of any border rather proliferate like wildfire and precipitate global crisis. Therefore, the lack of vaccination or slack pace therefore has global repercussions. Therefore, it is judicious of the developed countries to concentrate efforts in contributing to the vaccination of the less developed countries which will yield good results for their economy.

The ubiquitous mechanism in battling Covid-19 remains one of containment that entails halting economic and other activities and insulating the countries from other countries through imposing border controls, curbs on air communication and other stringent measures echoing protectionist attitude. However, these measures are antithetical to the spirit of the globalization and global trade. While lockdowns and other protectionist measures yield temporary improvement in the Covid  cases, it is not viable in the longer term. Besides, lockdowns have deleterious ramifications on the economy and further aggravate economic rebounding of the developed countries and developing countries alike. Therefore, efforts should be aimed at preventing the Covid cases rather than grappling with the Covid with a knee-jerk policy of improvisation. .

Moreover,Covid-19 has already occasioned far-reaching economic fallout in the world economy. Indications abound regarding the fact that the world economy is verging on profound and prolonged recession. Against the backdrop of ominous predictions and slackening growth and painful inflation of the world economy, the prospects of the world economy due the advent of a new variant remain mired in obscurity. It can be concluded that the economic repercussions of yet another novel variant will be momentous and will offset hard-earned growth of the countries .Unlike previous precedent of haphazard policy and knee-jerk policy solutions, this time around the countries need to undertake challenge much prudently and should concentrate all of their efforts aiming at universal vaccination of all countries so as to prevent the resurfacing of similar virulent viral strands.

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A Good Transport System Supercharges the Economic Engine

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The infrastructure bill in the U.S. has been signed into law.  At the American Society of Civil Engineers (ASCE), they are celebrating the fruition of a couple of decades, at least, of hard work publicizing the decaying infrastructure and lobbying for a fix-it bill.  Countless delegations have visited the White House and met with staff to present their case.  And something for their efforts is better than nothing. 

They also started a grading system, giving an overall grade — currently C minus, a notch above the previous one.  The bill seeks improvement in roads, bridges and transit although it falls short of the ASCE estimates for what is needed.  For example, the bill contains $39 billion for transit (ASCE grade of D minus) but there is a backlog of $176 billion that is needed.  Given Republican opposition to spending and the compromises made to pass the bill, the administration got what they could — they can always fight for more later. 

This opposition against infrastructure spending is somewhat incomprehensible because it generates jobs and grows the economy.  Too much spending, too fast has inflationary potential but that is caused by too much money chasing too few goods, usually not when there is a tangible product — improved transit, roads and bridges in this case.  And then there are also other ways of checking inflation. 

This bill is a start but still a long way from having high speed cross-country electric trains as in other major industrialized countries.  These are the least polluting and especially less than airplanes which emit six times more CO2 per passenger mile. 

Why is the U.S. so lagging in high-speed rail when compared with Europe and Japan?  Distances are one reason given although these are a function of time.  No one would have thought of commuting 30 miles each way to work in the 19th century but it is not uncommon now for some to be quite willing to sit 45 minutes each way on a train for the pleasure of living in the greenery of suburbia. 

The bill also includes $110 billion for roads and bridges.  Unfortunately the backlog of repair has left 42.7 percent of roads in sub-standard condition costing motorists an estimated $130 billion per year in extra vehicle repair and maintenance.  Some $435 billion is now needed to repair existing roads plus $125 billion for bridges, $120 billion for system expansion and $105 billion for system enhancements like increasing safety — a necessary improvement given a changing environment such as an increase in bicycle traffic.  Allowing for round-off discrepancies, the total amounts to $786 billion (in the funding and future need section of reference).  Increases in severe weather events have also had their effect, causing damage to roadways and further burdening the repair budget.  

New technologies (in the innovation section of reference) like advanced pavement monitoring on key roads, using moisture and temperature sensors embedded in the roadway, now make it possible to assess pavements quickly without impacting road users.  This leads to earlier repair and in addition new materials increase the life cycle.  Much of this requires increased investment up front to take advantage of the new innovations. 

Above all one can never afford to forget that a good transport system acts like a supercharger for the economic engine.

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Another Look at the Prospects of a Eurasian Digital Platform

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In view of the idiosyncratic features of Eurasia with respect to the gravity of distance, a common Eurasian platform for digital economic agreements may allow the region to attenuate the effects of distance and severe economic fragmentation — most notably in the regulatory sphere — emanating from the sheer size of Eurasia and the multiplicity of regional integration arrangements. By consolidating regional, bilateral, as well as corporate alliances, a common Eurasian digital platform would allow its members to introduce greater consistency and compatibility into the existing set of digital economic agreements, thus providing the conditions for multilateralising existing digital arrangements and for creating new digital economic accords.

One of the ways to create a digital “platform of platforms” for Eurasia that is to include platforms for regional integration arrangements, regional development banks and regional financing arrangements (RFAs) of the countries of Eurasia.

  • The platform for regional integration arrangements would work towards advancing greater inter-operability into the digital platforms of Eurasia’s regional groupings such as the EU, the EAEU, ASEAN, RCEP, EFTA, BIMSTEC, SAFTA, GCC.
  • The platform for regional development banks and funds such as EDB, EIB, ADB, EBRD, SDF, CAF would focus on building project portfolios in the area of digital cooperation/digital connectivity/digital inclusiveness and work to advance digital economic agreements (DEAs) on the basis of the existing digital arrangements concluded by countries such as Singapore.
  • The platform for regional financing arrangements (ESM, EFSD, Chiang Mai Initiative Multilateralization, Arab Monetary Fund) would focus on the coordination of anti-crisis measures, the creation of ex-ante anti-crisis response mechanisms based on the use of “big data” and forward looking indicators obtained through digital cooperation and data exchange.

These three platforms can reinforce one another and can be further complemented by country-level and corporate-level platforms to form a Eurasian ecosystem of digital cooperation and inter-operability.

Such a Eurasian “platform of platforms” is:

  • Digital: it advances digital cooperation, including digital trade at the level of countries and regions
  • Regional: it places particular emphasis on building cooperation in areas that have hitherto lacked coordination, namely among regional integration arrangements and their development institutions
  • Scalable: it can be replicated in other parts of the world as well as at the global level via creating a regional layer of global governance

The current economic framework in Eurasia is fragmented and lacks the digital connectivity that would be predicated on cross-country and cross-regional digital agreements. This in turn limits the capability of countries to coordinate policies in areas such as trade, migration, digital economy development. A common platform would address the issue of the “digital gap” across the countries of Eurasia via promoting greater “digital inclusivity”, most notably with respect to the low-income developing economies. Such a common digital platform for Eurasia may prove to be particularly important for land-locked developing countries that face notable geographical/logistic barriers to trade.

Indeed, of all of the different parts of the global economy Eurasia stands to benefit the most from greater digital connectivity and inclusivity, given the prominence of the “distance factor” that constrains the intensity of economic cooperation within the region. The gravity of distance is particularly costly for Eurasia’s land-locked economies — in fact Eurasia harbours 26 out of 44 (59%) of all of the world’s landlocked countries. Moreover, the scale of “inwardness” of some of the regions of Eurasia in terms of geographical location is truly unique, whereby Kazakhstan is the largest landlocked country in the world, while Bishkek is the farthest capital city from the coast in the world (all top-5 of the most distant capitals from the sea coast in the world are in Asia).

Existing research suggests that digital platforms may exert a sizeable effect in reducing the gravity of distance: as noted by Pierre-Louis Vézina, “distance between countries impedes international trade, but it matters 65% less for trade on the eBay platform than for traditional offline trade… The online world is flatter”. Yet another study focusing on the EU evaluated the importance of distance for e-commerce. This study of 721 regions in five countries of the European Union shows that while distance is not “dead” in e-commerce, there is evidence that express delivery in e-commerce reduces distance for cross-border demand.

Ways of measuring the effectiveness of a common platform would include the scale of liberalization and trade facilitation in digital trade across the Eurasian platform; increases in the size of the portfolio of joint investment projects related to the digital economy on the part of the region’s development institutions, increases in cross-border and cross-regional trade and investment associated with the digital economy. The number of multilateral digital economic agreements (DEAs) facilitated by the platform would be a measure of the contribution of the initiative to multilateralism. Another important metric is increases in connectivity arising from the creation of the platform — this would concern increases in digital connectivity/inclusivity, most notably in developing economies.

A common digital platform in Eurasia will serve to improve coordination across countries as well as regional integration arrangements and their development institutions. It will also serve to transform the landscape of trade agreements by facilitating the conclusion of digital economic agreements and multilateralising existing digital accords. The common platform will also advance international cooperation in the digital sphere and other areas pertaining to the Fourth Industrial Revolution to strengthen the response to the Covid pandemic and improve the region’s capabilities in the health care sphere as well as other areas pertaining to the development of human capital. A more cooperative framework for Eurasia that aims to emulate best practices and standards across the platform will also be conducive to longer-term cooperation, a more active use of ESG standards and greater emphasis placed on economic sustainability.

The creation of the Eurasian digital platform may be a step towards building a global network of cooperation on the basis of a “bottom-up” plurilateral cooperation among regional blocs rather than a “top-down” framework devised at the global level. Such an approach conforms with the principles contained in the WEF’s White paper on Globalization 4.0 that advocates the use of flexible plurilateral trade agreements as a way of further advancing trade openness in key areas, including in digital trade and e-commerce: “open plurilateral agreements of this nature are the most promising way available to update the trade rulebook without further fragmenting the world economy and weakening its crucial multilateral foundation”.

The formation of an open digital platform for Eurasia renders it amenable to replication at the level of not only regional arrangements, but also at the level of country-to-country cooperation as well as multilateral corporate platforms. An important aspect of the operation of such a platform is the principle of openness and inclusivity — whereby developing countries benefit from greater “digital inclusion” and the possibility to join digital alliances with advanced economies across Eurasia. In this way, the operation of such a platform contributes to a more sustainable and balanced economic paradigm across Eurasia.

From our partner RIAC

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