The World Economic Forum in Davos was a pessimistic conference this year and a harbinger of the global economic crisis.
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The annual World Economic Forum in Davos, an international economic conference, was more pessimistic than expected this year. Prominent leaders like US President Donald Trump, Chinese President Xi Jinping and Indian Prime Minister Narendra Modi, who were present last year, were absent from this year's conference. Also, the International Monetary Fund released a report on slow global growth, predicting a bleak future for 2019.
Attending the conference in Davos are representatives of the rich around the world. So the economic statistics that say the rich got richer than last year will be comforting to this class. But this time there was one more thing that stood out. That is, the growing inequality between the rich and the poor and its consequences have led many to anticipate future dangers.
Last year, Xi Jinping and Narendra Modi supported globalization in their speeches, but this year, the audience felt that a crisis was emerging. Globalization flourished during the period 1990-2010, but now the pace of globalization has slowed down. Overseas investment, trade, bank lending, and supply of goods appear to have slowed or increased. During the period of globalization, the system of transporting goods using ships was changed to air transport, which made transportation cheaper, reduced taxes and liberalized the economy.
The 'telecom revolution' has made phone calls much cheaper, which has facilitated globalization. In the Western world, there has been a lot of change, with CEOs increasing their salaries, albeit not as much as CEOs. This resulted in an increase in the cost of manufacturing the goods and exporting them worldwide. Also, MNCs have been challenged by local producers and this competition has reduced their profits, so such markets no longer attract MNCs. As a result, foreign investment fell by 20 per cent, while regionalism and services grew.
The slowdown in globalization has led to trade wars between the US and China, as well as between the US and the EU. The slowdown in annual GDP growth of both China and the European Union is not a good thing for India's exports.
In 2018, India's exports had already slowed down. The EU is an important market for India and China and the EU buys a large amount of raw materials from India. The decline in trade between the US and China may benefit some manufacturers by boosting their exports, but India will benefit less from this position compared to China's free trade partners. I think China will buy from them whatever it needs. India could increase exports of some agricultural products to China, such as soybeans and cotton.
Seth A., a well-known American investor. Clarman wrote a letter to all who attended the meeting in Davos, in which he warned of the growing sense of political and social division among people around the world and the danger that this could lead to an economic catastrophe. "It is not possible to do business as usual amidst constant protests, riots, shutdowns and rising tensions," he wrote. He suggested that the society should be united for those who have capital to invest. India should take note of this.
He points out that after the economic crisis of 2008-2017, the national debt of all developed countries, including all other countries, has increased. India is also one of these countries, with a high national debt to annual gross domestic product (GDP) ratio of 70 per cent. This is also an unstable situation. In addition to repaying the debt, the government has to pay a large amount of interest, and some of the funds set aside for social activities are used here. Already, funding for social initiatives is scarce. This high debt ratio will be a deterrent for foreign investors. India aims to reduce the debt-to-annual gross domestic product (GDP) ratio by 40 per cent by 2023, while the states will try to reduce the debt-to-annual gross domestic product (GDP) ratio by 20 per cent.
The high debt-to-income ratio of developed countries is more than 100 per cent, which has increased the disparity between income and wealth worldwide. At present, only 26 people in the world have a combined wealth of 3.8 billion people, which is part of the world's poorest population. The wealth that 44 people had last year is now concentrated in 26 people.
According to Oxfam, the rate of inequality in India is on the rise. In one year, 18 new billionaires were added to the existing list of billionaires in the country, bringing the total number of billionaires to 119. His net worth is estimated at рек 440.1 billion. This disparity is growing between the community of the top 1 per cent billionaires and the rest of the Indian population, with 1 per cent of the population owning 51.53 per cent of India's wealth. The bottom 60 per cent of the population owns 4.8 per cent of India's wealth. Such widespread inequality is dangerous and capable of destabilizing democracy, Oxfam said. Between 2018 and 2022, 70 new millionaires will be created every day in India.
According to Oxfam, the biggest impact of growing economic inequality will be on girls and women as the cost of childbirth, childbirth and general health care will also decrease in poor families. If 0.5% more tax is levied on the wealth of the richest 1%, the situation of women and girls can be improved. A higher tax of 0.5 per cent on them would be enough to increase the government's health spending in India by 50 per cent.
Closing the gap between the rich and the poor will be a major challenge for the government, as it will have to increase its investment in the public sector to enable the poor to earn a decent living. Growing inequality is contributing to social tensions and disrupting the country's economy, as the Gilets Jaunes movement in France has slowed growth and made the poor poorer.
When the fourth industrial revolution was discussed in Davos, the focus was on artificial intelligence and automation, so it became clear that the future was bleak in terms of jobs. In India, it would mean training people who have become unemployed due to automation and digitization. Training young people in low income groups will be a real challenge as they will need to be trained in government schools in the villages.
The problem of creating good quality jobs is facing many countries today. India can address this problem by focusing on and encouraging traditional industries such as textiles, textiles and food production, which will also create a lot of jobs for women.
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