Editorial 1 : Powering America

Context: What Donald Trump needs to understand about Indian labour, migrants.

History of Migration

• Pre-20th Century Norms
  1. Migration was a natural phenomenon with no distinction between “legal” and “illegal” migrants.
  2. Nation-states introduced visas and border controls in the 20th century, reshaping global movement.
• Colonial Legacy: European colonization of the Americas relied on migration, contrasting modern restrictions faced by migrants from former colonies like India.

Socio-Economic Critique of Middle-Class Morality

• Hypocrisy in Attitudes
  1. Trump supporters (descendants of migrants) criticize today’s “illegal” migrants, ignoring their own ancestors’ unregulated migration.
  2. Middle-class India condemns illegal migration while pursuing legal visas for similar aspirational goals.
• Class Divide in Migration
  1. Elites & Middle Class: Use education, wealth, and influence to secure legal entry.
  2. Illegal Migrants: Rely on financial resources and physical endurance due to lack of access to legal pathways.

Legal and Economic Realities

• Deportation Dynamics: Indian deportees from the US violate US laws, not Indian laws. Exit from India is legal, unlike tax-evading elites who leave India lawfully but exploit global tax havens.
• Economic Contributions
  1. Skilled Migration: Indian talent (IT, healthcare, etc.) has powered the US economy for decades.
  2. Global Capability Centres: Indian professionals in India working for US firms boost US competitiveness through cost-effective labour.

India’s Strategic Response to US Trade & Migration Policies

• Trade Relations
  1. Imbalance: India exports goods/services and skilled labour to the US but gains limited access to advanced technologies.
  2. Need for Comprehensive Analysis: India should quantify its contributions to the US economy (e.g. value addition by Indian workers in the US and Indian employees of US firms).
• Countering Trump’s Zero-Sum Approach
  1. Challenge Tariff & Trade Complaints: Highlight India’s role in enhancing US economic growth and innovation.
  2. Reject Win-Lose Framing: Advocate for mutual benefits instead of conceding to Trump’s America First unilateralism.

Defence Policy and Strategic Autonomy

• Atmanirbharata in Defence
  1. Reduce reliance on US defence sales to avoid strategic dependency.
  2. Decouple defence relations from trade disputes to preserve autonomy.
• US-India Defence Cooperation
  1. Current ties are transactional (sales-driven), not collaborative.
  2. Linking defence sales to trade negotiations risks undermining India’s self-reliance goals.

Way Forward: Recommendations for India

• Diplomatic Clarity: Assert that US policies must not harm Indian interests (e.g. unfair tariffs, visa restrictions).
• Narrative Shift: Publicize India’s economic contributions to the US to counter negative stereotypes of migrants.
• Policy Coordination: Strengthen domestic talent retention strategies while leveraging diaspora influence in the US.

Conclusion: India’s role in US growth warrants reciprocal respect in trade talks. India must prioritize self-reliance and reject transactional US demands.

Editorial 2 : The Missing Growth Strategy

Context: India’s transition to a high-income country is riddled with unknowns.

Introduction: In 2007, India joined the ranks of middle-income countries, classified, to be precise, as a lower middle-income economy. Almost 18 years later, it remains in that category. Over these years, the country’s per capita income has risen from $1,022 to about $2,700. Some have argued that if a country remains a lower middle-income economy for 28 years, then it is caught in a lower middle-income trap.

Projections

• The per capital income required for India to join the ranks of upper-middle-income countries is $4,516. 
• Moving up to this category does seem possible in a decade, though not by the end of this decade.
• The IMF expects India’s per capita income to touch $4,195 by 2029.
• Target to become a high-income economy (per capita income >$10,000) within two decades.

Regional Disparities in Development

• High-Performing States (South/West)
  1. Leading States
     • Telangana, with a per capita income of around $4,306, will probably be the first to achieve that status in the next few years, followed by Karnataka ($4,021), Haryana ($3,934) and Tamil Nadu ($3,807). With an average income of $5,579.
     • Delhi can already be classified as upper middle income.
  2. Growth Drivers
     • Diversified economic activities (low-cost manufacturing to high-end services).
     • Investments in semiconductor units, IT, automotive, and skilled services.
     • Benefiting from Production-Linked Incentive (PLI) schemes and capital/labour inflows.
• Lagging States (East/Central)
  1. Examples: Bihar ($729), Chhattisgarh ($1780), West Bengal ($1861) and Odisha ($1970), moving towards the upper middle-income levels for these states will be a difficult journey.
  2. Challenges
     • Lack of manufacturing/services base.
     • reliance on primary sectors (mining, agriculture).
     • Limited job creation and technological capabilities.

The Middle-Income Trap: Dual Challenges

1. Key Risks: Rising wages, labour shortages, and competition in higher value-added sectors.
2. Requirements
   • Develop technological capabilities and sustain export competitiveness.
   • Avoid stagnation (e.g., China’s struggle to transition to high-income status).
     • For Lagging States
3. Structural Hurdles: Weak infrastructure, skill gaps, and policy neglect.
4. Political Economy Issue: Despite political representation, limited focus on economic upliftment.

Strategic Policy Imperatives

• Economic Diversification
  1. Operate across the ‘smile curve’ (low-value manufacturing to high-end R&D/services).
  2. Example: Telangana’s focus on IT and Karnataka’s semiconductor investments.
• Trade and Industrial Policies
  1. Debate: Protectionism (e.g. import substitution) vs. freer trade.
  2. National Champions Strategy: Risks stifling competition; need for SME support.
• Institutional Development: Strengthen education, R&D, and governance frameworks.

Political and Governance Challenges

• Divergence of Power
  1. Wealthier states (South/West) contribute more economically but have less political influence.
  2. Risk of policy misalignment (e.g. redistribution ≠ growth strategy).
• Need for Inclusive Growth: Targeted investments in lagging states’ infrastructure and skill development.

Way Forward and Conclusion

• Indian economy has grown at an average of around 6 per cent over the past three decades. And that this growth has been largely maintained despite the ups and downs of the economy under both coalition and majority governments, in the face of a global financial crisis and a pandemic.
• Well-thought-out policies are needed to even sustain the growth of 6% growth for next two-decades, let alone an 8% growth trajectory needed to achieve high-income status.
• The history of the world is littered with examples of countries whose growth has stalled, whose economies have failed to make the transition from upper-middle-income to high-income status.
• This calls for a careful evaluation of economic policy as getting caught in the middle-income trap will be a failure of governance.