The World Economic Forum (WEF) released its ninth edition of the report Global Risks 2014 recently at Davos, where world leaders have gathered for the annual event. The aim of the report is to understand how global risks are evolving and how their interconnectedness may lead to unexpected consequences over the long-term.
Global Risks 2014 helps global leaders to better understand, manage and perhaps mitigate risks. The opinions of over 700 leaders and decision-makers from the WEF’s global multi-stakeholder community were sought and they arrived at 31 selected global risks. Economic and social issues topped the list of risks. These 31 risks are bracketed into five categories (economic, environmental, geopolitical, technological and societal) according to level of concern, likelihood and impact, and interconnections between them.
Find the top 10 risks that the world faces in the decade ahead and what these risks mean to India as a country. Read Part 1 of this article here.
6) Greater incidence of extreme weather events (e.g. floods, storms, fires):
Between 1993 and 2012, India suffered from many extreme weather events, ranking it 18th out of 178 countries that suffered loss of life and assets. This is according to data from the report Global Climate Risk Index 2014 published by Germanwatch. Since 1990, 3,255 people have died annually because of extreme weather changes. India has witnessed 325 “extreme weather” events in the last 18 years.
The country is particularly at risk because extreme events like floods and droughts will lead to large-scale migration and thousands becoming refugees. Besides, India is ill-equipped to handle environmental disasters, which might lead to food shortages, medical emergencies and social unrest. According to a report by risk consultancy firm Maplecroft, by 2025 India will be at ‘extreme risk’, when it comes to feeling the effects of climate change.
7) Global governance failure:
The failure of governance is very apparent in India in both political and corporate worlds. The UPA government had a good opportunity to guide India into a bright economic future and stabilize the country socially by making good on its promise of inclusive growth. But bad governance has derailed most of the good work done in earlier years.
Corporate malfeasance was everywhere: Ranbaxy was sued in the US for dodgy practices and Infosys, known for its squeaky clean image, was not spared either, fined by the US government for its visa irregularities. This lack of good governance, largely driven by a vacuum in good leadership is hurting the country morally, socially, politically and economically.
8) Food crises:
Everyday 3,000 children die in India due to hunger. There are thousands more who don’t get enough to eat. More than 42 percent of Indian children under are malnourished; this is double the percentage of children in Sub-Saharan Africa.
Out of 118 countries, India ranks a lowly 98th on the global hunger index, with 214 million people going hungry. This is not only because of extreme poverty but also due to the fact that the public distribution system in the country is inefficient. So even though there’s a bumper crop, the government does not have warehouses to store the grains and the mechanism to distribute it to the hungry. Another big issue is that of rising prices and a high rate of food inflation.
9) Failure of a major financial mechanism/institution:
Indian banks have been able to absorb both domestic and international pressures during the 2007-08 global financial meltdown. But the banking system is slowly starting to feel the pressures of bad loans and aggressive expansion in the growth years. In spite of the helping hand that the Reserve Bank of India lends when banks are under pressure, big banks have been known to collapse. The collapse of Global Trust Bank comes to mind.
2013 was a particularly bad year for Indian banking.
Last year the pressure from the rising rupee, extravagant government spending and corporate defaults had banks in a tizzy. The media was quick to point this out, devoting a lot of time and attention, to the upcoming banking crisis. Bank of Amercia Merill Lynch called India Asia’s most financially vulnerable big economy. Indian banks are estimated to have Rs. 200,000 crore worth of non-performing assets on their accounts. To maintain capital adequacy, according to the latest international norms, banks need Rs. 5 trillion in capital in the next five years.
10) Profound political and social instability:
The UPA’s poor performance in its second term at office, a BJP that’s yet to find its moral core and an aggressive new threat in the form of the Aam Aadmi Party (AAP) means that there may not be clear winners in the 2014 general elections. A fractured mandate could mean no single party emerging strong making it difficult to pursue economic and social reforms. The Indian economy has to trim social spending, spur growth and at the same time, aim for inclusive growth. This is going to be a tall order for any party that comes to power.
Years of unequal growth has led to simmering tension about those who haven’t been part of India’s amazing economic growth in the last decade. The Naxalite problem is just the tip of iceberg. Not addressing the concerns of these economically disadvantaged communities could destabilize India in the long-term. Urban India comes with own set of revolutionaries, who step out into the streets when they feel aggrieved due to the failure of the state machinery, to protect women or curb corruption.
Some political commentators are going as far as to say that 2014 maybe the last year of political stability in India.
Read the full WEF report here.