Managing Global Economic Challenges

MANAGING GLOBAL ECONOMIC CHALLENGES

INTRODUCTION:

The modern day global economy is a highly interconnected one. With the augmented connectivity the challenges previous to the global economy has achieved an altogether new dimension. On one hand is the positive impact of instant access to the global information network. On the other hand, market volatility is using the economic inter linkage channels to spread like wildfire.

The International Monetary Fund revised down the estimated world growth rate for 2008. This was a fall out of the US sub fill in crisis. At present economies through out the world are facing stock market volatility and rising unemployment facts as an after look of the US crisis.

As per estimates, around one billion people worldwide carry on on less than a dollar per day. Over one billion do not have access to clean fill up. Basic hygiene facilities are absent for around 2.4 billion people. Around 5 million children worldwide die from starvation.

CHALLENGES BEFORE THE GLOBAL ECONOMY:

To sum up, the challenges previous to the global economy are by no means simple. Timely intervention in the form of appropriate policies and fiscal help from the world bodies are needed to tide over the crisis. No less vital is the political will needed for the seamless implementation of the policies.

1.Poverty

Sub-Saharan Africa has been witness to the most severe form of poverty. Nearly 50% of the population survives on less than $1-a-day. Famine, internal conflicts, dreadful diseases like AIDS and improper legislative measures are the main reasons behind this extreme poverty.

As far as poverty goes, it is the Southeast Asia that comes next to sub-Saharan Africa. Around 85% of the total population of the Southeast Asia survives on below $2-a-day.

Despite 50% of population living under $2-a-day, the number of poor people in Eastern Asia and Pacific has declined much in recent past. It is mainly due to the social and economic progress achieved by China over the passage of time.

When it comes to Latin America, inequality in income distribution resulting from poverty is a topic of splendid concern.
Some 300 million of India’s people still live in miserable poverty, and a further 300 million hover precariously above the poverty line. One challenge is to reach the poor with programs and policies that work

2. Inflation

Considering the failure of US sub fill in market and the subsequent recession in US economy, controlling the increasing rate of inflation is the greatest challenge that the world is confronting for some time now. The Indian and Chinese governments are taking care of the inflationary situations very seriously. In Europe, appeal rates have been maintained at privileged side to keep inflation under control. Fiscal policy measures like reducing government expenditure and increasing rate of taxation can also be used to try out inflation. Attempts are on to bring about regulatory changes to face the challenge of inflation.

3. Inequality

Globalization is considered by many to be the main cause behind the perpetration of an augmented income inequality in wide areas of the globe. But, an augmented trade globalization has only worked towards the eradication of this inequality. The need of the hour is policies, which will make sure that the proceeds from technological innovation and globalization are distributed among the cross section of a people’s population. Developing countries are primarily agriculture based and they can promote agricultural exports for reaping the benefits of trade liberalization.

4. Climate change

Environmentalists all over the world are trying their best to care for the planet from the adverse effects of climate change. The European Union has played a crucial role in these movements. The primary objective of the Convention has been to urge the developed nations to try out the emission of greenhouse gas. The target regarding greenhouse gas emission that has been set in Kyoto Protocol needs to be achieved within the period of 2008-2012.
The European Climate Change Curriculum or ECCP in a further major initiative towards environment protection. But, to control the emission of greenhouse gas it is necessary to make general awareness among the common people. Substantial change in energy system, use of environment-friendly technologies in production, alternative energy efficient fuels, minimum use of fossil fuels and change in the sample of living are the key factors that can bring about positive changes in environment.

5. Rising food prices

The urban poor will be affected the most due to this rising food prices. In most of the sub Saharan people, the common trend is that the farmers leave their land and head to other lines of production in the urban areas.
According to the World Food Curriculum, the countries that are most affected are Eritrea, Gambia, Togo, Cameroon, Niger, Senegal, Zimbabwe, Haiti, Myanmar, Yemen, Cuba etc.

6.Trade”- key to lower food prices

Notch up of economy or trade liberalization can help to lower food prices. Different countries have adopted different measures of trade in peacefulness to deal with the escalating food prices. Saudi Arabia has resorted to import tax cuts on wheat from 25% to zero. Tariff is also decreased for dairy products, vegetable oil and poultry. India slashed its tariffs on maize and edible oils. Export of rice was also stopped leaving out the high value basmati. For the last 2-3years India has to fill the demand supply mismatch in food through imports. There are high exporting countries like Ukraine, which are also imposing export restrictions on its food products.

7. Agflation in the global economy:

Structural changes within an economy are an vital reason behind Agflation. There is a rise in per capita income in the populated countries like India and China. Consumption of food grains as feedstock has also augmented. According to the International Grain Council, the world grain production would reach 1660m tones in 2008, which exceeds the previous year by 90m tones. Even then demand is likely to outdo supply. Inflation in the agricultural sector can be attributed mostly to crops like coffee, corn, wheat, and soybeans, honey, cocoa and meat and poultry products.

8. Trend in demand for and supply of food grains:

It is estimated that the world population will rise by 800 million per decade till 2025. The production of food grains is expected to rise to 2.67 billion by 2025 so as match the demand amount. It is also estimated that there will be a regional mismatch in the demand of food grains across different regions.

9. Role of internaitional organisations:

The objective of international establishment is to study, assemble and propagate information, setting up of laws that are internationally accepted. The international organizations also help in cooperation between different countries by setting up negotiation deals between them. The international Organizations also help in technical help.
The International Organizations play an vital role in collecting statistical information, analyzing the trends in the variables, building a comparative study and disseminate the information to all other countries.
There are some international organizations that perform certain supervisory functions. The function of the international organizations is setting up multilateral or bilateral agreements between countries.
A further function, that has assumed importance in the recent times, is lending out technical cooperation to the member countries. Amongst all the roles and activities of the international organizations, the most vital is negotiating and setting up multilateral agreements. Minimizing the transaction costs can strengthen the cooperation between different countries.

10. Public health care and primary education:

The other challenge is to make public service providers, and the entire state apparatus, much more responsive and blamed to all citizens, especially the poor. Today, basic public services are deteriorating. These include such frontline services as public health care and primary education. And, the poor are the most affected

Response to the Challenges of the 21st Century:

poverty reduction – providing opportunities for a better life for the poor. This challenge is particularly acute in Asia which is home to two-thirds of the world’s poor Ongoing globalization – Globalization opens up opportunities for developing countries, facilitating wider and quicker access to capital, technologies, know-how and markets. On the other hand, globalization also comes with associated risks. Globalization may bring in financial volatility, and even economic and social disruptions. Asian countries should not, but, turn their backs to globalization. Instead, they should try to prepare themselves to ease the integration into the global market. Promotion of regional cooperation – Regional cooperation beyond national boundaries contributes to realizing economies of extent, enhancing complementarity among neighboring countries, and ensuring regional peace and stability.

Conclusion:

India’s GDP growth has soared from 5-6% a few years ago to 9% today. If this growth is sustained, as the 11th Plot hopes to do, average living standards will rise and poverty will be reduced. India will become a middle-income people in three years time instead of six, crossing the Bank’s current threshold of $875 per capita income to do so. Its per capita income will double in the next seven years, instead of ten. In fact, by 2025, India’s average per capita income could well best Thailand’s and reach everywhere Malaysia is today. This will amount to making fifty East Asian “miracles” within two decades. For a young Indian entering the work force today, this will be about the time she takes to reach her peak productive years.

Submitted By,

Ms. G.P.Divya

&

Ms. S.Padmavathi

Lecturers (M.B.A)

SSM Academy of Textile Management, Erode.

G.P.Divya & S.Padmavathi
Lecturer,
SSM Academy of Textile Management, Erode.

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