India–EU Free Trade Agreement: A Geo-Economic Turning Point for India

The India–EU Free Trade Agreement is the largest and most comprehensive trade deal in India’s history, covering goods, services, investment, digital trade, and sustainability across a market of 2 billion people.

The signing of the India–European Union Free Trade Agreement (FTA) marks far more than a conventional trade arrangement. It represents a strategic recalibration of India’s position in the global economic order, at a time when supply chains are fragmenting, protectionism is rising, and geopolitical blocs are hardening.

With this agreement, India is not merely reducing tariffs—it is re-engineering its trade geography.

Why This Deal Matters in Geo-Economic Terms

The India–EU FTA connects:

• The world’s fastest-growing major economy (India)

• With the world’s largest integrated economic bloc (EU-27)

Combined Geo-Economic Scale

• ~2 billion people

• ~25% of global GDP

• ~30% of global trade

Macro Scale of the India–EU FTA

Indicator	India	European Union	Combined Impact
Population	~1.4 billion	~450 million	~2 billion
Share of Global GDP	~7%	~18%	~25%
Share of Global Trade	~3%	~27%	~30%
Member Countries	1	27	Largest FTA bloc
Negotiation Period	—	—	18–20 years

No previous Indian FTA comes close to this magnitude. Unlike earlier tariff-centric deals, this agreement covers goods, services, investment, digital trade, climate norms, and supply chains—making it a system-level economic partnership.

From Stalled Negotiations to Strategic Urgency

Negotiations began in 2007 but collapsed by 2013 due to disputes over:

• Automobiles

• Alcohol

• Agriculture

• Data protection

• Intellectual property

What changed?

Three global shocks:

1. COVID-19

2. Ukraine war

3. US trade protectionism (Trump era onwards)

Together, they forced both India and the EU to diversify trade partners and reduce over-dependence on single markets—especially China and the US.

This FTA is therefore a response to global geo-economic fragmentation.

Tariff Liberalisation: The Structural Shift

Nearly 90% of tariff lines will be reduced or eliminated over 5–10 years.

This gradualism is crucial:

• Sensitive sectors are protected

• Domestic industries get time to adjust

• Long-term competitiveness improves without sudden shocks

Sectoral Geo-Economic Impacts

✈️ Aerospace: Strategic Autonomy in Aviation

Zero tariffs on aircraft, engines, and spare parts from Europe.

Geo-economic impact:

• Strengthens Airbus vs Boeing

• Lowers costs for Indian airlines

• Builds domestic MRO and aerospace manufacturing

• Reduces supplier concentration risk

This aligns directly with Make in India + strategic autonomy goals.

🚗 Automobiles: Liberalisation Without De-Industrialisation

India’s 110% import duty on European cars will fall to 10%, but under strict quotas.

Category	Vehicles	Timeline
Petrol/Diesel	160,000	5 years
Electric Vehicles	90,000	10 years

Geo-economic logic:

• Luxury imports liberalised

• The mass-market domestic industry protected

• EV ecosystem shielded during infancy

This is calibrated openness, not blind liberalisation.

🧵 Textiles & Leather: Labour-Intensive Geo-Economics

EU tariffs of 8–12% → near zero

Why this matters:

• Boosts MSMEs

• Expands women’s employment

• Counters Bangladesh & Vietnam

• Strengthens India’s position in labour-intensive global value chains

This is where trade policy meets social policy.

💊 Pharmaceuticals: Protecting India’s Global Role

India secures:

• Zero-duty access for generic drugs & APIs

• Protection of compulsory licensing rights

Despite EU pressure, India safeguards its role as the pharmacy of the Global South—a major geo-economic win.

🍷 Alcohol & Food Products: Political Trade-Offs

Tariffs on European wines and spirits fall sharply but remain quota-based.

Geo-economic compromise:

• EU gains symbolic market access

• India protects mass consumption sectors

• Hospitality and tourism benefit

Every major trade deal involves managed concessions—this is one of them.

Services, Mobility & Digital Power Services

• IT, engineering, and consultancy gain EU access

• Indian degrees and qualifications are recognised

Mobility

• Uncapped movement for Indian students and professionals

This contrasts sharply with tightening US visa regimes and positions the EU as a more predictable destination for Indian human capital.

Digital Trade

• Alignment with EU data standards

• Respect for India’s data sovereignty

• Support for cross-border digital services

This places India firmly in the rules-shaping phase of digital globalisation.

Investment & Strategic Capital Flows

Europe seeks:

• Legal certainty

• Faster dispute resolution

India delivers:

• Stronger investor protection

• Time-bound dispute mechanisms

Result: Greater European capital inflows, especially in manufacturing, green tech, and infrastructure.

Long-Term Geo-Economic Impact

• India–EU trade likely to double by 2032

• Lower logistics & transaction costs

• Deeper global value chain integration

• Reduced dependence on the US market

• Stronger bargaining power in future FTAs

India already enjoys a trade surplus with both the EU (~€25 bn) and the US (~$45 bn)—a rare position among developing economies.

Risks and Constraints

No geo-economic shift is frictionless.

Key concerns:

• Pressure on autos, dairy, and MSMEs

• Strict EU climate and labour standards

• Implementation challenges: customs, logistics, compliance

The deal’s success will depend on domestic reforms, not just external access.

Geo-Economics Bottom Line

The India–EU FTA is:

• A trade agreement on paper

• A strategic diversification tool in practice

• A geo-economic signal to the world

India is no longer reacting to global trade rules—it is actively reshaping its trade geography.

If implemented effectively, this agreement could become one of the most consequential economic decisions of post-reform India.

The Political Legacy Of Bharat Ratna Karpoori Thakur: Unravelling His Visionary Impact On India’s Socio-Political Landscape

Karpoori Thakur was one of the most influential Lohia socialist leaders. As a socialist, he participated in most political movements outside the legislature, and remained a member of the Legislative Assembly (MLA) of Bihar from 1952 until his death on 17 February 1988, interrupted only in 1977 when he became a member of the Lok Sabha. He was once the Deputy Chief Minister of Bihar (from December 1970 to June 1971) and the Chief Minister of Bihar twice (from June 1977 to April 1979). He lost only one election, in the 1984 Lok Sabha election.

When he was the Deputy Chief Minister and Education Minister of Bihar, he introduced some controversial policies – removing English as a compulsory subject in the matriculation examinations. During his first term as Chief Minister, he gave priority to unemployed engineers in government contract jobs. He introduced reservations for OBCs in government jobs and educational institutions in the state during his second term as Chief Minister of Bihar. He brought a reservation policy for backward classes, which had a provision for sub-quota for the Most Backward Classes (MBC), which is currently known as the Extremely Backward Class (EBC). He himself belonged to a community (caste) that was a minority and politically ineffective as a group: the Nai (Barber) community. He played a major role as a mentor to the socialist leaning leaders of Bihar – Nitish Kumar, Lalu Yadav, Ram Vilas Paswan, and many others.

The subsequent proliferation of socialist leaders into different parties, some of whom were disciples of Karpoori Thakur, does not end the continuity of his legacy. The process of empowerment of lower-class groups started by him is still going on. His notion of empowerment, which included self-respect and dignity and development, could be implemented in a sequence – development followed by dignity and self-respect. Even Karpoori Thakur focused on the first and neglected the latter. This was again due to the difference in the development vision of the socialists and the policy approach of their governments, led by Karpoori Thakur. The agenda of these governments included symbolic and identity issues, but not development. Thus, he did process some populist demands, like reservation only and passing the matriculation examination without English. In this sense, Karpoori Thakur was not able to create a regime, but he left room for future government practices to be adopted by socialists who came to power in the 1990s.

Karpoori’s dynamic politics, which spanned four decades from the mid-1940s to the mid-1980s, showed how creatively he approached arousing the lowest classes of society. The main tactics were to instill in rural Bihar some semblance of caste and class consciousness, as this was impeding the upward mobility of socioeconomically challenged caste groups. Indeed, it appears from the reasoning, articulation, and agenda-setting that Karpoori’s politics were shaped and moulded by the way the government operated, with a constant attempt to persuade these actions. He attempted to influence legislative and policy decisions loudly, but he also tried to influence government behaviour by making opposing demands and coming up with a plan of action. 

Karpoori positioned himself within the framework of government and used official logic to improve the lot of the underprivileged. He frequently outlined the goals of government and emphasized the constraints and possibilities of acts and omissions by the state. The tendency of his political articulation and techniques to emphasize the state’s opposition to democracy was evident. 

But it was always apparent that he valued population calculations, political arithmetic, and reason in the service of the excluded population’s care and welfare, both in his approach to ruling and in opposing it. According to Mitchell Dean, calculation is essential because the government demands that the “right manner” be specified, specific “finalities” be prioritized, and strategies be adjusted in the end to provide the best outcome. As Chief Minister, Thakur’s emphasis on calculation and well-thought-out intervention projects demonstrated the rationality of government and ultimately became the hallmark of all he stood for. In a short amount of time, during his dual roles as Chief Minister and Deputy Chief Minister of Bihar, Thakur emerged as a prominent populist leader. 

His programs and recommendations were replete with astute political judgment and innovative governing techniques. The enactment of the OBC reservation, the annexation of castes, the optional nature of English education, the holding of panchayat elections, and other populist measures were all well-thought-out and quickly carried out. By highlighting caste inside the class and aggressively pursuing caste conflict to challenge the dominance of higher castes in electoral politics, these moves changed the sociological category of caste into “caste politics.”

The benefit was interpreted as establishing the power of the backward caste in Bihar politics. Blair states that “Sachhidanand Sinha could be said to be the creator of modern Bihar. He led the struggle that resulted in Bihar’s separation from Bengal in 1912.” One could argue that Sri Krishna Sinha, who led the province during independence and the first fifteen years of its post-independence period, established a Forward Raj in Bihar. Furthermore, it’s possible that Karpoori Thakur invented the Backward Raj. Lalu Yadav carried forward this legacy but allegations of corruption and nepotism have overshadowed Lalu Yadav’s contribution in strengthening and continuing the sense of dignity and self-respect among the backward classes. Current chief minister of Bihar Nitish Kumar carried forward the legacy of Karpoori Thakur more broadly, he provided respect and self-respect to the people of Bihar along with development.

The article concludes by pointing out further studies. As the leader of a populist government, Karpoori Thakur also symbolizes a distinctive development within socialist thought in India, away from the Marxist tradition. If we view it in the light of changes in socialist politics with the advent of liberalisation in India, Thakur’s tenure in power also points to the first experiments in “socialist” government, and the importance of Thakur as the leader of a populist government will become more apparent. Perhaps, Karpoori Thakur’s greatest contribution as the head of a socialist government was to point out other possibilities that Lohia could have had for socialism and social justice. When postcolonial Bihar’s political events are closely examined, it becomes clear that Karpoori had a significant impact on the growth and collapse of socialist politics in the region as well as the backward caste system that shaped the political landscape and provided the groundwork for subaltern politics.

This article was also published on https://www.eurasiareview.com/01022024-the-political-legacy-of-bharat-ratna-karpoori-thakur-unravelling-his-visionary-impact-on-indias-socio-political-landscape-oped/ 

  

2026: A Decisive Turning Point for the Indian Economy

Based on economic data and developments over the past year, India’s economy has become a major subject of global discussion. At the end of 2025, the Government of India officially announced that India had become the fourth-largest economy in the world in nominal GDP terms, surpassing Japan (NITI Aayog, 2025; IMF, 2025; Arya, 2026). Several analysts have described this phase as a “Goldilocks moment”—a situation characterized by high economic growth combined with relatively low and stable inflation (The Times of India, 2025).

In economic terminology, this represents a Goldilocks zone, where macroeconomic conditions are neither overheated nor stagnant, but optimal for sustained growth. However, the real focus of policy debates is now 2026. Many economists and policy experts argue that 2026 could emerge as a critical inflection point for the Indian economy—one where growth momentum could accelerate decisively. This potential shift is not the result of a single reform, but rather the cumulative impact of multiple structural and policy reforms implemented over the past few years.

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Why 2026 Holds Special Significance?

Major structural reforms introduced between 2020 and 2022—including trade policy realignment, manufacturing incentives, and infrastructure expansion—typically involve a gestation period of three to six years before their full macroeconomic impact becomes visible. Consequently, the effects of these reforms are expected to materialize most clearly around 2025–26 (RBI, 2025; Business Standard, 2026).

These reforms can broadly be classified into three areas:

1. Free Trade Agreements (FTAs) and trade diplomacy
2. Export-ready domestic manufacturing capacity
3. Strategic recalibration of tariff policy

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Free Trade Agreements: Opening New Markets

India has significantly accelerated its engagement in trade agreements in recent years. One of the most notable developments is the India–Australia Economic Cooperation and Trade Agreement, under which India gained zero-duty access on nearly all tariff lines. This agreement is expected to boost Indian exports of textiles, leather goods, engineering products, gems and jewelry, and processed food in a high-income and stable market (IBEF, 2025).

Similarly, the India–UK Free Trade Agreement is strategically important. It lowers tariffs on Indian industrial goods, expands opportunities in IT and financial services, and reduces non-tariff barriers. The UK also functions as a gateway to the broader European market, potentially enhancing India’s access to European value chains (Business Standard, 2026).

In addition, negotiations are ongoing with the European Union, Gulf Cooperation Council, Canada, Chile, Peru, and Bahrain. If key agreements are finalized by 2026, India could gain preferential access to markets representing nearly 40% of global GDP, significantly strengthening its export potential (IBEF, 2025).

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Manufacturing Expansion and the Impact of PLI Schemes

Trade liberalization alone cannot drive exports without sufficient domestic production capacity. Recognizing this, India launched the Production-Linked Incentive (PLI) schemes in 2020–21 to transform the economy from import-dependent to export-oriented manufacturing.

Sectors such as electronics, automobiles (including electric vehicles), pharmaceuticals, solar modules, and capital goods are expected to reach optimal production capacity by 2026. This expansion is already reflected in industrial output trends, with manufacturing growth contributing significantly to India’s Index of Industrial Production (IIP) (RBI, 2025; Reuters, 2025). As new manufacturing units mature, India is likely to integrate more deeply into global value chains, improving scale, efficiency, and competitiveness.

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Infrastructure and Logistics Reforms

Infrastructure development remains a cornerstone of India’s growth strategy. Initiatives such as PM Gati Shakti, the Dedicated Freight Corridors, and large-scale port modernization projects have begun reducing logistics costs and improving multimodal connectivity.

Faster port turnaround times and better port-to-factory linkages are gradually bringing India closer to East Asian logistics efficiency benchmarks, thereby enhancing export competitiveness (Business Standard, 2026).

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Tariff Policy: From Protection to Strategic Openness

Between 2017 and 2020, India’s tariff policy emphasized import substitution and domestic industry protection. However, since 2024, the approach has shifted toward selective tariff liberalization, particularly for countries with which India has trade agreements, while maintaining protection for sensitive sectors such as agriculture and dairy (Economic Times, 2026). This evolution suggests that India is not moving toward de-globalization, but rather toward a re-globalization strategy on its own terms—combining openness with strategic protection.

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Why the World Needs India

India’s rising global relevance is closely linked to the “China+1” strategy adopted by multinational corporations seeking to diversify supply chains. India offers a unique combination of scale, political stability, skilled labor, and a vast domestic market, making it a preferred alternative investment destination (Reuters, 2025).

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Opportunities and Risks

Despite the strong outlook, 2026 represents an opportunity rather than a guarantee. Key risks include:

• A potential global economic slowdown
• Delays or failures in trade negotiations
• Weak implementation of infrastructure and labor reforms
• Quality and standards constraints in export products

According to the United Nations and other multilateral agencies, India’s GDP growth may moderate slightly to around 6.6% in 2026, down from 7.4% in 2025, due to global uncertainties and trade tensions—yet it is still projected to remain the fastest-growing major economy (Economic Times, 2026; Reuters, 2026).

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Conclusion

The year 2026 presents a historic window of opportunity for the Indian economy. If reforms are implemented effectively and global conditions remain broadly supportive, India could strengthen not only its economic standing but also its strategic and geopolitical influence.

However, this transformation will not occur automatically. It will require policy consistency, institutional capacity, quality enhancement, and sustained reform momentum. The decisive question is how effectively India leverages this moment. 2026 is not an inevitability for India, but a policy-managed opportunity. Strategic execution will determine outcomes.

References

Arya, N.K. (2026). India As The Fourth Largest Economy: An Analytical Perspective. Eurasia Review. India As The Fourth Largest Economy: An Analytical Perspective – Eurasia Review

https://www.eurasiareview.com/03012026-india-as-the-fourth-largest-economy-an-analytical-perspective/

Business Standard. (2026). India’s economy in 2025: Low inflation, FTAs and GDP growth amid global uncertainty. Business Standard.

Economic Times. (2026). After tariff shocks, India’s export growth moderates but remains resilient. The Economic Times.

India Brand Equity Foundation. (2025). Export surge: India steps up on the global stage. IBEF.

International Monetary Fund. (2025). World economic outlook: Navigating global divergences. IMF.

NITI Aayog. (2025). India overtakes Japan to become the world’s fourth-largest economy. Government of India.

Reserve Bank of India. (2025). Monetary policy report. RBI.

Reuters. (2025). India’s economy grows at fastest pace among major economies. Reuters.

Reuters. (2026). India’s GDP growth projected to moderate in 2026 amid global headwinds. Reuters.

The Times of India. (2025). India’s Goldilocks phase: High growth with low inflation. The Times of India. 

India As The Fourth Largest Economy: An Analytical Perspective

India as the Fourth Largest Economy: An Analytical Perspective

Abstract

Over the past year, there has been intense debate in academic, policy, and media circles regarding whether India has officially become the world’s fourth-largest economy. While several reports, videos, and unofficial estimates suggested that India had overtaken Japan, an official confirmation from the Government of India was awaited. This confirmation came just before the New Year through a press release issued by the Press Information Bureau (PIB), stating that India has indeed surpassed Japan to become the fourth-largest economy in the world in nominal GDP terms. This article provides an overall analytical perspective on this development, explains what being the “fourth largest economy” actually means, examines the drivers behind India’s economic rise, compares India with Japan and Germany, and critically evaluates the gap between aggregate GDP and per capita income.

Introduction

India’s ascent in global economic rankings marks a significant milestone in its development trajectory. According to the Government of India, India’s nominal GDP has reached approximately USD 4.187 trillion, marginally surpassing Japan. Alongside this announcement, the government has projected that India may overtake Germany within the next three years, potentially becoming the third-largest economy by the end of the decade. However, headline rankings often conceal important structural realities. Therefore, it is essential to analyze this achievement from a broader economic perspective.

Understanding the Concept of the Fourth Largest Economy

The claim that India is the fourth-largest economy is based on nominal GDP, measured at current prices and converted into US dollars using prevailing exchange rates. Nominal GDP reflects the total monetary value of goods and services produced within a country over a year. It captures the overall size of economic output but does not account for population size or income distribution.

As per recent estimates: – United States: ~USD 28 trillion – China: ~USD 18 trillion – Germany: ~USD 4.5 trillion – India: ~USD 4.1–4.2 trillion – Japan: ~USD 4.168Slightly below India

This ranking reflects aggregate economic output rather than individual prosperity, a distinction that becomes crucial when comparing per capita income levels.

India’s “Goldilocks” Phase of Growth

In its PIB release, the Government of India described the current phase of growth as a “Goldilocks moment”—a situation where economic growth is strong while inflation remains relatively moderate. Typically, high growth is accompanied by high inflation, but India currently exhibits a favorable balance. Consumer Price Index (CPI) inflation has remained under control even as GDP growth has accelerated, creating conducive conditions for sustained expansion.

How Did India Overtake Japan?

Several structural and cyclical factors explain why India has surpassed Japan in nominal GDP terms.

1. Growth Trajectories

Japan is a mature, developed economy with limited growth potential. Over the past three decades, its average growth rate has hovered around 1% or less. In contrast, India, as a developing economy with a large and youthful population, has consistently recorded real growth rates between 6% and 7%.

2. Demographic Differences

Japan faces rapid population ageing, leading to a shrinking workforce and lower productivity growth. India, on the other hand, enjoys a demographic advantage with a median age of around 28 years, supporting both consumption and production.

3. Currency Effects

Nominal GDP comparisons are sensitive to exchange rate movements. While the Indian rupee has depreciated in recent years, the Japanese yen has weakened even more significantly. Since GDP is measured in US dollar terms, currency depreciation directly reduces nominal GDP rankings.

4. Structural Momentum

India is witnessing strong momentum in manufacturing expansion, infrastructure development, and the digital economy. Japan, by contrast, has faced prolonged deflationary pressures and relatively stagnant domestic demand.

Key Drivers of India’s Economic Rise

India’s economic expansion is supported by multiple reinforcing drivers:

Demographic Advantage

A large working-age population fuels consumption, savings, and investment, making demographics one of India’s strongest growth engines.

Infrastructure Push

Massive public investment in highways, railways, airports, ports, logistics parks, and urban infrastructure has reduced logistics costs and improved competitiveness across sectors such as cement, steel, and manufacturing.

Manufacturing and Industrial Policy

Government initiatives such as the Production Linked Incentive (PLI) schemes across electronics, defence, pharmaceuticals, and other sectors have boosted domestic manufacturing. Additionally, the global “China+1” strategy has redirected foreign investment towards India.

Strong Domestic Demand

India’s GDP composition reveals that consumption contributes nearly 55–60% of total output. A growing middle class has driven demand in housing, automobiles, services, and consumer goods, insulating the economy from global shocks.

Digital Public Infrastructure

The expansion of Aadhaar, UPI, and the GST network has lowered transaction costs, enhanced formalisation, and improved efficiency across the economy.

Why Germany Is Likely to Be Next

Germany currently ranks as the world’s third-largest economy, with a nominal GDP exceeding USD 4.5 trillion. However, India is projected to overtake Germany within the next three years due to differential growth rates. India has been growing at an annual rate of approximately 6.5–7.7%, with recent quarterly growth figures reaching 7.4%, 7.8%, and 8.2%. Germany, in contrast, has struggled to grow beyond 1–2% annually.

Moreover, Germany is heavily export-dependent and vulnerable to global trade slowdowns, energy transition costs, and an ageing population. India’s growth model, driven largely by domestic consumption, provides greater resilience.

Additionally, India’s GDP base year is expected to shift from 2011–12 to 2022–23, which may further raise measured GDP levels, potentially accelerating the overtaking of Germany.

Aggregate GDP vs Per Capita Income: The Core Challenge

Despite India’s impressive aggregate GDP ranking, per capita income remains relatively low due to its large population. With a population of approximately 1.43 billion, India’s per capita GDP is around USD 2,800.

In contrast, Japan (population ~123 million) has a per capita GDP of around USD 34,000. – Germany’s per capita income is similarly high.

This implies that the average Japanese citizen earns nearly 12 times more than the average Indian. Thus, while India’s economic size has expanded, individual prosperity has not yet reached comparable levels.

Implications for Policy and Global Standing

Becoming the fourth-largest economy enhances India’s global standing. It strengthens India’s role in global supply chains, increases its attractiveness for foreign direct investment, and enhances its influence in multilateral institutions such as the IMF, World Bank, and G20.

Geopolitically, India is increasingly viewed as a balancing power between the United States and China, gaining leverage in trade negotiations, climate diplomacy, and technology governance.

However, the ultimate success of economic growth depends on its translation into employment generation, higher productivity, improved education, better healthcare, and rising living standards.

Conclusion

India’s emergence as the world’s fourth-largest economy is a significant symbolic and structural milestone. Official confirmation by the Government of India underscores the country’s strong growth momentum and favorable macroeconomic conditions. Nevertheless, this achievement should be interpreted with caution. High aggregate GDP does not automatically imply widespread prosperity. The central challenge ahead lies in converting economic growth into inclusive development, higher per capita incomes, and improved human development outcomes. Only then will India’s rise in global rankings reflect genuine progress for its citizens.

About the Author:

Dr. Nitish Kumar Arya

Dr. Nitish Kumar Arya is an Assistant Professor of Economics in the University Economics Department, Bhupendra Narayan Mandal University, Madhepura, Bihar, India. He is working in Public Economics and Public policy with a special focus on contemporary economic issues.