|
Even as India seeks to consolidate its impressive gains in economic development and poverty alleviation, with a strategy focused on higher growth that is inclusive and equitable for its billion plus people, its trade, financial and technological linkages in the global economy are taking on faster wings. In the early years of the 21st century – reckoned to be one of Asian resurgence and knowledge explosion – India has already come to be recognized as an emerging economic power eminently capable of playing a leading role in the reshaping of the international order for peace and development.
This should be comforting as the nation, which has forged ahead in a highly democratic framework on strong foundations of mostly self-financed development laid in the post-independence decades, completes its 58th year of independence, and looks poised for a leap forward in its economic, scientific, technological and political interactions with the rest of the world.
The country’s acknowledged advances in science and technology, especially in nuclear and space fields, have been buttressed by an even more spectacular entry into information technology which has the potential to accelerate the pace of progress in achieving its economic and social goals. India is already reckoned as a global power in software technology.
Sustained growth, faster than that of major industrial as well as most developing countries, globally competitive manufacturing firms, remarkable strides in IT and IT-enabled services, commitment to further reforms and observance of multilateral rules and codes of conduct in international dealings have all contributed to India’s economic image abroad. Its political and military strengths, recognized role as a responsible nuclear power, and adherence to democratic values have enhanced its appeal as a nation destined to play a significant role both in Asian region, where at present it is the fourth largest economy, and in the world.
In the post-liberalisation era, beginning early 1990s, India gradually opened up its market, lowering trade barriers and freeing industrial licensing and exchange controls, and set the stage for its evolution as an active player in global economy and trade. Wide-ranging structural reforms have resulted over time in India moving to a higher growth path with an average of six per cent over a decade while the Tenth Five-Year Plan (2002-07) is most likely to end up with a 7 per cent average. With its vibrant manufacturing and liberalized financial sectors, India has been reaching out to the world and asserting its competitiveness. Export growth surged to 20 per cent in each of the last three years though outpaced by imports geared to economic expansion.
India holds greater international attraction not so much for its growth record and strong economic fundamentals, as for its market size, vast reservoir of skilled and semi-skilled manpower, highly qualified professionals in all disciplines, its legal system which safeguards property and dominant business and industrial sectors. Capital flows are steadily increasing, such as foreign direct investment and portfolio, in a policy environment to attract such investments especially in infrastructure and areas of high technology as well as export-oriented ventures. India is also a preferred destination for relocation of production by multi-national companies which have also a strong presence in IT, automobiles and pharmaceuticals.
Indian industry itself, having made considerable progress in modernization and technological upgradation, has been expanding its overseas presence, with subsidiaries or through acquisitions. Growth in manufacturing in recent years has helped to boost the country’s exports which comprise over 70 per cent of manufactures and are adding to the gross domestic product. Exports of manufactures could go up from 40 billion dollars in 2003 to 300 billion dollars by 2015, according to a study commissioned by the Confederation of Indian Industry (CII). Auto components, motor vehicles and chemicals are other products of high growth in exports. With the dismantling of the quota regime, India’s exports of textiles and garments are also expected to make a quantum jump, next to China which is likely to capture 50 per cent of total exports of textiles and clothing.
Currently, both industry, which has restructured itself under the impact of trade liberalization and competition, and the information technology and IT-enabled services are in the vanguard of India’s growing involvement with world economy. Exports of software services (at 16.6 billion dollars in 2004-05) have become a major source of income under “invisibles” in the current account of balance of payments along with remittances from Indians working abroad (20.5 billion dollars). Exports of IT-enabled services and business process outsourcing (BPO) have also been rising. The potential for export of other professional and business and commercial services such as travel and transportation is large and the benefits could be realized if there is a multilateral agreement on Services under the current Doha Round in trade liberalization.
India itself, as Prime Minister Manmohan Singh said in Washington recently, is undergoing a “fundamental transformation”, both its economy and society, with rising income levels, expectations and demand for quality products. The country has now world-class firms operating and it is moving into more of knowledge-based activities. India is well positioned to take advantage of multinational firms building global supply chains sourcing components manufacture in low-cost countries.
Large portfolio flows into India’s stock market reflect investor confidence in Indian corporates and foreign institutional investors (FIIs) have substantially raised their holdings in many blue-chip companies. The number of companies with one billion dollars of investment by FIIs is also increasing.
India, along with Ireland, are on top in jobs under business process outsourcing by international firms. India has a competitive edge over other countries in both skills and supply of personnel at lower costs. But projections for the future show that the country needs to do much more in both quantity and quality to meet the rapid growth in manpower needed for IT, biotechnology and other knowledge-based industries.
Demographic dynamics will also favour India in relation to not only developed world but also China as it will have a larger share of working age population and increasing incomes which could translate into a higher savings rate. This is one more factor cited in researches published on the configuration of global economic power between 2030 and 2050. India is likely to be the third largest economy after US and China by 2030, according to one such studies. By then, ageing of population would have overtaken most of Europe, North America and Japan with declines in savings rate relative to investment. East Asia and China would also begin to feel the pressures of decline in working population not long afterwards. India is totally committed to multilateralism in dealing with global issues. It remains a leading participant in the current Doha Round trade negotiations on behalf of developing countries. India is also invited along with China, Brazil, Mexico and South Africa to meetings of G-7 (Group of Seven Finance Ministers of leading industrial countries). Global movements of capital, inflation, interest rates and commodity prices have now significant influence on India’s management of its economy, monetary policy and exchange rates. All this underscores the benefits as-well-as risks in globalisation.
*Freelance Writer
|
