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India is allocating a very large proportion of public resources to human and social development and she is capable of producing the best of ideas and designs through world class Research and Development. India intends to make her capabilities long-lasting by investing heavily in education, health, infrastructure, gender development and other basic needs. Efforts to get the best out of liberalisation & globalisation policies must begin from human development efforts at the regional and local levels. In India this means spreading of education, giving every person access to basic and affordable health care and addressing issues on discrimination and prejudice and offering equal opportunities for all. This was stated by the Finance Minister, Shri P. Chidambaram while delivering his address “India in a Globalising World” at Bertelsmann Foundation at Berlin in Germany yesterday. He said that achieving and sustaining high growth is meaningless, unless it positively impacts the lives of common people. Policy outcomes must be durable and aim towards making a significant difference to the quality of lives of all the people – especially the poor and marginalized. India’s stance in the WTO negotiations, approach to environmental issues, and her positions in the meetings of the IMF, World Bank and the G-20 must be viewed in the context of our obligations to the poor in the country, he added.
The Finance Minister said that India’s progress towards integrating with the rest of the world has been quite remarkable, given the decisive manner in which import tariffs have been slashed, licensing has been abolished, controls on capital flows withdrawn, operational procedures for foreign investors simplified and financial markets reformed. Our current industrial, trade, financial, investment and taxation policies are designed in order to achieve the maximum benefits offered by the new opportunities in a fast-changing world. At present, with a GDP of more than US$700 billion in market prices, a trade – GDP ratio of almost 40%, and an average growth rate of 6.2 percent over 14 years, India is one of the fastest growing economies in the world, he added.
Shri Chidambaram said that achieving time bound targets for the Millennium Development Goals requires extensive support from the richer countries in the form of enhanced Overseas Development Assistance as well as concessional assistance. Many advance nations continue to impose protectionist barriers on goods such as agricultural products which offer the best export opportunities to developing countries whose main occupation is agriculture. “We are also worried about the sharp rise in barriers to movement of people from developing to advanced nations. These barriers must go if the world is serious about spreading the gains of globalisation” he stated. The Finance Minister concluded saying India would continue to follow the liberal policies by balancing her main interests of harnessing globalisation for obtaining economic growth and removal of poverty.
The following is the full text of the Finance Minister’s address:
“May I begin by expressing my gratitude to Bertelsmann Foundation for inviting me to deliver an address to this distinguished gathering ?
I intend to speak on ‘India in a Globalising World’. The subject covers a wide canvas of issues – economic, social, cultural, and political – and touches upon the lives of millions of people, and their many hopes, disappointments, challenges and opportunities. Globalisation is a phenomenon that is being experienced in various forms by almost all developing countries and they have, perforce, to adapt to globalisation.
Globalisation – the features
Globalisation however, is not a new phenomenon for the world. In the 20th century, following the end of the second world war, rapid global integration of financial flows, movement of goods and cross-country flows of capital acquired significantly larger dimensions. The current phase of globalization, however, is markedly different from its predecessors because of the crucial role played by communications technology. Advances in information and communications technology (ICT) and the unfolding of the digital revolution have enabled rapid exchange of ideas, knowledge and thoughts. Carefully drawn boundaries and zealously constructed national identities have broken down due to the assault of technology. Countries that were hostile to each other are now embracing each other through bilateral and multilateral agreements – and Europe has witnessed turbulence in its move towards the ambitious goal of a political union.
Steady evaporation of national borders for economic purposes has significantly reduced the cost of doing business across nations. Such efficiencies have been facilitated by not only technological advances, but also the remarkable speed with which countries have removed roadblocks to the movement of goods, services, capital and ideas. As a result, production of goods and services in various national economies has increasingly acquired a ‘global’ dimension. The market is no longer in one’s own neighbourhood or country or just across the national border. The whole world has dramatically turned into a neighbourhood, and competition for that market can come from any country, any city or even any unit.
The progress of global integration has had much to do with the determination displayed by individual countries in facilitating its advance. The urgency shown by the international community in removing controls over trade and business has been quite unprecedented. The motivation behind such urgency, needless to say, arose from the realization that higher and faster growth is the primary requisite for enhancing the welfare of the common people. With growth there is a chance for equity. More jobs and higher incomes pave the way for distributional justice. Without growth, we can only distribute the burden of poverty and, more often than not, a disproportionate share falls on those who are already poor. For achieving high growth, it is imperative to expand economic frontiers by integrating with the rest of the world.
With countries trying to outpace each other in the race for shedding controls and moving on to new, unexplored business horizons, strong linkages have developed between markets, institutions and economic stakeholders across nations. Capital is fast locating itself in far-flung corners of the world. Capital flows - both short and long term - are leading to deep integration of financial markets. Multinationals, rather than governments, have become the main transporters of capital, and they have taken advantage of the circumstances to forge strategic alliances and create dynamic global production networks, which have different stages of production activity dispersed across countries, but are connected strategically.
Globalisation – the concerns
While goods, capital and knowledge markets across the world have become fairly interdependent, labour, unfortunately, is yet to witness such assimilation. The perceived lack of labour mobility across the world has important ramifications for economic prospects of countries, where efficient skilled labour forms the main source of comparative advantage. The stark contrast between the effortlessness with which capital can move while labour cannot has made globalization a contentious subject and has imparted to it a somewhat undesirable ‘pro-rich’ flavour.
We accept that there are clear benefits obtainable from globalization, but let me also emphasize that participating in the process cannot be an end in itself. To what extent it serves as the means to an end depends crucially upon the extractive abilities of individual countries. It is important for us to remember that we live in a world characterized by sharp inequalities in income, wealth and resources. Such disparities can result in significantly different welfare outcomes for individual countries in their efforts to integrate with the global economy. For example, given the speed with which advances are taking place in the IT industry, the growing digital divide could widen into a ‘Giga-Gulf’, unless nations develop adequate logistics and complementary infrastructure.
For poor countries, it is important to approach globalization in a carefully calibrated manner. Policy flexibility for securing the advantages of globalization is a must. But these flexibilities must be accompanied by dedicated institution-building. Without strong institutions and effective delivery mechanisms, integrating with the world can produce counterproductive outcomes, most definitely in the short term and, perhaps, also leave unforeseen scars in the longer term.
Globalisation – the Indian approach
The 1990s marked the beginning of the period when India, following closely the example of China, started integrating with the rest of the world. India’s progress in this regard has been quite remarkable, given the decisive manner in which import tariffs have been slashed, licensing has been abolished, controls on capital flows withdrawn, operational procedures for foreign investors simplified and financial markets reformed. Our current industrial, trade, financial, investment and taxation policies are designed in order to achieve the maximum benefits offered by the new opportunities in a fast-changing world. At present, with a GDP of more than US$700 billion in market prices, a trade - GDP ratio of almost 40%, and an average growth rate of 6.2 percent over 14 years, we are one of the fastest - growing economies in the world.
We, however, realize that achieving and sustaining high growth is meaningless, unless it positively impacts the lives of common people. Policy outcomes cannot afford to be short-lived or directed towards selected sections of the society. They must be durable and aim towards making a significant difference to the quality of lives of all the people - especially the poor and marginalized. Our stance in the WTO negotiations, our approach to environmental issues, and our positions in the meetings of the IMF, World Bank and the G-20 must be viewed in the context of our obligations to the poor in our own country.
The clear message therefore is to invest in human resources. It is impossible to extract benefits from an increasingly knowledge and skill-oriented world economy unless human capabilities expand manifold. Efforts to get the best out of globalization must begin from human development efforts at the regional and local levels. In India, this means the spread of education and putting every child in school and keeping her there for 10 years; this means giving every person access to basic and affordable health care; and this means addressing issues of discrimination and prejudice and offering an equal opportunity for all.
Our economic agenda, enshrined in the National Common Minimum Programme (NCMP) being pursued by my government, clearly outlines our priorities. We are allotting a very large proportion of public resources to human and social development. We know that we are capable of producing the best of ideas and designs through world class R&D. We intend to make our capabilities long-lasting by investing heavily in education, health, infrastructure, gender development and other basic needs. There is a little known fact that I wish to share with you. India, alone among the large countries of the world, enjoys an unique demographic advantage: the size of our workforce, as a proportion of the total population, will continue to grow until about 2020 or 2025, before it begins to decline, giving us the unparalleled advantage of being the largest supplier of human resources. If India’s workforce is educated and skilled, imagine the tremendous contribution they will make to the national output that will propel the country to the front ranks of the world.
Globalisation – the desired direction
I must confess that higher integration of the world economy has proceeded simultaneously with a marked ‘unfair’ attitude to expansion of trade and business on the part of some countries. Many advanced nations continue to impose protectionist barriers on goods such as agricultural products which offer the best export opportunities to developing countries whose main output comes from agriculture. We need to vigorously engage in discussions and advocacy for achieving the true mandate of the WTO. We are also worried about the sharp rise in barriers to movement of people from developing to advanced nations. These barriers must go if the world is serious about spreading the gains of globalisation.
We are encouraged by the sincerity displayed by the international community in removing the ills of poverty, hunger and malnutrition from vast parts of the world, by adopting the time-bound targets for the Millennium Development Goals (MDGs). Achieving the MDGs are tall tasks for poor nations. It requires extensive support from the richer countries in the form of enhanced Overseas Development Assistance (ODA) as well as concessional assistance. The very poor countries, such as those in Africa, also deserve debt forgiveness.
Let me conclude on an optimistic but cautious note. We recognise the benefits of embracing the world and do not seek to move away from that course. We adopt that course willingly, but wish to put on the table our terms for such engagement. We have successfully undergone more than a decade of increasingly liberal policies without experiencing any economic crisis. We shall continue to follow the course by balancing our main interests of harnessing globalisation for obtaining economic growth and removal of poverty in India”.
BSC/BY/DN-235/05
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