Dr V P RAGHAVAN
MINISTRY OF CULTURE
GOVERNMENT OF INDIA
ECONOMIC GLOBALIZATION AND THE ROLE OF INDIA IN THE PROCESS
Globalization is the captivating catchword all over the world. Some may praise its gainful fortunes while others denigrate its disfavoring vices. Globalization, as an economic phenomenon, denotes the integration of national economies to global economy through trade, investment and capital flows. Globalization helps move people and flow technology over international boundaries. It removes borders and barriers to trade between nations .In fact globalization deepens international relationships and broadens interdependence among people and the nations in the world. It entails free movement of capital, resources and people across national boundaries. It permits free trade, which helps enhance economic growth , that in turn reduce poverty and unemployment of the people. Economic globalization thus pre supposes free trade, which necessarily enhances economic growth that helps reduce poverty among nations.
Globalization is not a new phenomenon. Trade relations occurred between nations in East and West in the distant past. Explorations of Marco Polo and Christopher Columbus helped European s to come into contact with the people of China and America. The human domestication of large mammals between 8000 and 2500 B.C helped early migrations of Europeans in the Americas. The European discovery of Australia in 17 th century was also a water shed in the history of globalization .. The late 19 th and early 20th century world economy were fully integrated through peoples’ movement and trade and capital flows. It was East India Company’s trade relations with India that led to the British Conquest of India, and the Dutch East India Company’s trade relations paved the y for its occupation of Indonesia. The earlier era witnessed the rapid growth of world trade .There was greater flow of capital and heavy explorations of energy and mineral resources through out the world. The past world economy was integrated by means of technological improvements in transportation and communications rather than by policy changes. improvements in transportation and communications rather than by policy changes. The technological innovations in transportation and communications helped reduce costs of transportation and communication in 19th century
Globalization in the Contemporary Era
In the present day globalization, information technologies favor for the rapid movement of services and resources more speedily around the world. Globalization is not a programme- It is a process .A process of integrating national economies to world economy. Globalization permits free movement of people, capital and technology across national boundaries. It is rather internationalization of economic systems. Economic Globalization presupposes free trade, which necessarily enhances economic progress of the nations. Higher economic growth helps reduce poverty among poor nations.
India in the Process
India as the emerging economy has witnessed unprecedented levels of economic expansion, along with countries such as China, Russia, Brazil and Mexico. India being a cost effective and labour intensive economy , has benefited immensely from outsourcing of work from developed countries, and a strong manufacturing and export oriented frame work.
The global economy seems to be recovering after the recent economic shock. The Indian economy , however , was hit in the latter part of the global recession and the real economy has witnessed a sharp fall , followed by lower exports, lower capital outflow and corporate restructuring . The global economies are expected to continue to sustain themselves in the short term , as the effect of stimulus programmes is yet to bear fruit and tax cuts are working their way through the system in 2010. Due to strong position of liquidity in the market , large corporate now have access to capital in the corporate credit market.
India’s Economic Outlook Projection
2007 2008 2009 2010
Inorder to keep up the economic growth during times of the worst recession, government authorities in India have announced the stimulus packages to bolster economic growths. To finance the stimulus packages, the Indian government had raised over $100 billion over the last 4 quarters.
The world is now talking more about India than that was before. The interest in India is clearly unprecedented and is a reflection of the rapid strides made by the Indian economy since the inception of economic reforms. India integrated its national economy in 1991 with the onset of a series of sweeping economic reforms which opened India’s economy to global players in business and enterprises. International perceptions of the Indian economy has been dramatically changed in the recent past. International economic agencies spelt India as the Economic Power House of the future world. The growing global interest in India and the perceptions of the global community towards India are reflected in numerous reports published by international financial institutions and private corporate entities.
These reports vindicate India’s growing economic potentials as it integrates into global economy. The BRIC Report of the Goldman Sachs argues that India has the potential to grow fastest among the four BRIC countries over the next 30 to 40 years. – higher than 5% in the next 30 years and close to 55% as late as 2050..
Recently during the visit to India Mr Rodrigo de Rato, Managing Director of IMF stated “ Globalization is a much discussed theme . but I believe India is the perfect venue to bring to it a new perspective . For India recently has grasped firmly the opportunities of globalization.”
Mr. Raghuram Rajan , Economic Councellor and Director of the Research Department of IMF highlighted “ The stars are well aligned for India to become a hub of globalization.”.McKinsey Quarterly Report in a Report titled “ A Richer Future for India” says “ India’s competitive intensity could give it a better position than China to serve as a global low cost auto manufacturing base. Articulations continue. There has been change in the mindset of the average Indian about what country and the people can achieve.
The changed mindset has enabled India to achieve various feats including becoming the most competitive steel producer in the world, the most preferred cross border outsourcing of high end service activities and one of the most preferred destinations for foreign investment.
According to a recent Paper by T N Srinivasan, in terms of Gross National Income at PPP rates , India stands at the 4th place , after US, China, and Japan. India’s share of Global GDP in PPP terms was 5.9% in 2995, the 4th highest in the world.
Its contribution to global growth was 8% . domestically, economic growth in last 15 years averaged 6.4%. In the last 3 years, as an average , the growth rate has been over 8%.
India has been emerging as a leading economy in the world. India launched economic reforms in the wake of unprecedented external payment crisis in 1991. it has taken place in India’s own unique circumstances of a vibrant democracy and federal polity.
India is the fastest growing economy in the world. It has averaged growth of 8.8% per annum between 2004 and 2007. India has strengthened its macroeconomic stability. Indian economy is characterized by the growing modernized manufacturing and service sectors. India’s external engagement has been profoundly transformed. India has shown that both in 1990s and in the present time, the capacity to withstand the worst impacts of internal economic crisis.
India has got little impacts of the 2008 financial meltdown originated in U S and spreading to all regions of the Globe for its unique regulatory mechanism.
India’s economy faces challenges as well India has to restore the growth momentum, which has lost to a some extent at the event of stroke of recent global financial crisis. Though India’s financial sector was sound, the economy was affected by the secondary impact of crisis.
The stock values went down as foreign institutional investers withdrew many because of their own liquidity pressures at home. India faced a severe credit crunch and a sharp down turn in its labour intensive industries.
Timely action by Reserve Bank of India, the central bank of India, to ease interest rates and ensure liquidity and by the government to cut VAT and excise duties to stimulate domestic demand helped to manage the impact.
The regain of the investers’ confidence reflected in both domestic investments and foreign capital inflows, which is accelerating business momentum, with industrial growth rebounding to touch double digits in recent times. The government intends to ease the stimulus measures gradually.
India has a saving rate of 35% of GDP. We expect the growth rate of 7.5 in the current year. As we seek to accelerate growth our priority is also make this growth inclusive. And for this we need to build our economy on all three legs: Services, Manufacturing and agriculture.
The service sector , powered by the revolutionary changes in the communication technology and India’s human capital, was to first to connect with the global economy.
The dynamism and growth of the information technology sector has had a transformative impact in India nurturing a merit and performance driven ethos and instilling the confidence that Indians can compete with the best in the world.
In recent years, India has achieved a significant turnaround in manufacturing , particularly in low-cost high-tech manufacturing. Agricultural productivity has dwindled in recent years with the share of agriculture in GDP now down to 18%. As this sector supports 60% of population, catalyzing the next leap in agricultural productivity is a core national concern. Massive public investment is underway in expanding irrigation and building rural infrastructure which will be critical for developing agri-businesses and food processing , providing new opportunities for rural growth and development.
Education is the key to empowering our people and transferring their lives. The sweeping education reforms currently underway aim both at massive expansion of capacity and at qualitative improvements at all levels.-schools, higher education and skill development with a very significant increase in all allocation of government resources for this sector.
Infrastructure development will be critical to support growth objectives. It is estimated that India will need to invest $ 500 billion in infrastructure over the next 5 years and another $ 500 billion in the five years thereafter. And in building the roads, ports, airports and high speed rail freight corridors to connect India to itself and the world and in powering a five fold expansion in electricity generation, India will seek an increasing role for the private sector, opening up existing business opportunities, which will become new drivers of growth.
Although much of our demand is generated domestically and most of the investments is financed by our own savings, foreign investment and trade will continue to be an integral part of our growth and modernization process. India’s trade has grown , India’s net capital inflows have increased and Indian companies all now increasingly investing abroad to exploit synergies, improve market access and acquire technologies.
Just as India’s success is in its own modest way, an affirmation of the values of democracy, pluralism , individual freedom and rule of law, so too economic progress of 1/6th of humanity will be of great consequences to the world. A nation of one billion plus people experiencing a growth rate of 8-10% , driven principally by the domestic market and savings, could be an anchor of global economic stability and will certainly be a great economic opportunity.
India’s Role in the World Economy
With India’s growing global integration , India is engaging purposefully with the world economy. India will continue to support an open, stable global trading regime , that is a positive sum game , reflecting a fair and equitable balance of interest which is the spirit in which India is approaching the revitalization of the Doha Round in the WTO.
India also support the reform and expansion of the global architecture of economic governance and coordination to reflect contemporary realities, make it more representative and improve its effectiveness in dealing with challenges of 21st century.
India’s economic future will depend on global peace, stability and security. And nowhere is that questions of greater importance than in Asia, where the centre of gravity of global opportunities and challenges of the 21st century is shifting.
India will approach its security challenges by striving to build , in partnership with others, on the historic opportunity that we have at this stage in human history to create a global order and international arrangements defined by consensus and cooperation. India approaches its neighbourhood on the premise that its interlinked destinies demand a cooperative relationships of shared prosperity and security. We have at this stage in human history to create a world order with consensus and cooperation. The destinies of humanity presumes a cooperative relationships of shared prosperity and security, and as such we may strive for everlasting cooperation for peaceful coexistence.
In the past few years India has emerged as a global economic power. It is one of the world’s fastest growing economies, the leading outsourcing destination and favorite international investors’ conglomeration. India is entering into a Golden Age of economic prosperity. India favours peaceful coexistence of all nations in the world.
I conclude with a Peace Invocation as chanted in our ancient Scripture Upanishad : Peace Invocation
Together We Work, Together We Grow.