It seems that my curious affinity on the subject of India has yet to cease since i did the dissertation research 2 years ago. I remain very eager to see how India develops and thus enhances its economic reforms successfully.
Last week, I had the honour of representing my office to attend a CSIS Seminar on India Going Global: Emerging Multinationals and Regional Economic Integration with Dr. Nagesh Kumar, the Director General of Research & Information System for Developing Countries (RIS), India, as the only speaker.
All in all, it was probably the most interesting seminar i've ever been to for the past months as i found myself sitting there with fully opened eyes listening intently to Dr. Kumar's presentation.
Anyways. Below is the short version of seminar review i managed to write after the seminar.India Going Global:
Emerging Multinationals and Regional Economic Integration
Speaker:
Dr. Nagesh Kumar
Director-General
Research and Information System for Developing Countries (RIS)
New Delhi, India
≈ India: Brief Overview and Analysis
India began its modest reform slightly in 1980, although it was a hesitant and sluggish reform. Up until then, India had always had large private sectors while markets were run by inflexible state controls. What had started in 1980 became systemic and far broader after India experienced a severe macroeconomic crisis in 1991. In late 1991, with the transfer of the Indian Parliament into the hands of political and economic reformers, despite much opposition, India began its reform towards liberalization and freer trade. Since then, Indian per capita GDP has doubled and has achieved the 6% plus rate of GDP growth earlier this year (Siegel 2006). Despite the slow pace of the reform, India has got all the necessities for a knowledge-based economy by credit of its human resource strength that has led it to become one of the major emerging economies in the world measured by purchasing power parity (PPP).
Taking a longer perspective, the economy did very well in the first five years or so after the economic reforms of ’91. The economic reforms marked a defining moment in India’s economic history. Under the reforms, India has fruitfully set groundwork for strong economic growth by remodeling itself from underdeveloped-agricultural-and closed economy into a progressively open one that promotes more foreign investment and attracts more fortune from industry and services.
India is moving fast to gain its place on the world stage. India has integrated itself to East Asia which is the most dynamic region in Asia today. Now, India is going global as its best companies are targeting global markets, i.e. Tata group, and the Indian consumer is drawing the world’s attention. The country, too, is entitled to boast companies with world-class capabilities ranging in sectors such as information technology, manufacturing, and pharmaceuticals. Many Indian companies, such as Infosys Technologies, Wipro technologies, Bharat Forge, and Reliance Infocomm, now hold a market capitalization over a billion dollars. They are soon expected to become competitive global firms. However, the biggest ones among them are: Tata Group and Mittal Steel.
Political sustainability is another aspect where in a democratic environment like India, people have to be capable of spotting benefits that arrives. However, in order to sustain these progresses and moving forward in going global, the country and its leaders still have a lot to accomplish. Among the tasks are mainly by focusing on building the much-needed infrastructure and driving a thriving labor market, while the next set challenges waiting to be tackled includes education, health care, food industry, poverty, and social unrest. These problems will be far more intricate and multifaceted, and the pace of transformation has not been as fast as it should be.
In the short run, the critical challenge India has to tackle is infrastructure as the country has not invested as much in infrastructure as it should have in the past. One of the major goals of India’s current Five-Year Plan is to sharply increase investment in infrastructure. Developing excellent infrastructure is not going off through the traditional public-sector development route since the public sector cannot mobilize resources on this level – as the country, too, has to invest massively in education and health. Thus, as revealed by Montek Singh Ahluwalia, the Deputy Chairman of India’s Planning Commission, in last year's interview with Mckinsey Quarterly, the country has formulated a strategy for infrastructure development based on public-private partnership where about three-quarters of the increase in infrastructure investment above business-as-usual projections would have to be privately funded. Basically, the government is willing to encourage infrastructure development with with private-sector entrepreneurs taking risk wherever feasible.
Interestingly, Dr. Kumar and Ahluwalia’s suggestion was coincidentally similar when talking on the subject of how bottlenecks at the state level affecting infrastructure-related growth. They both admitted that indeed there was a bottleneck effect of reforms initiating in the center and spreading to the states afterwards. However, there are many examples that state governments recognizing and are quite aware of the idea of attracting private investment is obviously the brilliant approach to boosting up economic growth. And thus, these state governments have been responding to this suggestion by attempting to create an investor-friendly atmosphere. The central government, in this case, will let each state to develop and enhance the said atmosphere independently while offering to provide supporting assistance if needed. There will be rankings of states prepared to indicate the most investor-friendly states and those of the less ones. This method is to entice politicians of each state government to be conscious of their performance, and thus create political motivation to encourage them to compete with each other and be the most improved ones. The key objectives here is to create organized-sector jobs
In essence, India is on the verge of becoming one of the forces reshaping the global economy. Whether it is going to be a success story or not, it depends on how India tackles the challenges and opportunities ahead. They need to develop a strong political commitment and reliable political system, and sound strategy to manage a sustained economic development to gain wealth. On top of that, a joint action from all stakeholders: the government, the private sector, and society, is highly important for India to go global.
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