India Today- A Current Perspective on India's journey to a status of Economic Superpower

"On the one side there is this great and overpowering progress in science and technology and their manifold consequences; on the other, a certain mental exhaustion of civilisation itself."- Jawaharlal Nehru

Ironically, to most of the so-called liberal capitalist generation of today's India, the Nehruvian or Congressian age seems to be one that meant the complete opposite as to what Nehru proclaimed when he unveiled his vision of socialist India. Many look at that age as a dark period of Indian economic stagnation that led to the delaying of India rising to the global front as a key economic player. This being a rather sensitive issue, let us leave this issue right there and concentrate on the more recent events in the Indian economy before concluding with an approach that should be applied in the future.

A scampering Tiger or a toiling Turtle?

The Indian economy is expected to overtake the United Kingdom and Japan by 2035, making it the world's third largest economy after the US and China- Goldman Sachs

India is already one of the world's largest economies and increasing its size regularly. It is, along with China and Brazil, classified as one of the countries which has the potential of emerging as an Economic Superpower in about half a century or maybe less. However, we still have one of the lowest GDP per capita in the world showing a very uneven distribution of wealth in our country. However, this should not be taken to undermine the achievments of the Indian economy which are very much real.

After 1991 and especially in the mid-1990s when India lowered its extravagant import duties and other protective measures, there was a fear among the economists about the imported Chinese products 'flooding' the Indian market. However, Indian industries especially the manufacturing industry has reacted resolutely to this claim and has been successful in thwarting Chinese products into ruling Indian markets. In 2003, India's exports to China were up by 101% from last year and the real value was $2.331bn and Chinese imports were up by 29% from last year the real value being $1.756bn. India enjoyed a favourable trade balance of $575 million. The overall trade is also up since in the whole of 2002, there was a trade of $4.96bn and in the first 7 months of 2003, the trade has already crossed $4bn and predicted to reach $7bn. India is actually even exporting steel to China a rare a great achievment of India's manufacturing. At this point in time our manufacturing industry seems mainly to be concentrated on the domestic market and soem Asian markets and does not really boast a global presence.

As far as the service sector is concerned, Indian telecom industry is flourishing and Infosys has established a hold in the Chinese market. Indian IT professionals are sought with great demand in US and Europe and regularly been recruited from India. A huge number of service jobs in Britain and the USA are being moved to India because of the high skills its workforce commands and the cheap setting up costs in India.

The main achievements of the Indian economy in recent times has surely been its increasing 'global presence'. Indian industries are also doing well in their trade with the EU and with the expanding EU, there might be more opportunities. Indian IT industry is doing extremely well in France and Germany with high demands even though the global IT market is slowing down. India's exports to Romania increased by 22% from 2002 compared to a 5.4% increase in the other way. The traditional idustries are doing well too with textiles and flowers. From last year the Indian export of flowers increased by 15%. Because of Chinese, Pakistani and Nepalese competition, Indian exports of garments to the USA declined by 10% but rose by 25% to the EU. The most important fact here is that the value of trade with the USA was only $965millions in textiles and now along with 10% fall in that, we have a $1.1bn trade with the EU. I dont need to say much more about the IT sector as Bharat has posted an article above and also I have given some links in my previous posts about it. Basically, I know India has to improve a lot more, but all I am trying to prove here is that Indian industries are doing really well and are well on track. For example, as you said that agriculture is the profession of 60% of the people yet it contributes only 25% of the GDP. But recent figures have shown that this figure is below 20% now and serious land reforms are needed for this to improve although despite this India remains the largest producer of agricultural products in the world despite the famine we had last year which underlines our potential. Many multi-national companies are also working in India to improve our Energy sectors which has become very efficient and a recent claim by the Government has been to electrify every village in India by 2008. India's traditional sector Agriculture remains strong although somewhat undermined by this huge upsurge for the service sector. Nevertheless, an improved Canal System linking rivers for better irrigation purposes is in the making and we must never forget that India remains the world's largest producer of agricultural goods despite last year's poor harvest. This year the monsoon has been good so results should improve.

The Way Forward

Each country has its advantages and problems. Judged by most criteria, there is no comparison between India and China. China is 20 years ahead. You dont need criteria to tell you that. A visit to Pudong will do.

Sure, we are doing very well. But we need to do more, much more. In most sectors apart from the service, we are considerably behind the Asian leaders. Considering unreliable Chinese statistics, we can scale down Chinas GDP growth but notby much. We still get between 7-8%. Depending on the year, we get between 5.5 per cent and 6.5 per cent. Our per capita income of US $ 500 compares with Chinas $ 1,000. Even if we reclassify our FDI measurements, as we are about to do, we get $ 6 billion for 2002-03. Even if the Chinese figure is scaled down, $ 40 billion becomes at least $ 30 million. Poverty, literacy, health indicators, IT penetration ratios, there is no comparison. We were in the same league in the second half of the 1970s. We arent now. There are at least three types of Chinese imports. First, legal imports from China. Second, smuggling and this can happen across the border from China or through Central Asia, Bangladesh or Nepal. Third, legal imports that show up as imports from Nepal or Bangladesh, but are actually Chinese products. Understandably, official import figures include only the first. China is alrady investing heavily in its service sector and it may catch us there too. We cannot sustain a 8% growth only riding on the service sector. The manufacturing industry has huge potential which must be realised by heavy investment in technology which is the main reason why Indian manufacturing often falls behind in the global arena. The agriculture needs to be mechanised and better infrastructure must be provided by the government for effective distribution of the products and easy access to markets for the farmers. We must also create more jobs in India through encouragin industry otherwise the 'brain-drain' problem we are having now will accumulate in the future. The best IT men and women and also many of our best scientists and engineers are going abroad. The incentive in India needs to be created to get them to stay in India.

We need the state to leave the control of the loss-making industries and instead concentrate on setting down competition and labour regulations which will enable the workers to have good conditions even in a privatised economy and the foreign companies to trade fairly with the Indian ones. However, we must encourage the growth of domestic industries where possible and the government must make available training centers and other resources for Indian firms and in some cases, protect them from overseas encroachment although this should be extremely selective. A welfare state is a must in India and the government should concentrate on saving money it spends in holding on to loss making companies and divert it to having better education, better health care, job centers and unemployment benefits, better housing, better food/water, better sanitation and better infrastructure across India which will lead to an effective equal distribution of the population,a better workforce and great organisation and greatly reduce poverty.

A Happy End Note

Recently the Reserve Bank of India forecasted India to grow at 7% this year. Well done to all if India achieves this. Keep your fingers crossed-I certainly am.