Razeen Sally

Razeen Sally European Centre for International Political Economy (ECIPE) London School of Economics (LSE)

GLOBALISATION AND INDIA SHINING India at 60 • From Gandhian mysticism, economic isolation and social backwardness to globalisation and India Shining

GLOBALISATION AND INDIA SHINING • Snapshot -- Macroeconomic conditions -- Trade and foreign investment (FDI) -- Financial markets -- Domestic business climate -- Politics and the state -- Comparisons with China

GLOBALISATION AND INDIA SHINING b) Prospects -- Politics, economic policy, the business climate -- Comparisons with China c) Focus -- States and cities -- Higher education

GLOBALISATION AND INDIA SHINING • History (1947-91) -- From Fabian socialism to Soviet-style central planning and the ‘license raj’ -- Foreign policy: nationalism, non-alignment and the Soviet Union as First Friend -- The economy: a ‘Hindu equilibrium’

GLOBALISATION AND INDIA SHINING • Market reforms, 1991- -- Half measures in the 1980s -- The 1991 crisis and ‘big-bang’ reforms (1991-93) -- Gradual, stop-go reforms (1993 to present) -- The state of play

Figure 1: Aggregate GDP Source: World Bank, World Development Indicators (WDI)

Figure 2: Per-capita GDP Source: World Bank, World Development Indicators (WDI)

Figure 3: Poverty as % of Population Source: India 1950-1978 World Bank Poverty in India Dataset Poverty and Human Resources Division Policy, Research Department, The World Bank, Berk Özler, Gaurav Datt, Martin Ravallion. January 1996 (http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:20699301~pagePK:64214825~piPK:64214943~theSitePK:469382,00.html); India and China 1981-2004 Chan and Ravillion "How have the world's poorest fared since the early 1980s?" The World Bank Research Observer, vol. 19, no. 2 (Fall 2004)

Figure 4: Inequality India (GINI) Source: Ozler, Berk, Gaurav Datt and Martin Ravallion. 1996. "A Database on Poverty and Growth in India," mimeo, Policy Research Department, World Bank.

Figure 5: Savings/ GDP Source: World Bank, World Development Indicators (WDI)

Figure 6: Investment / GDP Source: World Bank, World Development Indicators (WDI)

Figure 7: Foreign Exchange Reserves Source: IMF International Financial Statistics (IFS)

Figure 8 (i): Share Agriculture in GDP Source: World Bank, World Development Indicators (WDI)

Figure 8 (ii): Share of Manufacturing in GDP Source: World Bank, World Development Indicators (WDI)

Figure 8 (iii): Share of Services in GDP Source: World Bank, World Development Indicators (WDI)

Figure 9: Total Trade (Goods & Services) Source: WTO, International Trade Statistics

Figure 10: Trade/ GDP Source: World Bank, World Development Indicators (WDI)

Figure 11: Current Account Balance Source: World Bank, World Development Indicators (WDI)

Figure 12: Current Account Balance (% of GDP) Source: World Bank, World Development Indicators (WDI)

Pie 1 (i): Share of Global Trade (Goods) Source: WTO, International Trade Statistics

Pie 1 (ii): Share of Global Trade (Service) Source: WTO, International Trade Statistics

Figure 13: Exports of Goods and Service Source: WTO, International Trade Statistics

Figure 14: Growth in IT Services/ GDP Source: World Bank, World Development Indicators (WDI)

Figure 15: Inward FDI Flows Source: UNCTAD, FDI Key Data

Pie 2: Share of Global Inward FDI Stock Source: UNCTAD, FDI Key Data

Figure 16: Outward FDI Flows Source: UNCTAD, FDI Key Data

Figure 17: Stock Market Capitalisation Source: World Bank, World Development Indicators (WDI)

Figure 18: Inward Portfolio Capital Flow Source: World Bank, World Development Indicators (WDI)

GLOBALISATION AND INDIA SHINING • Reform results -- Massive changes: opening to the world, transformed business landscape, IT powerhouse, emerging world-class firms -- But lopsided growth: benefits urban middle classes but not the vast majority of the poor – unlike China

GLOBALISATION AND INDIA SHINING • Reform gaps -- Unreformed agriculture -- Lack of labour-intensive manufacturing and throttled labour markets -- Overregulated, underperforming services sectors -- Remaining trade and FDI barriers -- Remaining capital controls -- The unreformed Indian state

Table 1: Ease of Doing Business Source: The World Bank Doing Business Database

Table 2: Trading Across the Border Source: The World Bank Doing Business Database

Table 3: Governance Indicators Source: The World Bank Doing Business Database

GLOBALISATION AND INDIA SHINING • Politics -- The most difficult country to govern: vast, hugely diverse, split so many different ways -- Messy democratic politics: multi-party coalitions at the centre; kaleidoscope of musical-chair politics in the states -- But advantages (compared with China): unity and stability; checks and balances; British-endowed liberal institutions; the English language; political and civic freedoms

GLOBALISATION AND INDIA SHINING • Focus (1) -- The states in a federal system -- Growth engines in the south and west (with outliers) -- Policy reforms and business transformation: e.g. Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Gujarat, Punjab, Haryana -- Key sectors, NRIs and FDI -- Transformation of India: a bottom-up, not a top-down story

GLOBALISATION AND INDIA SHINING • Focus (2) -- India’s expanding demand for higher (and lower) education: insufficient, low-quality supply; foreign investment prospects; reform hurdles

GLOBALISATION AND INDIA SHINING • Prospects -- The big picture: the new Asian Drama -- Asia’s transformation of the world economy: much more competition; gains for the West and the Rest; but more difficult adaptation required; wider inequalities; the middle-class squeeze; the middle-income trap -- Role of India in the new Asian Drama

Figure 19: Share of Global GDP (i) Source: Agnus Maddison

Figure 19: Share of Global GDP (ii) Source: Agnus Maddison

GLOBALISATION AND INDIA SHINING • Prospects (cont.) -- Lou Dobbs is wrong: stupid economics; bad business logic; noxious politics -- Lessons for policy: contain protectionism; constructive economic engagement; strategic foreign-policy partnership

Razeen Sally

Razeen Sally

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