The global context today is one of globalization – which in the words of Joseph Stiglitz is essentially a double – edged sword. To those able and willing to seize the opportunities and manage globalization on their own terms, it has provided the basis of unprecedented growth. To those who have not been able to manage it as pet their country specifics, it has spelt doom. The challenges, therefore, is to minimize the disruptive and contentious aspects of globalization, and maximize its benefits, especially for those who are as yet outside the pale of development.
Globalization should be an inclusive process for all, specially developing countries. The developing world is now playing an increasingly significant role in the world economy – not just as traditional producers of cost-effective goods and services but as significant consumers of those products as well. Way back in the eighties, it was the emerging power of countries in Asia and South America that prompted an acknowledgement of the need to overhaul the global trading system to make it more reflective of developing country interests. Today, emerging economies like India, Brazil and South Africa have shown that it is a voice that can no longer be ignored by the world’s developed economies. Opening market access, as recent global trade negotiations have demonstrated, has to be a two-way mutually beneficial process in which the developing world’s legitimate concerns demand reflection.
This is not an altruistic wish but a realistic reflection of the rising significance of emerging economies in the new world order. Economic analyst around the world have said that the 21st century belongs to these economies. Goldman Sachs’s prediction that the famous BRIC grouping of Brazil, Russia, India and China would be the world’s largest economies by 2050 – that is, a little over 40 years from now – is based not on perception but on hard economic facts. These are the economies of the future with sustained growth and rising purchasing power and they are setting the global economic agenda today. There is no doubt that Asia is at the centre of this transformation and that India and China are the epicenters of the emerging world order.
Coming to the India growth story, after 15 years of economic reforms it would be no exaggeration to say that India has moved up the value chain of global perception. India’s economy registered an average rate of growth exceeding 8 per cent during the last 3 years. In the first six months of the current year the GDP growth was 9.1 per cent which is a record in itself. India’s industrial production grew at 10.3 per cent and manufacturing sector at 11.2 during the current year (upto October) which is the fastest pace in a decade. Exports are growing at three times the growth of GDP at around 25 per cent during the last four years. In 2005-06 exports crossed the landmark figure of US $ 103 billion almost doubling over a four year period. Merchandise exports along with service exports together account for around 20 per cent of GDP. Foreign exchange reserves are more than US $ 170 billion and inflation rate is contained at around 5 per cent.
We are also attempting to re-invent ourselves:-
The Government of India (GOI) has divested some of its powers of approving foreign investments that it exercised through the Foreign Investments Promotion Board (FIPB) and has placed them under the RBI through the General Permission route.
The FDI cap for aviation has been hiked from 40 to 49 per cent through the automatic route. It has set up an Investment Commission that will garner investments in the Infrastructure sector and plans to increase the limit for investment in the Infrastructure sector.
The Government approved sweeping reforms in FDI with a first step towards partially opening retail markets to foreign Investors. It will now allow 51 per cent FDI in single brand products in the retail sector. Besides retail, other sectors are being opened too:-
100 per cent allowed in new sectors such as power trading, processing and warehousing of coffee and rubber.
FDI limit raised to 100 per cent under automatic route in mining of diamonds and precious stones, development of new airports, cash and carry wholesale trading and export trading, laying of natural gas pipeline, petroleum Infrastructure, captive mining of coal and lignite.
Subject to other regulations, 100 per cent FDI is allowed in distillation and brewing of potable alcohol, industrial explosives and hazardous chemicals.
Indian investor allowed to transfer shares in an existing company to foreign investors.
Limit for telecoms services firms raised to 74 per cent from 49 per cent.
The Indian Government has been working very hard to improve ties with the Overseas Indian Community. The remittances from our Overseas Indians is one of the highest. In fact, over the years, it has emerged as a stable source of foreign exchange inflows into the country. In 2004, inward remittances into India were US $ 21.7 billion. It not only benefits the immediate recipients but raises national income and stimulates investment.
Ministry of Overseas Indian Affairs website gives all the relevant information about the rules and regulations relating to the taxation and investment policies.
A single Window Agency called Overseas Indian Investment Promotion Council is in the process of being set-up so that our Overseas Indian Investors may not have to face hassles. This Council will also have liaison with State Governments so that investment in a state is smooth and they get co-operation from the State Governments.
However, the other side of the story has to be also seen. There are other areas still to be addressed. There is a need to make the tax structure non-distortionary. Commercial taxes must conform to a national uniform level. Introduction of VAT has been a welcome step in this direction. We need to revisit our labour laws to incentivize large-scale industrial activity and creation of jobs.
The most vital cog in the industrial growth process is the upscaling of infrastructure to world-class levels. This is very essential in not only attracting investments but in making operations efficient and cost-effective thereby allowing the domestic industry to compete globally. Investments amounting to US $ 350 billion in various sectors of infrastructure like roads and highways, ports, airports and telecom are envisaged over the next five years. Infrastructure development has to be a task accomplished through the joint efforts of the government and the industry.
We must appreciate the fact that there is a need to take along all segments of the society in India’s growth process. In other words, we must not only grow more but also include more in that growth. Attaining greater inclusivity in India’s future growth is the challenge before us. The challenge would be to bring more and more people to the market. We must follow a multi-pronged strategy that should include: increasing employment in the non-farm sector in the rural areas, increasing wage levels in rural employment by undertaking various measures to improve productivity levels, promote entrepreneurship among the weaker sections of the society, promote industrialization of rural areas with significant backward population, attaining improvement in standards of education at all levels, uplifting infrastructure, courses and quality of instruction in the vocational education system by stressing on industry-education linkage and providing greater opportunity to the backward sections of the society in employement.