Role of India in Global Economy

Adnan ul Haque

Business Globalization

Word count: 1801

Introduction:

A world is a global village. This phrase defines that in modern regime the world’s
different parts have come close to each other. This is not just because of the one factor
that is technological advancements, but various factors such as changes in the
economic, cultural, political, social and legal systems, transport mechanism and free
international capital flows. Globalization has paced up in the world in late nineties
with the end of cold war and split of Soviet Union. Globalisation has brought in new
opportunities to developing countries. Greater access to developed country markets
and technology transfer hold out promise improved productivity and higher living
standard.

India’s progress towards Globalization after crises in early 90’s:

The economic crises in the early nineties made India to make advances towards the
globalization trend. This was the same period when there was gulf war going on,
which affected the labour force of India in that region too. With the huge fall in the
Indian economy, the initiative was taken by the government in the shape of new
reforms, famous as “Liberalization, Privatization and Globalization” (LPG). Since the
reforms of the early nineties, the Indian economy seems to have performed well and
has raised expectations of a major take off. These reforms help India in breaking
from the traditional grounds and making strong impact as globally competitive
country. The sluggishness of the first 30 years of independent India were reason for
its economic crises as the social norms were too strong and there was a reluctance for
change. With the exception, perhaps, of the years immediately following India’s
independence, never before has there been as much optimism about the Indian
economy as in the last decade. But India is notorious for blowing its chances, not only
in cricket, but also vis-a-vis the economy. The hope, in the immediate wake of her
independence, was firmly belied. In the late 1970s, with foreign exchange reserves
beginning to build up, the savings rate crossing 20% for the first time and the
economy running a food surplus, many felt that the time for India’s economic take-off
had come. Reforms did help India to a large extent as the liberalization of the
domestic economy increased the gross domestic product (GDP) at a fast growth rate.
Within the six year the GDP growth rate of India picked up to 77.8% from just 5.6%
but last six year of Indian economy remained slow as it only achieved 5-6 % growth
rate. In recent years particularly after 2007 till 2009, India is regarded as the fastest
growing country just after China. 2007-2009 tenure’s statistics shows that India has
major labour workforce in the Information technology. Not only this, India is known
for its services for the other countries in the field of IT as there are working for most
dominant software developers. Most of the developed countries rely on the India’s
software developer and IT professionals. For instance, the British Airways is the UK
based airlines that provides international flights but they have outsourced their
ticketing to Chennai, India. All the tickets are booked for BA’s flights from India.
This clearly shows the technological advancement and progress of Indian excellence.
The recent gradual increase in the economy of India has improved its ranking in terms
of generating annual revenues. Today India stands as the 12 th largest economy in the
world. This has improved the purchasing power in the people and obviously, the rate
of consumption has also remained high due to the dense population.

Gross Domestic Product Growth rate:

In 2001-02 the real GDP growth rate remained 5.4% though the expectations were
more than that but the survey in 2009-10 reveals that gradually the GDP growth rate
have increased for India by approximately 2% and further more the estimated growth
rate was 9% with full returns in 2011/12. At the end of 2012, there will be 3.6% raise
in the GDP growth rate. (According to Professor TN Srinivasam),  in terms of Gross
National Income at purchasing power parity exchange rates, India stands at
the fourth place, after the US and China and just below Japan. India's share of
global GDP in PPP terms was 5.9% in 2005, the fourth highest in the world.

Its contribution to global growth was 8.0%. Domestically, economic growth in

the last ten years averaged 6.4%. In the last three years, on an average, the
growth rate has been over 8%. The indices of trade and financial integration
for India have also increased sharply over a ten year period. Trade integration
has risen from 25.06% of GDP in 1992-93 to 35.14% in 2003-04. Financial
integration has increased during the same period from 15.3% to 19.88%.

Exports and Imports of India:

A steady growth rate of GDP accelerated from $ 13586 million since August 2009 to
$16644 million by the end of August 2010 as till date last six months the growth of
export was 28.6 per cent in Dollar terms.

Imports of India have gradually increased but not to a greater extent which is the sign
of becoming self sufficient in various sectors. This is also the sign of steady progress
and positive approach in the recent years. Imports represent a growth of 32.2 per cent
in Dollar terms.
India’s role in Globalization:

India’s history proves that it has been on the forefront of globalization. Rather, it has
been guiding the process of global trade as well as culture. Indians are fast learners
and have not only learned from others but have also shared their own knowledge and
skill sets for mutual benefit.

Therefore it is not surprising that graduates from India’s management and information
technology institutes are given top places in multinational companies in the West, on
one hand, while on the other, India offers top-class business processes outsourcing
and back office services to companies elsewhere in the world.

In February 2005, The Foreign Policy Centre (FPC) launched a new programme of
research, publications, forums and public discussions on India and globalisation. The
programme aims to engage a broader group of actors with new thinking on the social
and economic consequences of globalisation on India and the impact of India’s
growing influence on the future of globalisation. It will adopt a pan-European focus
in exploring the way in which India fits into a changing world order and how the new
‘rising powers’, notably India and China, can be key actors in shaping it.

A partnership-based programme

The Foreign Policy Centre is working with a number of leading Indian think tanks and
other partners in various fields, including:

 Indian investors in Europe

 UK investors in India
 Prominent journalists, academics and opinion formers
 Indian Diaspora organisations in Europe, especially the UK
 NGOs, think tanks and research organisations
Due to the change in foreign policy India has remarkably done well in last two
decades. They have promoted the international political values, Multilateralism and
international security. India has been an active player in efforts to promote
international cooperation on economic matters. India’s trade and investment
relationship with other rising economic powers developing a strong bond and it has
perceived its relationship with major trading blocs including ASEAN, the EU,
NAFTA, SAARC, GCC, SACU, COMESA and Mercosur.

Export Of India including Outsourcing:

The amount of exports, the nature of exports and the kind of outsourcing can be
looked at to explain the degree of globalization of India. The nature of exports will
indicate how competitive the Indian industry has been and whether the global
economy depends on India just as Indian economy depends on the global economy.
Of principal exports during the period 1960-2003, export of manufactured items has
been a major component of Indian exports. However, the basket of manufactured
items consists of low value items like textiles, yarn, handicrafts, garments, leather,
chemicals, gems and jewellery, and simple and low technology based machinery. The
exports value of major principal items of exports during the period 1960-2003 is
shown in Figure 1.
Global Perspective in India since independence

Figure 1: Principal Exports from India, 1960-2009

45000
40000
35000
30000
25000
20000
15000
10000
5000
0
Manufactured goods

Agricultural goods 1960-65-69-75-79- 85-89-95-99-2005- 2009

Others

A large portion of foreign investment has come to India for outsourcing purposes.
Cheap and - skilled labour, intense competition, saturated markets and thin margins
have compelled countries to outsource their supplies/services from countries like
India. The major areas of outsourcing from India have been information technology,
software, pharmaceuticals textile, auto components, and other backend services. An
estimated $5 billion worth of low value engineering goods, auto components,
pharmaceutical products and textiles products have been outsourced from India over
the past four years. However, none of the outsourced items are unique to India, and
hence, are not sustainable over a long period of rime as other low economies can offer
these products and services.

Outward Foreign Direct-Investments from India:

Outward foreign direct investment from India is a good measure of the extent of
productivity and competitiveness of the Indian industries. Outward FDI is therefore a
good estimator of the extent of globalization of Indian companies in the global
economy. It has been rather a recent phenomenon with the outward FDI amounting to
only US $10 millionn in the year 1990. The total amount of outward FDI increased to
US $500 million in the year 2009. Figure 2 shows the trend in outward FDI during the
period 1997-2009. Although. There has been some increase in the amount of outward
FDIs from India in the recent years; these FDIs have been mainly in the basic and
commodity products. The nature of outward FDI also indicates that the Indian
enterprises have not achieved the required productivity and competitiveness in the
global economy.

Inclined progress of India after its independence

Final Thoughts:

What the empirical examination has demonstrated is that, instead of economic

recessions and stagnation, India achieved an acceleration of the growth rate after in
opted for the integration with the world economy, and in doing so, it has broken the
barrier of stagnation that had been the lot of the country before globalization. It is
difficult to exaggerate the significance of this accomplishment. The acceleration has
provided additional resources not only for the investments in human capital but also
for expenditures on the social sectors and poverty alleviation. Moreover, the
economic dynamism associated with and resulting from the acceleration has imparted
to the elites and the people the self confidence to go forwards with the projects of
building a consolidated nation-state. In short, India is not emerging country, it has
already emerged. It has improved the Asian bloc as a powerful contender to be a
player to balance the power in Asia. It has the potential to play more vital role in the
globalization of economy. It requires the radical improvement of the infrastructure,
particularly as regards to power, the lowering of tariffs to enhance competitiveness,
and higher its investments in social sectors. India has economic potential and
resources to play active role in the economy of world.
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