Author: Rajiv Kumar, ICRIER

Last week I went back to Seoul after 26 years. The city is transformed and so is the economy. In 1984, when I visited the export processing zones, Masan and Iri contributed at least 60 per cent of total exports from South Korea. Posco had been established as a public sector company to take on established global giants and out-competed all of them despite having to import 100 per cent of its raw materials by relying on latest technology, economies of scale and above all, sheer hard work and dedication. And, at the same time, Korea was reaching full employment levels by furiously expanding labour intensive exports.

The question arose in my mind that if Korea could successfully combine the latest technology with large-scale employment generation, could India do it as well? Read the rest of this entry »

Author: Pravakar Sahoo, IEG and Nisha Taneja, ICRIER

China has been taking an increasingly active interest in South Asian countries over the past few years, seeking to rally friendship and support in order to surpass India’s dominance in the region. When the South Asia Association for Regional Cooperation (SAARC) was formed in 1985, they expected leadership from India, but India has yet to assume this role. Now China, India’s main political rival, is entering its neighbouring markets more aggressively through both trade and investment.

China has been the fastest growing economy in the region for the last decade and has surpassed India in terms of growth, world trade share, price competitiveness in product manufacturing and winning oil deals. Read the rest of this entry »

Author: Rajiv Kumar

I write this from a freezing Beijing where I am ensconced in a well-heated deluxe room of the Lakeview Hotel at Peking University. The campus, which I had first visited in 1996, has been transformed since: It has reportedly received generous capital infusions of at least $100 million on several occasions during the last 15 years. I met a number of senior foreign academics who are attached to Peking and Tsinghua universities, whose infrastructure and quality of faculty are improving continuously. As an academic, I admit to feeling most envious of my Chinese counterparts.

But the real bonus of being here has been to find an answer to the question, how is China able to flood global markets with cheap exports without any evident infringement of WTO norms? The related issue is China’s ability to push up investment levels to historically unprecedented levels. These investment levels have been used to expand the manufacturing base, and China has emerged as the second largest exporter after Germany. It is building up huge modern infrastructure capacities, which some would argue may be relatively overdeveloped, given China’s current income levels. Read the rest of this entry »

Author: Rajiv Kumar

There is currently an air of expectation about India’s future prospects both within the country and even more so abroad. We are surely on the move. The new century, it is said, will see India emerge as a global player because of its structural advantages.

Some of the major ones are, for example, a young population with its promise of an expanding workforce Read the rest of this entry »

Author: Rajiv Kumar, ICRIER

At a recent India-China book launch, where human resource development minister Kapil Sibal was present, I made it a point to highlight the comparative picture between India and China in the education sector. This is a crucial sector for emerging economies attempting to achieve inclusive and rapid growth. Moreover, as several recent studies have brought out, returns on skill formation and higher education, which are already substantial, continue to rise as the world increasingly takes on the attributes of a knowledge economy. By the way, the book by Mohan Guruswamy and Zorawar Daulet Singh titled Chasing the Dragon is well worth a read for all those interested in finding out the distance we have to cover to catch up with China. Read the rest of this entry »

Author: Rajiv Kumar, ICRIER

After a long time, the Indian market has begun to under perform the other emerging markets. On days when emerging and other Asian markets have been gaining sharply, our indices have been witnessing selling pressure.

Are we going to enter a phase of relative underperformance due to our own domestic issues, and secondly, is the market running ahead of valuations? One of the major reasons for the underperformance in the past week was a sharp decline in stocks from the telecom sector that came under attack. Read the rest of this entry »

Author: Rajiv Kumar

The Pittsburgh Summit has clearly pronounced that ‘Today, we designated the G-20 as the premier forum for our international economic cooperation.’

This should normally imply the demise of G8, which has so far been the premier informal forum for global governance. It seems, however, that G8 will continue to function, albeit economic issues may be formally off its agenda, which could hen­ceforth be more focused on geo-strategic and political issues. This will result in a two-track global governance architecture, which, in my view, does not really work.

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Author: Rajiv Kumar

Security hawks, the media’s foreign policy experts and the political class had a field day after July’s Indo-Pakistani joint statement. Particularly for the Bharatiya Janata Party (BJP), whose astute leader Atal Bihari Vajpayee once took the boldest of steps to liberate India from its Pakistan obsession, nationalism seems confined to overtly displaying our superiority over a smaller neighbour, one fighting with its back to the wall against destabilising forces. Good foreign policy, however, has to be more nuanced so that our long-term national interests are served.

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Author: Rajiv Kumar

Despite exhortations from successive G-20 summits, the Doha Development Round (DDR) has been in a state of suspended animation since July 2008. It is fortunate that protectionist measures taken by several governments since November 2008, have not resulted in a rash of competitive protectionism. But we are at the top of a very slippery path. It will not take much for governments to succumb to domestic protectionist pressures if unemployment continues to rise or the recovery falters. Therefore, it is quite important that the multilateral trading regime be strengthened and the credibility of the WTO which serves as its global watchman is enhanced. There can be no better means of achieving this than to ensure a successful conclusion of the DDR.

In this context, it is sad to realize that a successful outcome of the DDR is seen as an increasingly remote possibility. There is talk of ‘multilaterlizing regionalism’ which in all honesty is some what of an oxymoron. And some observers, on grounds of realism have suggested that we accept a failed DDR as a fait accompli and start to look for second best options. India and other emerging economies should not accept such a pessimistic prognosis. Instead they need to ensure that the DDR, is successfully concluded even if with a lower ambition level.

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Author: Rajiv Kumar

About a month ago, at a closed-door session on India and Global Climate Change, the main presenter, a former Environment Secretary, eloquently outlined the tough stand that India should adopt in partnership with China and Brazil in the forthcoming Copenhagen Summit. That this is the standard party line was clearly demonstrated by Environment Minister Jairam Ramesh in his recent dialogue with Hillary Clinton. India will not consider any capping of emissions by emerging economies and, in any case, advanced economies should demonstrate their seriousness by making substantial upfront funding (hundreds of billions of dollars) commitments for any meaningful advance to be made.

At this session (June 27), I had raised a somewhat practical question about what India’s position would be in case the Chinese had a deal with the Americans. None of us had any inkling of what was brewing and transpired exactly a month later (July 27) in Washington, when China and the US signed a memorandum of understanding (MoU) on enhancing bilateral cooperation on climate change, energy and environment. Unarmed with this information, the key presenter at the seminar asserted that the Chinese would never let India down and would not have any agreement with the US. Apparently, our Minister subsequently accepted the explanation given by the Chinese Ambassador that the MoU does not and will not lead to any bilateral understanding between China and the US on Copenhagen.

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Guest Author: Andrew Sheng

We are seeing a change all over Asia.  Thanks to Asian giants like Gandhi, Nehru, Mao and Deng, the revival of India and China is changing the 21st century.

If we were to take a grand macro-historical perspective, with India and China both growing at more than 8 per cent per year, whilst the G-3, US, Europe and Japan are growing at less than 2 per cent a year, the relative power between the mature economies and the emerging markets is changing dramatically.

Angus Maddison projects that, by 2018, China will overtake the USA as the largest economy in the world, with India as number 3. By 2030, he estimates that Asia (including Japan) would account for 53 per cent of world GDP, whereas the US and Europe would only account for 33 per cent.

If this were the case, the global financial architecture would have to be significantly different from the present.

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Author: Amit Singh, ICRIER

PM Yoshiro Mori’s visit to India in August 2000 was the beginning of a new era in India-Japan relations. The visit set a precedent for visits to India by his successors Junichiro Koizumi and Shinzo Abe. Since then, the two countries have sought to strengthen bilateral ties through initiatives and programs ranging from economic and cultural linkages to defence and security.

Japan directs 30 per cent of its foreign aid to India and is, even in this period of global economic turmoil, committing more than US $4 billion to the Delhi-Mumbai Industrial Corridor (DMIC). The two recent mega deals between Indian and Japanese companies, namely, the Daiichi-Ranbaxy merger (US $4.6 billion) and the acquisition of 26 per cent stakes (US $2.7 billion) in TATA Teleservices by Japanese mobile giant NTT DoCoMo, are clear instances of the growing economic ties between the two countries.

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Authors: Rajiv Kumar, Mathew Joseph, Karan Singh (ICRIER)

India had a dream run of five years during 2003-08 as the GDP growth averaged nearly 9 per cent annually, the best run over five years ever! The economy began to slow from the middle of 2007-08. A 9 per cent growth apparently could not be sustained: India’s potential rate of growth has been estimated by more than one agency to be around 8.5 per cent. As the economy overheated, the central bank tightened credit gently initially but more sharply since 2006-07. The economy began to slow down. Some of us had argued that the tightening was going too far and was an over-reaction to global inflationary pressures. No one foresaw the external shock arising from the global crisis which began with the financial meltdown in the US.

Now the interesting question is what would India’s growth rate have been in response to the policy measures without the global crisis as compared to what it is likely to be in the context of the on-going global crisis.

Our analysis suggests a sharp collapse in Indian growth this year. India would have grown 7.5 per cent (a slowdown from 9 per cent in 2007-08), had the global crisis not occurred. The global crisis is likely to bring India’s growth rate to below 6 per cent in 2008-09.

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Author: Rajiv Kumar, Director ICRIER

Barack Obama’s election has been cheered across India and for many good reasons. Once again the US has shown remarkable qualities of social and political regeneration and surprised all of us with the depth and breadth of its democratic traditions. By electing Obama with a clear majority of votes polled, the American people have given the US a fresh opportunity to regain its pre-eminent position in the world, a position which it has enjoyed since the middle of the last century.

An Obama administration, if it does live up to the campaign promise of being less unilateral and more consultative, can restore US political leadership  in countering global terrorism and pushing  back the obscurantist forces of fundamentalism. While these may well be the necessary conditions for giving a fresh lease of life to Pax Americana, the sufficient condition must surely be Obama’s effective handling of the on-going global financial meltdown and reinforcing the positive features of globalization and giving it the much needed human face.

President Bush has moved quickly, as he must, to try and reverse the recessionary tide and bring the US economy back on the growth path. But the world will of course be watching with great interest his handling of the multilateral economic and trading regime and his commitment to globalization. Read the rest of this entry »

Author: Rajiv Kumar, Head of ICRIER, New Delhi

These are unprecedented times. The post independence generation in India gets to experience its first real financial sector crisis and near meltdown. Thank the Lord that it is elsewhere where a trillion dollars is less than one eighth of the GDP! This will hopefully add to its growing confidence by realizing that ‘they in the developed west’ can also make mistakes, can falter and are not infallible.

The success of India’s software and outsourcing industry had, to our great surprise, already seen senior economics professors in the US questioning the merits of liberal and open economies. Now we see a theologically devout Republican President of the US urging the Congress to pass a bill that would effectively nationalize large parts of the financial sector, having already taken into government care the world’s largest insurance company by pumping in $85 billion of taxpayers money. Read the rest of this entry »