India’s Tryst with Globalization

Rahul Mukherji

Associate Professor South Asian Studies Pr ogramme

Honorary Senior Fellow, Head (Research)

Institute of South Asian Studies

National University of Singapore

October 16 2014

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Nominal Gross Domestic Product at Purchasing Power Parity - 2011

2

2009

2007

Source: Economist Intelligence Unit Database assessed via NUS library web site, 2012

Economic Liberalization & GDP Growth: India

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Public Sector and Economic Self Reliance Private Sector and Economic Self Reliance Private Sector and trade Private Sector and Trade Promotion

3.4%

5.1%

6.2%

8.8%

Comparative GDP Growth: 2003-2012

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The Tipping Point: The Earthquake Model

• Evolutionary Change

• Endogenous change

• Appearance and reality

• Ideas within the state matter

• This is not the East Asian developmental state

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Reasons for Resisting Globalization

From pre - colonial to colonial experience

Powerful Economic Ideas

• Import substitution or economic self reliance

• Public sector and private companies

• Large country and economic self reliance

Why the transition from import substitution to trade promotion?

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The Old Model

• Nehru Vs Patel

• The Old Consensus - Second Five-Year Plan (1956-61)

1. Foundational Idea

2. Heavy Industries

3. Neglect of agriculture

7 Sardar Patel (left) & Jawaharlal Nehru (Right)

Gradual Globalization and Deregulation – The 1980s

PM Desai

1977-79

– New Ideas

– Help Indian companies but not trade

– Political resistance

– Bias favoring status quo

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PM Indira Gandhi 1966-75; 1980-84 PM Rajiv Gandhi 1984-89

The Tipping Point in 1991

Why globalization and deregulation?

New Economic Ideas

Balance of Payments Crisis

Economic Crisis and Domestic Opposition

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PM Rao Manmohan Singh 1991-96 Finance Minister: 1991-96 PM: 2004-2014

Economic Reforms of 1991

Economic Reforms

1. Reduction in Tariffs

2. Devaluation & competitiveness

3. Industrial Deregulation

4. Foreign Investment

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The Role of Private Companies

• Deregulation helped Indian Private Companies

– The Tata Group Ratan Tata – Infosys: The Software Giant

– A New Business Class – India and China

N R Narayana Murthy (Infosys)

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Roots of Competitiveness

• Success – Telecommunications – Banks PM Vajpayee (1998-2004)

– Stock Markets • Failures

– Ports Sunil Mittal

– Power

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Why Foreign Investors Should Care?

• India is not China

• Why should investors care?

• What should an investor do?

• The success of J C Bamford against Caterpillar

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Amartya Sen Versus Jagdish Bhagwati: State versus Market?

14 Authors: top left – Sen; bottom left – Dreze; top right – Bhagwati; bottom right - Panagariya

Human Development in South Asia

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Can Narendra Modi succeed with globalization?

• Ideas Matter – Inspiring speaker & good administrator

– Jan Dhan Yojana

– Employment & right to information

– Investor sentiment & easy visas

• Worries – Inexperienced ministers

– Trade facilitation

– Better regulation

– Minority rights and social peace See: http://www.pmvisit.org/ (Madison Square Garden Speech)

http://www.youtube.com/watch?v=yc1iTDUnsqQ (Modi at Times Square)

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