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India’s role in global trade

In global trade, power has shifted and new blocs have been created. After two decades of changes in the fundamental structures of the global trading system, China has risen to the rank of the mega-trader of its own class, whereas the USA, Canada and the European Union have consolidated their dominance of the Transatlantic Trade and Investment region and the USA, Japan, South-Korea together with smaller Asian economies represent the Trans-Pacific trading bloc. India, soon the most populous nation of the world, remains outside of these trading blocs. While the growth of trading economies demonstrates the age-old experience that only trade enhances the growth of national economies, India’s example illustrates the sobering recognition of the fact that in a globalising economy and society the size of the domestic economy, even if it is very large as in India, nevertheless remains a secondary factor in wealth-creation compared to the impact of international trade. China, after recovering from century-old subjugation and misery, has become the world’s second-biggest economy by turning world-champion as a trading nation through exporting manufactured goods globally. India with all its successes in the disproportionate growth of its export of services in the IT field, remains a relative dwarf in international trade, and therefore a suboptimal performer in the global competition of nations for the growth of their economies. A one-million community of IT brains and experts cannot raise living standards of a one-billion nation, of whom one third is illiterate and surviving in subsistence agriculture. Population wise, China and India are roughly the same. Fundamentally, they must aspire to the same economic and strategic role. For practically every criterion taken individually, India compares negatively with China. China is on its way to realise all its potential. It is the world’s largest trading nation, it has probably the largest military manpower, it is reaching out strategically and economically to all corners of the globe, it is challenging strategic competitors in its region, Japan and Korea in the East China Sea, Vietnam, Malaysia and the Philippines in the South China Sea, and it has become the overall economic challenger of the world’s only super power, the USA. Under every heading, India is behind, except on the statistics of buyers of military goods, and does not show the capacity to equal China in the speed of economic growth, let alone to overtake it. India does have specific assets and qualities that could be turned into comparative advantages: the industrial production of generic pharmaceuticals (the “Pharmacy of the World”), a globally relatively dominant position in the field of IT services, a level of industrial wages estimated at ten percent lower than in China, which could facilitate a take-off in manufacturing industries following the Chinese example by producing more for the global market, and, finally, a free press and democratic structures, which will, eventually, prevail over collective authoritarian regimes in a globalised society. In everything he tackles, current Prime Minister Modi is heading in the right direction, but the effect on figures and international political recognition for India is still not what it could and should be. The task awaiting every Indian leader surpasses his or her possibilities by far; the sheer size of the country and its challenges is beyond any government’s means. But the world still needs India as a counterweight to existing dominant forces in international affairs. The USA and China could, on their historic way to their current dominant position, rely on the support by the often tacit but effective loyalty of underlying networks of private business and individuals. For the USA it was the Anglo-Saxon community still dominating much of global society, for China it was the equally loyal Chinese communities spread over large parts of the world. Indian communities are also spread over large parts of the world, but they do not seem to feel the same loyalty for the Government of India, at least there is no comparable impact of their global influence on the well-being of India. And yet, their role could be determining for the development of India, not by supporting the Indian government of the day, but by taking back to India as individuals and private business their understanding of global rules and standards in developing an economy against bureaucracy, mismanagement, corruption and waste of resources. The unanswered question remains relevant: Who starts doing what first?

12th June 2015 / Philippe Welti

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