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Is India an Emerging Economy?
The global emergence of new economies has been part of the international debate for some years. The subject of the alleged decline of Europe is more recent. How do these topics relate? Three more questions: Is the emergence of new economies owed to Europe’s decline? Or is Europe declining because new economies are emerging? Or are the new economies just appearing to be emerging because Europe’s growth figures look so poor? First on emerging economies: The most prominent club of emerging economies is the group of the BRIC countries. “I” stands for India. Let us, therefore, concentrate on India and see how it fares with regard to the introductory questions. Let us keep it simple and start with the question: Is India after all growing? There is a good case to say no, or at least, not enough, to be genuinely emerging. Facts and figures are at hand to support this assertion: Some nine percent at the peak a few years ago, less than six percent in the current year. But there is also a good case to say yes. Other facts and figures and more general criteria and thoughts of a different statistical nature would support such an alternative assertion. Before deciding, let us look at India’s competitors in the immediate neighbourhood, the smaller ones:
Bangladesh, still a poverty-stricken economy, is nevertheless taking away from India jobs in the textile industry, one of the traditional export strengths of India, because with the wages, Bangladesh has a comparative advantage over India.
Sri Lanka, still recovering from civil war, has kept its advantage over India with regard to its GDP and the average living standards of its people. They are in the process of realising their potential.
Myanmar, former Burma, has made a dramatic shift in its domestic political life and its set of foreign relations. And is getting rewards for daring to open up.
Wouldn’t “emerging” mean to grow more than your immediate neighbourhood? India’s neighbours seem to profit from specific advantages and trends which are far more difficult for a giant to trigger or to follow. India must have other cards to play. Does India play them successfully or, if not, what is it that withholds India from playing its cards more successfully. What are the impediments to the full realisation of its potential?
India’s growth rate over 20 years is not bad, an average of some seven percent annually, but clearly less brilliant when measured per capita, and even less breathtaking when measured against the main competitor, China. The National Current Account has been negative over the last ten years and its deficit is growing. So is the State budget deficit measured against the GDP. With these figures it is not surprising that the poverty reduction rate over the last ten years has been much smaller than what the other BRIC countries and even Cambodia, Pakistan and Indonesia have achieved. The result of this is a level of living standards measured as GDP per capita, which is just a fraction of each of the other BRIC countries. This is summarised in the UN Human Development Index, where India ranks behind two thirds of all countries. These are the discouraging facts and figures.
But still, there is a generalised assumption that India does matter and must be relevant for the rest of the world, for its neighbours, for its competitors, for the old powers and for the world’s old rich. India’s relevance lies in its unique specificities against which temporary advantages of its neighbours and of other competitors become irrelevant in the long run. India’s democratic structures are genuinely democratic and will, borne by the size of its population, have an impact on its neighbourhood and the wider region because globalised society will be a democratic society. In India, the media are genuinely free and are undoubtedly inspiring society and the media in neighbouring countries and in the wider region. With this, too, India is anticipating globalised society. Add to this the ever growing private sector and the sense of initiative of Indian entrepreneurs. And finally, even against the legacy of existing backwardness, the growing share of open society within a country of over one billion people add to the conviction that India is relevant per se, whatever the current growth rates and the state budget deficit. Its huge domestic market may be disregarding rules of globalisation. But the growing Indian ex-pat community in the world is returning home in growing numbers, taking back the message of globalisation and, thus, increasing India’s capacity to impose to the world its presence now and its economic weight in the future. India has got development dynamics of its own. Its potential has to be considered and measured by other criteria than its neighbours. Forget about statistics! They may not be telling lies, but they are less essential than the genuine experience of getting engaged in India. India is emerging, full stop.
21 November 2012, Philippe Welti