Mar 14th 2009

Resilient India

by Shashi Tharoor

Shashi Tharoor, an acclaimed novelist and commentator, is a former Under-Secretary-General of the United Nations

NEW DELHI - With the world's most developed economies reeling under the incubus of what is already being called the Great Recession, India at the beginning of the year took stock and issued a revised estimate for GDP growth in the 2008-2009 fiscal year. Its projection came out at a healthy 7.1%.

It is striking that even amid all the doom and gloom assailing world markets, there is no fear of a recession in India. Even the pessimists are speaking only of lower positive growth.

This is quite a turnabout for an economy that for years had crept along at what was derisively called the "Hindu rate of growth" - around 3% - while much of the rest of Asia shot ahead. For more than four decades after Independence in 1947, India suffered from the economics of nationalism, which equated political independence with economic self-sufficiency and so relegated the country to bureaucratic protectionism and stagnation.

But, since 1991, India has liberalized its economy and profited from globalization. Its tech-savvy information-technology pioneers, software engineers, and call-center operators have made the country an economic success story.

India has multiplied its per capita income levels many times over since 1950, and has done so far faster in recent years than Britain or the United States did during and after the industrial revolution.

In the last 15 years, India has pulled more people out of poverty than in the previous 45 - 10 million people a year on average in the last decade. The country has visibly prospered, and, despite population growth, per capita income has grown faster than ever before. The current financial crisis is unlikely to change the basic success story.

India's financial system suffers from few of the creative and risky derivative instruments that caused such problems in the West. A tradition of conservative banking regulation and a tough-minded Governor of the Reserve Bank (India's central bank) ensured that Indian banks did not acquire the toxic debts flowing from sub-prime loans, credit-default swaps, and over-inflated housing prices that assailed Western banks.

The negative effect of the US financial setbacks on Indian stock markets, therefore, made little sense, since they bore no relation to the real value of Indian companies. Instead, the decline in Indian stocks reflected foreign investors' liquidity problems: they withdrew from holdings in India because they needed their money back home, not because it wasn't growing for them.

Of course, economies that depend on foreign investment are bound to be hurt nowadays, because those investors have less capital to invest. But there are two reasons to be confident that India will weather the storm.

First, India has considerable resources of its own to put towards growth, and has proven itself skilled at the art of channelling domestic savings into productive investments. Second, once things have begun to stabilize in the West, investors looking for a place to put their money will look anew at India, owing to the opportunities for growth and the sheer size of the market.

That said, India has relied much less on foreign direct investment than China, and has even exported FDI to OECD countries. Despite being seen as a poster child for the benefits of globalization, India is not unduly dependent on global flows of trade and capital. India relies on external trade for less than 20% of its GDP; its large and robust internal market accounts for the rest.

India's private sector is efficient and entrepreneurial, and its capital and management skills have proven able to control and manage assets in the sophisticated financial markets of the developed West. India clearly has the basic systems it needs to operate a twenty-first-century economy in an open and globalizing world.

Obviously, the terrorist attacks of late November complicate this story. The terrorists attacked India's financial nerve-center and commercial capital, a city emblematic of the country's energetic thrust into the twenty-first century. They struck at symbols of the prosperity that have made the Indian model so attractive to the globalizing world, a magnet for investors and tourists alike. Indeed, by striking hotels favored by foreign businessmen and visitors, they undermined the confidence of those whom India needs to sustain its success story. Terror may add to the time India will need to recover from the economic crisis.

But India is already bouncing back. The hotels assaulted and burned in November reopened their doors a month later. Investors are returning, and FDI inflows this fiscal year are set to exceed the $25 billion received in 2007-08. At the end of February, Indian Prime Minister Manmohan Singh assured Parliament that "India would emerge the least affected among the countries of the world from the current economic crisis."

So, for those looking for signs of recovery from the global economic downturn, India remains the place to watch. According to the World Bank's annual assessment of Global Economic Prospects, India's economy could even triple in size in the next 15 to 20 years. A few more slumdogs may become millionaires by then.


Copyright: Project Syndicate, 2009.

If you wish to comment on this article, you can do so on-line.

Should you wish to publish your own article on the Facts & Arts website, please contact us at info@factsandarts.com.

 


This article is brought to you by Project Syndicate that is a not for profit organization.

Project Syndicate brings original, engaging, and thought-provoking commentaries by esteemed leaders and thinkers from around the world to readers everywhere. By offering incisive perspectives on our changing world from those who are shaping its economics, politics, science, and culture, Project Syndicate has created an unrivalled venue for informed public debate. Please see: www.project-syndicate.org.

Should you want to support Project Syndicate you can do it by using the PayPal icon below. Your donation is paid to Project Syndicate in full after PayPal has deducted its transaction fee. Facts & Arts neither receives information about your donation nor a commission.

 

 

Browse articles by author

More Current Affairs

Mar 31st 2023
EXTRACT: "Although the EU will have gained more internal stability, its basic character will have changed. Security will be a central concern for the foreseeable future. The EU will have to start thinking of itself as a geopolitical power and as a defense community working closely with NATO. Its identity will no longer be defined mainly by its economic community, its common market, or its customs union. The bloc has already accepted Ukraine as a candidate for future membership, and that decision was driven almost entirely by geopolitical considerations (as was also the case, previously, with Turkey and the West Balkan states)."
Mar 30th 2023
EXTRACT: "As I have long warned, central banks ..... will likely wimp out (by curtailing monetary-policy normalization) to avoid a self-reinforcing economic and financial meltdown, .... "
Mar 30th 2023
EXTRACT: "Netanyahu is simply unfit to be prime minister of Israel. He is a liar, a schemer and a fraud. If he has an ounce of integrity left in him, he should resign and save the country instead of stopping short of nothing, however evil, to save his skin."
Mar 29th 2023
EXTRACTS: "Though Mao Zedong viewed himself as Joseph Stalin’s peer, leading the world’s peasant communists as Stalin led its proletarians, behind closed doors Stalin reportedly called Mao a “caveman Marxist” and a “talentless partisan.” " ----- "Stalin’s behavior enraged Mao." ---- "When ..... Khrushchev, took over as Soviet premier following Stalin’s death in 1953, Mao paid back for Stalin’s disdain – and then some. On his return from his trip to Beijing in 1958, Khrushchev talked incessantly about how unpleasant his experience had been." ---- "Even if Xi did not have the upper hand before Russian President Vladimir Putin launched his war of choice in Ukraine, he certainly has it now..." --- "So, when Xi arrived in Moscow ..... he carried himself with an air of superiority, whereas Putin’s expressions appeared strained."
Mar 27th 2023
EXTRACT: "The spectacular collapse of Silicon Valley Bank (SVB) – the second-largest bank failure in US history – has evoked memories of the 2008 collapse of Lehman Brothers, which sparked the worst economic crisis since the Great Depression. But the current situation is, at least for Germans and other Europeans, more reminiscent of the “founder’s crash” (Gründerkrach) of 1873. Then, as now, an era of cheap credit had fueled a tech boom and then triggered a banking crisis. In those days, the startups were in railroads, electronics, and chemistry, but there were also a large number of financial startups rising with the tide. In both cases, the crisis was rooted in bad accounting rules that turned the financial system into a playground for gamblers."
Mar 16th 2023
EXTRACT: "Putin is desperate for a ceasefire, but he does not want to admit it. Chinese President Xi Jinping is in the same boat. But US President Joe Biden is unlikely to jump at this seeming opportunity to negotiate a ceasefire, because he has pledged that the US will not negotiate behind Zelensky’s back. -- The countries of the former Soviet empire, eager to assert their independence, can hardly wait for the Russian army to be crushed in Ukraine. At that point, Putin’s dream of a renewed Russian empire will disintegrate and cease to pose a threat to Europe. -- The defeat of Russian imperialism will have far-reaching consequences for the rest of the world. It will bring huge relief to open societies and create tremendous problems for closed ones."
Mar 15th 2023
EXTRACT: "Fifty years ago, a war broke out in the Middle East which resulted in a global oil embargo.... " ---- " Many historical accounts suggest the decade of global inflation and recession that characterises the 1970s stemmed from this “oil shock”. But this narrative is misleading – and half a century later, in the midst of strikingly similar global conditions, needs revisiting." ----- "In early 2023, the global financial picture feels disconcertingly similar to 50 years ago. Inflation and the cost of living have both risen steeply, and a war and related energy supply problems have been widely labelled as a key reason for this pain." ---- "In their public statements, central bank leaders have blamed this on a long (and movable) list of factors – most prominently, Vladimir Putin’s decision to send Russian troops to fight against Ukrainian armed forces. Anything, indeed, but central bank policy." ---- "Yet as Figure 1 shows, inflation had already been increasing in the US and Europe long before Putin gave the order to move his troops across the border – indeed, as far back as 2020."
Mar 7th 2023
EXTRACT: "The United States is in the midst of a book-banning frenzy. According to PEN America, 1,648 books were prohibited in public schools across the country between July 2021 and June 2022. That number is expected to increase this year as conservative politicians and organizations step up efforts to censor works dealing with sexual and racial identity."
Feb 28th 2023
EXTRACT: "As was the case before World War I, it is tempting to minimize the risk of a major conflict. After all, today’s globalized, interconnected world has too much at stake to risk a seismic unraveling. That argument is painfully familiar. It is the same one made in the early twentieth century, when the first wave of globalization was at its peak. It seemed compelling to many right up to June 28, 1914."
Feb 19th 2023
EXTRACT: "Another front has opened in the global rise of populist authoritarianism. With their efforts to weaken Israel’s independent judiciary, Prime Minister Binyamin Netanyahu and his corrupt coalition of Messianic fascists and ultra-Orthodox allies are determined to translate their anti-democratic rhetoric into authoritarian policy."
Feb 17th 2023
EXTRACT: "One year on from the start of a military operation that Moscow was expected to win easily, there are increasing signs of anger, frustration and resistance from ordinary Russian soldiers. These are important reminders that these men are not mindless pawns who will do Putin’s bidding under any circumstances."
Feb 16th 2023
EXTRACT: "Over the past few days, more details have emerged about the alleged Russian plot in Moldova. Apparently, well-trained and well-equipped foreign agents were meant to infiltrate the ongoing protests, then instigate and carry out violent attacks against state institutions, take hostages and replace the current government. This may seem far-fetched, but is it? Yesterday, Moldova denied entry to Serbian soccer fans who had planned to support their team, FK Partizan Belgrade, in a Europa Conference League match against the Transnistrian side Sheriff Tiraspol. ---- " ..... there is a history of Serbian football hooligans being involved in paramilitary activities, including war crimes committed by the notorious Arkan Tigers during the war in Bosnia in the early 1990s. Moreover, Russia attempted to overthrow the Montenegrin government in October 2016, just ahead of the country’s Nato accession the following year, in a plot eerily prescient of what was allegedly planned recently in Moldova.
Feb 14th 2023
EXTRACT: "As the British novelist L.P. Hartley once wrote, the past is “a foreign country: they do things differently there.” Alas, this does not mean that we necessarily do things better now. But to understand that lesson, we have to follow Santayana’s advice, and study history very carefully.."
Feb 7th 2023
EXTRACT: "Others who have left Russia include tens of thousands of the country’s excellent computer scientists, whom the armament industry desperately needs. In fact, so many Russians have emigrated to neighboring countries that Armenia expects its 2022 GDP growth to come in at a whopping 13%. Unlike oil fields, this is capital that Putin cannot nationalize or seize."
Feb 6th 2023
EXTRACTS: "Under these circumstances, Ukraine’s allies are right to scale up their military assistance, including by providing battle tanks. The goal is for Ukraine to prevail against its aggressor. But we cannot wish for that end without giving Ukraine the means to achieve it. The alternative is a prolonged war of attrition, leading to more deaths in Ukraine, greater insecurity for Europe, and continued suffering around the world (owing to Russia’s weaponization of energy and food supplies)." ---- "And make no mistake: the sanctions are working. Russian oil is selling at a $40 discount to Brent, and its daily energy revenues are expected to fall from around €800 million to €500 million after our latest measures kick in this month. The war is costing the Kremlin dearly, and these costs will only rise the longer it lasts."
Feb 6th 2023
EXTRACTS: "Brezhnev, in power from 1964 to 1982, signed the 1975 Helsinki Accords, together with the United States, Canada, and most of Europe. Eager for formal recognition of its borders at the time, the USSR under Brezhnev, together with its satellite states in Central and Eastern Europe, underestimated the potential impact of the Accords. That is probably why it agreed to include commitments to respect human rights, including freedom of information and movement, in the agreement’s Final Act." --- "Putin’s regime is turning its back on the legacy of Soviet dissent. Worse, it is replicating the despotic practices of Brezhnev and Soviet totalitarianism. If it continues on this path, it risks ending up in the same place."
Feb 5th 2023
EXTRACT: "....when countries like Saudi Arabia, Egypt, and, above all, China flagrantly violate their citizens’ human rights, liberal democracies must unite to constrain their behavior. Ultimately, it is up to those of us who believe in the universality of human rights to expose crimes against humanity and to uphold liberal-democratic values in the face of authoritarian threats" --- "....liberal democracies have a shared responsibility to support the Ukrainians fighting to defend their homeland and to protect their rights to self-determination and statehood in the face of Russian aggression."
Jan 14th 2023
EXTRACT: "On balance, then, the events in and around Soledar over the past week illustrate that no matter the outcome of the current fighting, this is not a turning point. It’s another strong indication that the war is likely going to be long and costly."
Jan 14th 2023
EXTRACTS: "Russian President Vladimir Putin has long regarded the collapse of the Soviet Union as a “geopolitical catastrophe.” The invasion of Ukraine, now approaching its one-year anniversary, could be seen as the culmination of his years-long quest to restore the Soviet empire. ..... "With Russia’s economy straining under Western sanctions, some of the country’s leading economists and mathematicians are advocating a return to the days of five-year plans and quantitative production targets." .... "The logical endpoint of a planned economy today is the same as it was then: mass expropriation. Stalin’s collectivization of Soviet agriculture in the late 1920s and early 1930s led to millions of deaths, and the post-communist 'shock therapy' of privatization resulted in the proliferation of 'raiders' and the creation of a new class of oligarchs. Now, enthralled by imperial nostalgia, Russia may be about to embark on a new violent wave of expropriation and redistribution."
Jan 11th 2023
EXTRACT: "These developments suggest that Indian economist Amartya Sen was correct when he famously argued in 1983 that famines are caused not only by a shortage of food but also by a lack of information and political accountability. For example, the Bengal famine of 1943, India’s worst, happened under imperial British rule. After India gained independence, the country’s free press and democratic government, while flawed, prevented similar catastrophes. Sen’s thesis has since been hailed as a ringing endorsement of democracy. While some critics have noted that elected governments can also cause considerable harm, including widespread hunger, Sen points out that no famine has 'ever taken place in a functioning democracy.' --- China’s system of one-party, and increasingly one-man, rule is couched in Communist or nationalist jargon, but is rooted in fascist theory. The German jurist Carl Schmitt, who justified Adolf Hitler’s right to wield total power, coined the term “decisionism” to describe a system in which the validity of policies and laws is not determined by their content but by an omnipotent leader’s will. In other words, Hitler’s will was the law."