India's Tryst with Globalization

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

1 Nominal Gross Domestic Product at Purchasing Power Parity - 2011

2009 2007 2 Source: Economist Intelligence Unit Database assessed via NUS library web site, 2012 Economic Liberalization & GDP Growth: India

3.4% Public Sector and Economic Self Reliance 5.1% Private Sector and Economic Self Reliance Private Sector and trade 6.2%

8.8% Private Sector and Trade Promotion

3 Comparative GDP Growth: 2003-2012

4 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

5 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?

6 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

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

Gradual Globalization and Deregulation – The 1980s PM Indira Gandhi 1966-75; PM Desai 1980-84

1977-79

– New Ideas – Help Indian companies but not trade

– Political resistance PM Rajiv Gandhi – Bias favoring status quo 1984-89

8 The Tipping Point in 1991

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

 Why globalization and deregulation? New Economic Ideas Balance of Payments Crisis Economic Crisis and Domestic Opposition

9 Economic Reforms of 1991

Economic Reforms

1. Reduction in Tariffs 2. Devaluation & competitiveness 3. Industrial Deregulation 4. Foreign Investment

10 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)

11 Roots of Competitiveness

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

• Failures – Ports Sunil Mittal – Power

12 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

13 Amartya Sen Versus Jagdish Bhagwati: State versus Market?

Authors: top left – Sen; bottom left – Dreze; top right – Bhagwati; bottom right - Panagariya 14 Human Development in South Asia

15 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) 16 http://www.youtube.com/watch?v=yc1iTDUnsqQ (Modi at Times Square)