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India – An Emerging Tiger

Interest in India has never been greater. Here CP Balachandran, one of the subcontinent’s most respected trade finance bankers, offers precious insights into this complex, multifaceted land, which despite its dazzling diversity of languages, customs, and cultures remains more than 60 years after its founding the world’s largest democracy. He describes the vast changes that have transformed this once sleeping giant into a world leader in science and technology, a nation once poverty stricken that now boasts a middle class of over 300 million people, as large as the entire population of the United States!

The key components of growth in India include increasing trade, savings, investments, industrialization, urbanization, technology backed innovation and infrastructure development. In recent times, Asia has emerged as the epicenter of sustained high growth primarily driven by China and India who have consistently outpaced the developed economies in achieving high growth and this trend is expected to continue in the years to come. Historically, China and India were the two major economies in the region much before the 19th century and again, both are steadily emerging as amongst the leading economies of the world.


China’s is predicted to become the world’s largest economy and India is also tipped to be amongst the top economies. In fact, India is expected to overtake China within next 2-3 years as the fastest growing major economy with a consistent average annual growth rate of over 8 %. India is poised to attract large capital flows and investments and also witness a major boom in its trade volumes driven especially by its services sector. As the largest English Speaking country in the world it has been well positioned to provide outsourcing opportunities to developed countries for many years now.

Emerging economies like India are expected to move more towards export of manufactured goods as they now produce more higher-value-added products and also consume a lot more themselves unlike before when the focus was on commodities trade. India has an advantage here as it has grown more as consumption oriented economy rather than as an export dependent economy which helped the country to stay unruffled in the wake of the major global economic crisis that we experienced recently. Going forward, Trade amongst emerging market countries is predicted to outgrow the trade volumes handled by developed economies.

However, can India sustain this growth or will it struggle to meet the challenges it faces in its journey towards becoming an economic super power? The answer is that India still has key issues to grapple with. India still needs to do a lot more to dismantle its trade and tariff restrictions for faster growth despite managing to forge many bilateral and regional trade deals. Management of short term capital flows continues to be a cause of concern for India besides the need to be cautious with its monetary policy, exchange rates & reserves management given the high inflationary pressures that the Indian economy has experienced in recent times. The unenviable task of Indian policy makers is to balance the monetary tightening process to fight inflation without seriously impairing growth momentum.

Major concerns for India & Areas For Improvement

Corruption cases and scandals have dented India’s image in recent times. While investigations are continuing to bring the culprits to book, many are skeptical and cynical about the outcome given India’s painfully slow legal process. India has a persistent trade deficit mainly due to being a consumption oriented economy coupled with a high dependence on oil imports which can be improved only after attaining self-sufficiency in manufacturing & energy sectors which is a long term goal for the Indian Government. India needs to push more for freer trade and cautiously work towards easing controls and Tariffs in order to reap the full benefits of more open trade to boost its economic growth.

India also needs to meet the challenge of huge domestic demand from it’s one billion plus population that could seriously push up prices as it seeks to build its infrastructure and attempts to meet its burgeoning energy requirements. India has to deal very carefully with its high inflation and twin deficits which could derail growth projections unless handled with great care and caution. In a nutshell, India needs to ensure equitable distribution of wealth and aim for a more balanced development across all regions of this vast country as well as persist with its economic reforms and undertake a comprehensive revamp of its legal systems.

India’s main Advantages

Rapid urbanization, a young and growing workforce , huge domestic market for consumption, growing middle class incomes, improvements in technology & innovation, ability to build knowledge intensive businesses, a vibrant democracy, quality entrepreneurship, high savings rate, growing investments and a well developed & prudently regulated financial sector are among the factors that should help India in its quest to be a major economic power. Conclusion India’s destiny is in its own hands. India needs to leverage well on its core strengths and identify efficient quick fixes for its problems through a proper blend of correct policies and effective implementation to stay on the growth track in its journey to become a major global economic power.

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