During 1989 to 1998 the share of foreign trade in India’s GDP improved to 24.8 per cent, a record not all that bad in terms of India’s own economic past.
During this period, the share of imports increased to 13.75 per cent and that of exports to 11 per cent in GDP. But India’s miniscule share of world exports is as much owing to historical reasons and faulty trade policies as to protectionism pursued by developed countries.
Dr Jalan also regrets that while Singapore with its three million population occupies a larger space on the world trade map than does India with 1,000 million plus people. Sadly, the comparison misses a whole gamut of historical, cultural and political factors that are crucial to understanding trade pattern of any country. Historically, India was a big maritime trade nation with links with many countries of those days. The interregnum has been marked by so many cataclysmic developments that it is difficult to single out a few factors as responsible for slow globalisation.
But the RBI governor is right in one respect—that globalisation is an inescapable economic reality and India’s interest lies in making the best of it. Even Russia and China, once closed societies, have adjusted to this reality. Even companies have begun to realise the critical importance of trade for their growth.
For instance, a study of 557 public limited companies in the Indian private corporate sector done sometime ago showed that export and import intensity for the exporting companies in the sample improved considerably during 1980-81 to 1995-96.
Indeed, it would be churlish for the country not to integrate. But the pace has to reflect its own economic and other constraints. A policy re-look at parameters of globalisation such as foreign trade, tariff levels, FDI inflow and capital controls should help. It is true that India is still behind many countries such as Malaysia, Thailand, Vietnam and the Philippines in bringing down tariff levels or attracting more FDI. Dr Jalan regrets that the country gets a trickle of $2-3 billion of the world’s $ 1,000 billion FDI. But this lapse can be corrected by fashioning a more foreign investment friendly policy.