First, on the future of globalisation. Many believe the process is irreversible, that it provides a one-way road to the future. Yet, historical reflection leads to a more sober assessment. The pre-1914 international economy was highly prosperous and integrated. Stimulated by a host of technological advances, the world enjoyed an era of liberal trade, free movement of people and almost total free movement of capital. Yet, war and the Great Depression followed, and the first phase of economic globalisation was brutally destroyed with the world reverting to near-autarkic national economic management.
Economic journalist Martin Wolf has suggested that the future of globalisation will depend on the combined operation of four main forcesprotectionist tendencies of individual nations, antiglobalising developments, economic instability created by globalisation itself and international rivalry among emerging international powers.
First, the protectionist tendencies of individual nations will invariably surface and grow over time because national policies, culture and business overshadow globalisation as a force. Second, collectivist movements in the form of anti-globalisers have not spared the current phase of globalisation, as is evidenced by the spate of protests at Seattle, Hong Kong, etc. Third, the question of global economic stability rests crucially, inter alia, on whether the United States will continue to run up huge current account deficits which are sustaining growth elsewhere, or whether protectionist sentiments within the US will take over and whether this can lead to global economic instability. Finally, international rivalries, with the growing economic power of China and India, combined with rapid polarisation and formation of economic blocs, will be an important factor in determining the future of globalisation.
Globalisation, therefore, may not be for eternity. What, then, needs to be done to maximise Indias gains from the current integration that the world is seeing
First, to realise the maximum advantage from globalisation, India must focus on the competitiveness edge. Competitiveness is crucial at two levelsfirst, India needs to be more competitive as an investment destination for investors, both domestic and foreign. The World Banks Ease of Doing Business Index for 2006 ranks India at 116 of 155 economies. There is ample room to take policy measures to improve Indias ranking, to enable it to attract a lot more foreign direct investment and also to get it in the right sectors.
To gain from globalisation, India must focus on having a competitive edge
Retrain displaced workers, so that the cost of globalisation is minimised
Ensure equitable distribution of the benefits of globalisation
There has been a marked growth in Indias exports in recent yearssince 2000, the value of exports has grown three times faster than in the latter half of the 1990s. Despite this, Indias export performance has lagged that of Asia and its share in global exports remains relatively low.
Various surveys have suggested that poor infrastructure and a high regulatory burden have hindered India from making greater inroads in world markets. Therefore, there is need for greater emphasis on infrastructure development, including greater investment in ports and airports, and streamlining of cumbersome procedures and regulations.
Third, the government needs to identify those industries where imports are leading to displacement of domestic workers. The displaced workers need retraining and assistance in utilising the new opportunities created by globalisation. This will minimise the costs of globalisation.
Fourth, measures are required to ensure that the benefits from globalisation are more equitably distributed. And finally, steps are needed to ensure that capital markets are not subject to instability due to rapid withdrawal of investments by foreign institutional investors.
Since globalisation may not be eternal or permanent, the government must act now to take stock and maximise the potential benefits from integration with the world economy while it lasts.
The writer is an IAS officer. These are her personal views