Globalisation by Me

Razeen Sally
European Centre for

International Political Economy (ECIPE)
London School of Economics (LSE)
GLOBALISATION AND INDIA SHINING
India at 60
From Gandhian mysticism, economic isolation and social

backwardness to globalisation and India Shining

a) Snapshot
-- Macroeconomic conditions
-- Trade and foreign investment (FDI)
-- Financial markets
-- Domestic business climate
-- Politics and the state
-- Comparisons with China

b) Prospects
-- Politics, economic policy, the business climate
-- Comparisons with China
c) Focus
-- States and cities
-- Higher education

History (1947-91)
-- From Fabian socialism to Soviet-style central planning
and the license raj
-- Foreign policy: nationalism, non-alignment and the
Soviet Union as First Friend
-- The economy: a Hindu equilibrium

Market reforms, 1991-- Half measures in the 1980s
-- The 1991 crisis and big-bang reforms (1991-93)
-- Gradual, stop-go reforms (1993 to present)
-- The state of play
Figure 1: Aggregate GDP
Source: World Bank, World Development Indicators (WDI)
Figure 2: Per-capita GDP
Figure 3: Poverty as % of Population
Source: India 1950-1978 World Bank Poverty in India Dataset Poverty and Human Resources Division Policy, Research Department, The World Bank, Berk zler, Gaurav Datt, Martin
Ravallion. January 1996
(http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:20699301~pagePK:64214825~piPK:64214943~theSitePK:469382,00.html); India and
China 1981-2004 Chan and Ravillion "How have the world's poorest fared since the early 1980s?" The World Bank Research Observer, vol. 19, no. 2 (Fall 2004)
Figure 4: Inequality India (GINI)
Source: Ozler, Berk, Gaurav Datt and Martin Ravallion. 1996. "A Database on Poverty and Growth in India," mimeo, Policy Research Department, World Bank.
Figure 5: Savings/ GDP
Figure 6: Investment / GDP
Figure 7: Foreign Exchange Reserves
Source: IMF International Financial Statistics (IFS)
Figure 8 (i): Share Agriculture in GDP
Figure 8 (ii): Share of Manufacturing in

GDP
Figure 8 (iii): Share of Services in GDP
Figure 9: Total Trade (Goods & Services)
Source: WTO, International Trade Statistics
Figure 10: Trade/ GDP
Figure 11: Current Account Balance
Figure 12: Current Account Balance

(% of GDP)
Pie 1 (i): Share of Global Trade (Goods)
Pie 1 (ii): Share of Global Trade (Service)
Figure 13: Exports of Goods and Service
Figure 14: Growth in IT Services/ GDP
Figure 15: Inward FDI Flows
Source: UNCTAD, FDI Key Data
Pie 2: Share of Global Inward FDI Stock
Figure 16: Outward FDI Flows
Figure 17: Stock Market Capitalisation
Figure 18: Inward Portfolio Capital Flow

Reform results
-- Massive changes: opening to the world,
transformed business landscape, IT
powerhouse, emerging world-class firms
-- But lopsided growth: benefits urban middle
classes but not the vast majority of the poor
unlike China

Reform gaps
-- Unreformed agriculture
-- Lack of labour-intensive manufacturing and throttled
labour markets
-- Overregulated, underperforming services sectors
-- Remaining trade and FDI barriers
-- Remaining capital controls
-- The unreformed Indian state
Table 1: Ease of Doing Business

Table 1: World ranking in ease of doing business 2006*
Country/
Economy
Ease of
Doing
Busine
ss
Starting
a
Business
Dealing
with
Licenses
Employin
g
Workers
Registeri
ng
Property
Gettin
g
Credit
Protectin
g
Investors
Payin
g
Taxes
Trading
Across
Borders
Enforcing
Contracts
Closing a
Business
Singapore
11
12
23
Hong Kong
64
16
60
10
14
Japan
11
18
36
39
13
12
98
19
Thailand
18
28
46
18
33
33
57
103
44
38
Korea
23
116
28
110
67
21
60
48
28
17
11
Malaysia
25
71
137
38
66
49
46
81
51
Taiwan
47
94
148
154
24
48
60
78
42
62
Pakistan
74
54
89
126
68
65
19
140
98
163
46
Bangladesh
88
68
67
75
167
48
15
72
134
174
93
Sri Lanka
89
44
71
98
125
101
60
157
99
90
59
China
93
128
153
78
21
101
83
168
38
63
75
Vietnam
104
97
25
104
34
83
170
120
75
94
116
Philippines
126
108
113
118
98
101
151
106
63
59
147
India
134
88
155
112
110
65
33
158
139
173
133
Indonesia
135
161
131
140
120
83
60
133
60
145
136
*The numbers correspond to each countrys aggregate ranking on the ease of doing business and on each of the ten topics that comprise the overall ranking.
Source: The World Bank Doing Business Database
Table 2: Trading Across the Border

Indicators for Trading Across Borders (2006)*
Country/
Economy
Ease of Trading
Across Borders (World
Rankings)
Documents for
export (number)
Time for
export
(days)
Cost to export
(US$ per
container)
Documents for
import (number)
Time for
import
(days)
Cost to import
(US$ per
container)
Hong Kong
425
425
Singapore
382
333
Japan
19
11
789
11
847
Korea
28
12
780
12
1.04
China
38
18
335
12
22
375
Taiwan
42
14
747
14
747
Malaysia
46
20
481
12
22
428
Indonesia
60
25
546
10
30
675
Philippines
63
18
1.336
20
1.336
Vietnam
75
35
701
36
887
Pakistan
98
24
996
12
19
1.005
Sri Lanka
99
25
797
13
27
789
Thailand
103
24
848
12
22
1.042
Bangladesh
134
35
902
16
57
1.287
India
139
10
27
864
15
41
1.244
Table 3: Governance Indicators

Percentile world rank of governance indictors for Asian countries 2005*
Voice and
Accountability
Political Stability/ No
Violence
Government
Effectiveness
Regulatory
Quality
Rule of
Law
Control of
Corruption
Singapore
38.2
84.0
99.5
99.5
95.7
99.0
Hong Kong
52.2
89.6
92.8
100.0
91.3
92.1
Japan
74.9
80.2
84.7
85.6
89.4
85.2
Malaysia
34.3
62.3
80.4
66.8
66.2
64.5
Taiwan
69.1
64.2
83.7
79.7
78.7
70.9
Korea
68.1
60.8
78.9
71.8
72.5
69
India
55.6
22.2
51.7
41.1
56
46.8
Thailand
49.3
29.2
66
63.9
56.5
51.2
China
6.3
75.9
52.2
44.6
40.6
30.5
Vietnam
7.7
59
45
25.7
42
26.6
Indonesia
40.6
37.3
36.6
20.3
21.2
Sri Lanka
39.6
10.8
40.7
50
54.1
47.3
Philippines
47.8
17.5
55.5
52
38.6
37.4
Bangladesh
31.4
6.6
21.1
14.9
19.8
7.9
Pakistan
12.6
5.7
34
27.7
24.2
15.8

Politics
-- The most difficult country to govern: vast, hugely
diverse, split so many different ways
-- Messy democratic politics: multi-party coalitions at the
centre; kaleidoscope of musical-chair politics in the
states
-- But advantages (compared with China): unity and
stability; checks and balances; British-endowed liberal
institutions; the English language; political and civic
freedoms

Focus (1)
-- The states in a federal system
-- Growth engines in the south and west (with outliers)
-- Policy reforms and business transformation: e.g. Tamil
Nadu, Karnataka, Andhra Pradesh, Maharashtra,
Gujarat, Punjab, Haryana
-- Key sectors, NRIs and FDI
-- Transformation of India: a bottom-up, not a top-down
story

Focus (2)
-- Indias expanding demand for higher (and
lower) education: insufficient, low-quality
supply; foreign investment prospects;
reform hurdles

Prospects
-- The big picture: the new Asian Drama
-- Asias transformation of the world economy: much more
competition; gains for the West and the Rest; but more
difficult adaptation required; wider inequalities; the
middle-class squeeze; the middle-income trap
-- Role of India in the new Asian Drama
Figure 19: Share of Global GDP (i)
Source: Agnus Maddison
Figure 19: Share of Global GDP (ii)
Source: Agnus Maddison

Prospects (cont.)
-- Lou Dobbs is wrong: stupid economics; bad business
logic; noxious politics
-- Lessons for policy: contain protectionism; constructive
economic engagement; strategic foreign-policy
partnership

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Razeen Sally

European Centre for

GLOBALISATION AND INDIA SHINING

From Gandhian mysticism, economic isolation and social

GLOBALISATION AND INDIA SHINING

GLOBALISATION AND INDIA SHINING

GLOBALISATION AND INDIA SHINING

GLOBALISATION AND INDIA SHINING

Figure 1: Aggregate GDP

Source: World Bank, World Development Indicators (WDI)

Figure 2: Per-capita GDP

Source: World Bank, World Development Indicators (WDI)

Figure 3: Poverty as % of Population

Figure 4: Inequality India (GINI)

Figure 5: Savings/ GDP

Source: World Bank, World Development Indicators (WDI)

Figure 6: Investment / GDP

Source: World Bank, World Development Indicators (WDI)

Figure 7: Foreign Exchange Reserves

Source: IMF International Financial Statistics (IFS)

Figure 8 (i): Share Agriculture in GDP

Source: World Bank, World Development Indicators (WDI)

Figure 8 (ii): Share of Manufacturing in

Source: World Bank, World Development Indicators (WDI)

Figure 8 (iii): Share of Services in GDP

Source: World Bank, World Development Indicators (WDI)

Figure 9: Total Trade (Goods & Services)

Source: WTO, International Trade Statistics

Figure 10: Trade/ GDP

Source: World Bank, World Development Indicators (WDI)

Figure 11: Current Account Balance

Source: World Bank, World Development Indicators (WDI)

Figure 12: Current Account Balance

Source: World Bank, World Development Indicators (WDI)

Pie 1 (i): Share of Global Trade (Goods)

Source: WTO, International Trade Statistics

Pie 1 (ii): Share of Global Trade (Service)

Source: WTO, International Trade Statistics

Figure 13: Exports of Goods and Service

Source: WTO, International Trade Statistics

Figure 14: Growth in IT Services/ GDP

Source: World Bank, World Development Indicators (WDI)

Figure 15: Inward FDI Flows

Source: UNCTAD, FDI Key Data

Pie 2: Share of Global Inward FDI Stock

Source: UNCTAD, FDI Key Data

Figure 16: Outward FDI Flows

Source: UNCTAD, FDI Key Data

Figure 17: Stock Market Capitalisation

Source: World Bank, World Development Indicators (WDI)

Figure 18: Inward Portfolio Capital Flow

Source: World Bank, World Development Indicators (WDI)

GLOBALISATION AND INDIA SHINING

GLOBALISATION AND INDIA SHINING

Table 1: Ease of Doing Business

Table 2: Trading Across the Border

Source: The World Bank Doing Business Database

Table 3: Governance Indicators

Source: The World Bank Doing Business Database

GLOBALISATION AND INDIA SHINING

GLOBALISATION AND INDIA SHINING

GLOBALISATION AND INDIA SHINING

GLOBALISATION AND INDIA SHINING