Role of India in the global economy: P. Chidambaram

If we could rise to the challenges and stay on the path of sound economic policies and fiscal prudence, the repositioning of India in the global order would be faster than what has been predicted.

Balance sheet of India’s achievements:

1. Gross National Income in PPP (Purchasing Power Parity) terms is 4th after US, China and Japan.
2. India’s share of global GDP in PPP terms was 5.9% in 2005, the fourth highest in the world.
3. India’s contribution to global growth was 8%.
4. Indices of India’s trade and financial integration have increased over a ten year period. Trade integration has increased from 25.6% of GDP in 1992-93 to 35.14% in 2003-04. Financial integration has increased from 15.33% to 19.88% during the same period.

There is every reason to believe that India will be able to maintain these growth rates in the longer term because:

1. There has been a shift in the structure of the Indian economy, with a decline in the share of agriculture and an increase in the share of industry and services.
2. Industry’s rise has been accompanied by a robust growth in manufacturing sector without any cyclical downturns. There are signs of improved overall industrial competitiveness.
3. Services sector is the major growth driver and is broad based.
4. India has demonstrated its resilience to shocks. Hence the impact of exogenous and endogenous factors on growth is limited.
5. India’s growth was initially driven by consumption and in of late has been complemented by robust investment.