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Economic growth helps India sit on high tables in int'l community
Date: 2010/12/20 Click: 1796

India, the third largest economy in Asia, has managed to sit on high tables like G20 in international community and eyes one permanent seat at United Nations' Security Council, bolstered by its near 9 percent gross domestic product (GDP) growth in 2010.

Indian top decision makers have played an active role in global economic governance, reform of international monetary system and climate change so far this year.


Indian officials and businessmen often said that India's economy was almost insulated from horrible global financial tsunami since 2008, which is still playing out at corners of the globe.

Indian economic growth rebounded from 6.7 percent in fiscal year 2008-2009, and 7.4 percent in fiscal year 2009-2010 thanks to the dominance of domestic consumption and monetary stimulus policies.

The GDP growth even could rise to 9 percent in fiscal year 2010- 2011 starting from April 1, 2010, according to the mid-term economic analysis by the Ministry of Finance.

Earlier this year, Indian Prime Minister Manmohan Singh said he hoped that the country's economy could see 9 to 10 percent growth in the coming 25 years.

Standard Chartered Bank released a report in November, saying that India could grow faster than China as early as 2012 and turn into an economic entity with 30 trillion U.S. dollars by 2030 as the third largest economy in the world.

The Indian government has mapped out a blueprint to channel one trillion U.S. dollars of investment into infrastructure sector within 12th five-year plan period starting from April 2012 in order to reap demographic dividends and improve its productivity.

The impressive economic growth has drawn record-setting 38.27 billion U.S. dollars of investments from foreign institutional investors into its equity and debt market by Dec. 14 this year.


India pays great importance to the G20 summit and wants to interact with more powers in comparison with smaller club of BRIC countries including Brazil, Russia, India and China, said Kaushik Basu, chief economic adviser at the Ministry of Finance, prior to G20 summit held in Canada's Toronto in June 2010.

Afterwards, India sought to reconcile the tensions between China and the United States on the exchange rate of Chinese currency RMB by calling for dialogue and against protectionism at G20 Summit in Seoul, South Korea, in November this year.

India held a mild but clear stance at the meeting and strived to force ahead Doha Round trade talks despite the lack of enthusiasm from developed economies in the time of recession.

"Now that we've arrived at the 'high table', what is it that we want the 'high table' to do," said Raghuram G. Rajan, an honorary economic advisor to Prime Minister Manmohan Singh.

Rajan called for India to play more proactive role at G20 again from the largely reactive one and resume its role in the era of Non-Aligned Movement in the 1950s.

India also successfully leveraged the BRIC forum to push forward the reform of the international financial bodies and lifted its quota shares from 2.44 percent as the 11th shareholder to 2.75 percent as the 8th one.

India won support from the United States and France for its pursuit of permanent membership of an expanded Security Council when U.S. President Barack Obama and French President Nicolas Sarkozy visited India at the end of 2010.

During the recent visit by Chinese Premier Wen Jiabao to India, Wen stressed that China and India have shared interests and common views on the issue of U.N. Security Council reforms.

"We both maintain that priority should be given to increasing the representation of developing countries," Wen said, "Closer cooperation between our two countries on Security Council reform will help uphold the interests of developing countries and promote democracy in international relations."

Wen said China understands and supports India's desire to play a bigger role in the United Nations, including its Security Council.

"As a fast-growing big country with over one billion people, India should and can play an increasingly important role in international affairs," Wen said.


Although India's economy has been growing rapidly in recent years, its high inflation at home threatens to derail the prospects of near double-digit economic growth in addition of laggard progress in infrastructure both physically and socially.

Inflation tax could plague India's "aam aadmi" (common people) in the coming years due to dependence on imported commodities, vulnerable agricultural sector and structural problems in the economy.

Meanwhile, the India government has caught in between socialist policies for economically weak people and market guidelines in the coming years in a bid to fight inflation, win ballots, lift the poor from poverty and maintain political stability.

Inflation is the most distorted part of India's economy with complex underlying forces, said a retired official at a conference in Mumbai.

Though the wholesale price index has come down to 7.48 percent in November as the lowest so far this year, inflation is still very high and close to economic growth rate.

High inflation has triggered nationwide protests in India in July and marred the credibility of incumbent government's ability to govern the country.

India will have 5 to 5.5 percent of inflation in the medium term resulting from structural causes, said recently Chetan Ahya, a well-known economist in India and South East Asia.

India's inflation will be very high in the next two or three years due to the inflows of cheap money printed in the developed economies, associate director with Angel Commodities Naveen Mathur said recently.

Naveen Mathur estimated that India's inflation will range from 6 to 7 percent next year even domestic fundamentals are fine. "We're bullish on crude oil prices with world economy in recovery and crude oil will be traded above 75 U.S. dollars per barrel even up to pre-crisis levels next year," said Kamlesh Jogi, an analyst with Fortune Equity Brokers in India.

India now imports around 75 percent of crude oil consumption and relies heavily on imported cooking coal and edible oil products.

Additionally, India has to tweak existing rigid labor laws and provide efficient training so that the promising demographic dividend will not become a nightmare to the economy.

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