India as a Rapidly Emerging Country - Essay Example

?India Globalization, liberalization and privatization are some of the new economic principles, which succeeded in rewriting the history of this world. Global wealth has started to shift from the less heavily populated American and European region to the more heavily populated Asian region because of globalization. India is one Asian country which succeeded in reap the profits of globalization. India is believed to be one of the rapidly emerging economies in the world at present. “According to UN agency, “the Indian economy is likely to expand by 8.1 per cent in 2011, the fastest growth rate in the world after China” (India's GDP to grow 8.1% in 2011, second only to China: UNCTAD). Being the biggest democratic country and the second most heavily populated country in the world, India’s progress is watched with curiosity by scholars and economists. Many people believe that India may become another superpower in the world in near future itself. It should be noted that the recent recession has caused less problems to India’s economy even though it caused many problems in America and Europe. Prominent companies are targeting India as a manufacturing destination because of the availability of cheap labor in India. Distance is no more a problem for overseas companies in targeting India because of the development of internet related business strategies. Offshoring and outsourcing like new business principles and the development of internet related business technologies helped India immensely in changing its destiny from a poor country to a prosperous country. Neither technology nor the dimensions of distance are a problem for India as far as development is concerned. This paper analyses India’s dimensions of distance, institutions, industrial clusters, and diffusion of technology. “Distance between two countries can manifest itself along four basic dimensions: cultural, administrative, geographic, and economic” (Ghemawat, Distance Still, p.138). India is a secular democratic country in which people from all religions staying in harmony. Even though Hinduism is the prominent religion in India, other religions can also worship their God and spread their religion in India. Even though Pakistan, China and Sri Lanka like countries are geographically close to India, these countries are not in good terms with India because of various reasons. For Indians, Pakistan is a different country culturally, politically and economically whereas China is a different country in terms of politics and culture. So these countries are not in good relations with India even though they are geographically close to India. On the other hand, geographically distant countries such as America and Europe are good trade partners of India. “Economists often rely on the so-called gravity theory of trade flows, which says there is a positive relationship between economic size and trade and a negative relationship between distance and trade” (Ghemawat, Distance Still, p.138). Traditional economic principles says that it is easy to increase global trade between countries of proximity. However, India is a country, which has trade relations with even distant countries. It should be noted that Europe and America are some of the distant regions from India; yet India has strong economic relationships with these countries. In fact, India is a prominent member country of the Group of 20 (G-20) developing nations, even though majority of the members of this group are from Europe and America. “The largest IT services markets are the most advanced economies, whose per capita incomes make them distant economically from India” (Ghemawat, The Cosmopolitan, p.95). For example, America and majority of the European countries are much more developed than India. These regions or countries are the largest IT services market in the world. The per capita income these countries are much higher than that of the Indians. However, it should not be forgotten that India is one of the largest service IT provider and the second largest country in terms of population. Under such circumstances, it is difficult for Indians to defeat Americans or Europeans in terms of per capita income, at least in near future. Online businesses may not cause much problems to India in terms of distance. “85% of India’s IT exports go to English-speaking countries. That makes continental Europe an obvious area for potential growth” (Ghemawat, The Cosmopolitan p.95). However, same thing cannot be said about heavy goods. In other words, it is difficult for Indian car or other heavy equipment manufacturers to export their products to Europe because of the huge distance between India and Europe. On the other hand, India is a country in which labour cost is very less whereas America and Europe are regions in which labour costs are extremely high. Therefore, American and European countries are offshoring their business to India even though the distance between these regions and India are extremely large. “Government inevitably plays a variety of roles in an economy. Its most basic role is to achieve macroeconomic and political stability” (Porter, p, 26). India is a politically stable country since the three major pillars of democracy (Executive, Parliament, and Judiciary) are combining and cooperating well with mutual respect in India. Indian government has implemented many economic reforms to attract foreign direct investments. The current Indian prime minister is not only a politician but also a renowned economist, which helped India immensely during the recent recession. India is a secular democratic country and that is why America and majority of the European countries are showing interests in strengthening their ties with India. India’s social, political and economic institutions such as Educational institutions, health institutions, Police, Judiciary, Parliament, Executive, Reserve Bank, etc are functioning well and contributing heavily to India’s progress. Indian judiciary and executive are combining well and they never try to clash each other. Both are functioning with mutual respect. On the other hand, these institutions are clashing each other in Pakistan and that is why Pakistan is struggling to progress properly. “India is a relatively closed economy because of the lukewarm reception the Indian government gives multinationals. However, India has been open to ideas from the West, and people have always been able to travel freely in and out of the country”(Khanna et al, p.67). India is following a mixed economic policy. In other words, both public and private sector businesses are encouraged in India. Private participation is not allowed in some critical sectors in India even though foreigners demand it for a long time. It should be noted that America and UK like countries are having a capitalist economy in which private business gets more importance. India’s mixed economic policies helped India to remain stable even when recent recession hit many of the prominent countries across the world. “Clusters are geographically proximate groups of interconnected companies and institutions that are linked by commonalities and complementarities”(Goerzen & Colevic, p.1). Several industrial clusters are existing between India and other countries. India is a prominent member country of ASEAN (Association of South East Asian Nations). Even though America geographically a distant place, India has formed many alliances with America in technology diffusion. For example, India’s moon exploration satellite “Chandrayan” carried some of the NAZA equipment to study the presence of water in moon. Moreover, India has recently signed a nuclear power treaty with America. As part of these treaty America will supply some of the most modern nuclear power exploitation technologies to India. In short, distance is not a problem for India to establish meaningful and mutually beneficial agreements with countries such as America. To conclude, India is a rapidly emerging country in the world at present. India has achieved huge economic growths in recent times because of the liberalization policies and economic reforms implemented by the recent governments. India has established meaningful relations with distant countries and regions even though their relationships with the neighboring countries are not so good. Works Cited Ghemawat, Pankaj . “Distance Still Matters”. Harvard Business Review. September 2001. Ghemawat, Pankaj. “The Cosmopolitan Corporation”. 2011. Harvard Business Review. May 2011 Goerzen, Anthony & Colevic, Ana. Lyonbiopole: The Challenge of Becoming a World Class Bio-Technology Cluster”. 2012. Richard Ivey School of Business. “India's GDP to Grow 8.1% in 2011, Second Only to China: UNCTAD”. 2011. The Times of India. Sep 6, 2011. Khanna, Tarun., Palepu, Krishna G. and Sinha, Jayant. “Strategies That Fit Emerging Markets”. Harvard Business Review. June 2005. Porter, Michael E. “Location, Competition, and Economic Development: Local Clusters in a Global Economy”. 2000. Economic Development Quarterly 2000 14: 15. DOI: 10.1177/089124240001400105 Read More