But when the village is being rebuilt, consensus is not easy (Kurup)." This is a pointed criticism of using a U.S. model where the financial sector is doing well (the speculative economy) as opposed to the "real" economy on the street. Dr. Kurup feels that the infrastructural problems that have dogged India for years need to be solved as well so the recovery is even and across the board. He further remarked in the article that "You have to see the context. Just because we were not affected by the crisis, it does not imply we are safe. One has to look at what is the purpose behind the changes. There is a perception if you develop the bond market, infrastructure will develop. Infrastructure will not develop if the bond market alone is developed. In fact, no country in the world, except for partly the U.S., developed infrastructure through the bond market (ibid)." In other words, for there to be overall health in the Indian economy industrial growth and the strong infrastructure that it brings along with it is necessary for real, sustained economic growth that will benefit all Indians. In other words, he is looking across the border at China and eyeing their successful infrastructure development and acknowledging the reality.
Entry Strategy and Strategic Alliances
Was Mr. Reddy appreciated before the economic crisis kicked in 2008? The answer to that question was no. Joe Nocera in a New York Times Business Column article observed that "So it was. And our regulators, unlike theirs, just stood by and let it happen. The next time we're moving into bubble territory, perhaps we can take a page from Mr. Reddy's book -- sometimes it's better to apply the brakes too early than too late. or, as was the case with Mr. Greenspan, not at all (Nocera)." Rather than let easy money propel the system, the Indian Reserve Bank put the brakes on the loans before the bubble was allowed to burst and their conservatism paid off. In this way, there was a lack of various negative issues that sank the United States market in the 2008 market meltdown, especially in the area of securitization of mortgages. In this way, India has kept up the wall between speculative and commercial investment in the crucial real estate sector of the economy.
Unfortunately, inflation is a problem and the Indian government is taking steps to stem this crisis. "The Indian government is making serious efforts to moderate inflation…"I can assure ... that our government is making serious efforts to moderate the inflation rates. We have difficulties but we shall overcome," said Prime Minister Manmohan Singh." India's annual headline inflation was at 8.58 per cent, making the central bank uncomfortable. The expectations are that the central bank will hold rates steady in the near-term. In contrast, house China which is taking more direct action to control inflation. The People's Bank of China said that it would raise the percentage of deposits commercial banks need to hold with the central bank by 50 basis points.
China's State Council said it will adopt 16 measures to stabilize consumer prices, including temporary subsidies and price monitoring according to local media reports.
China has however stopped short of raising interest rates for now, fearing a rush of speculative money into the economy ("Economy").
The Global Trade and Investment Environment, Imports and Exports,
This conservative strategy may very well be paying off. The Indian export sector is small, but increasing. Having been an agro-based economy, Indian trade has traditionally been devoid of manufactured or industrial goods. Post liberalization, imports dominated the Indian trade scene in the form of heavy machinery and information technology products and, thus, created an imbalance of trade. Indian trade was impacted by the global recession of 2007-2009. Indian exports fell from $200.9 billion in 2008 to $165 billion in 2009. India ranked 22nd in the world in terms of export volume. Indian trade has undergone massive restructuring following the 1991 liberalization policies. Ever since, India's exports have experienced a growth rate of 18.11%. The big surprise has been the import sector that has experienced a growth rate of 34.30%. The Indian economy is headed towards becoming a developed economy and all its sectors are in need of machinery and energy. Therefore, Indian imports are dominated by crude oil and machines. In 2009, total imports amounted to $253.9 billion, down from the 2008 figure of $322.3 billion. Indian trade has undergone massive restructuring following the 1991 liberalization...
Ever since, India's exports have experienced a growth rate of 18.11%. The big surprise has been the import sector that has experienced a growth rate of 34.30%.
The Political Economy of International Trade, FDI and Its Political Economy, International Monetary System
India has been one of those emerging markets however that has traditionally lagged behind China in the area of Foreign Direct Investments (FDI) by Trans National Corporations (TNCs) China gets some 60 billion dollars FDI annually while India does not even bet 6 billion dollars (Swapna, p. 2). For India's economic future, this is the key question. Earlier in this paper, we considered this point. The lack of infrastructural attention has been a major contributing factor in the past to India's inability to attract FDI. However, the overheated nature of the present Chinese market is causing the TNCs to reexamine India, especially now that the Indian government is putting major capital into improving this infrastructure. In the Swapna journal article, statistical data based upon regression analysis research was done on variables taken from data in the six mega states of Maharashtra, Gujarat, Hyderabad, Andhra Pradesh, Tamil Nadu and Delhi where most of the Indian growth is concentrated. The first variable was human capital. Others included variables from a national level such as market size (GDP) market growth rate (GDP % growth), political stability (Interest rate), corruption and exchange rate volatility (% change over a year). The FDI model included the above variables and their impact on the tested model to predict FDI inflows and changes. Swapna's FDI model used data for the period 1992-2005, with FDI data for the mega states. What Swapna found was that FDI inflows in the emerging market of India in a globalization scenario are positively correlated with the human capital present in the market. Political stability, corruption and exchange rate volatility also were found to be partially significant (ibid, pp. 5-6). Swapna believes that India needs $300 billion dollars in foreign FDI to catch up (ibid, p.12). Finally, this is happening very nicely now. India is finally catching up with the other BRIC (Brazil, Russia, India, and China) countries in the emerging markets.
Regional Economic Integration
Indeed one issue that has traditionally kept India behind may be a key to its growth. A core problem in the past has been that India's overpopulation has eaten up much of its economic growth. Now, with the demographic implications of China's one child per family kicking in, it will soon be an aging nation. India is overwhelmingly young and will continue to be so. This huge, new vibrant population is bursting with energy and will undoubtedly overtake and overwhelming China's aging and continually more conservative population which will less and less able to keep up with technological and other changes. The operative word in today's fast-paced global market is change and the ability to adapt and develop will be the difference between global leadership and obsolescence in the fast-paced world of the twenty-first century.
To sum up, India is in the process of transforming from a developing country to a moer developed one. Despite problems such as overpopulation, environmental degradation, poverty and corruption rapid and quick economic development is fueling India's rise on the world stage. In this paper, the author has compared it to China in its periphery. India is under democratic principles with a competitive market while China is a modified state capitalist economy. Both China and India tend to be facing some of the same problems under their economic structures because of political, institutional and societal factors. Throughout the paper, India was the base, although China and India were both compared and contrasted as to their political culture systems and their impact upon trade regarding the economic process at the domestic and global levels.
To a lesser extent, India was compared to the United States. Luckily for India, there was a lack of various negative issues that sank the United States market in the 2008 market meltdown, especially in the area of securitization of mortgages. In this way, India has kept up the wall between speculative and commercial investment in the crucial real estate sector of the economy.
Entry Strategy & Strategic Alliances
Attracting FDI will be critical in India's entry into the global capital market, for its strategy of and organization of itself in the international business arena. For India's economic success to be permanent (and it appears to be so) FDI will spur imports and exports as…
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