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Global Optimism Towards India (28 July 2020)

Global Optimism Towards India (28 July 2020)

Why in News:

Global manufacturers have initiated talks with Indian firms to explore the possibility of shifting a part of their supply chains from China as they seek to diversify their operations following the COVID-19 outbreak.


The world is now looking to India to play a major role in the region and beyond to lokk for multi-faceted solutions in the short and long term. Bilateral meetings and summits have seen PM Modi deliver key-note addresses and come up with fruitful outcomes.


According to the International Monetary Fund, this year‘s global GDP is going to shrink by about 5.5 percent. So when global economy is getting a hit so also the Indian economy will receive a certain amount of hit.

The same report says Asia will become the hub of bringing that resilience and demand to the global economy and redeeming it and in Asia will be two countries China and India growing at 1.9 percent for India and 1.2 percent for China.

Most of the multinationals have suffered widespread disruptions to their businesses as authorities enforced strict lockdown measures to contain the pandemic, which originated in Wuhan city in China’s Hubei province. Wuhan is one of China’s so-called “motor cities", housing several automotive factories.

Earlier this month, Japan earmarked $2.2 billion to help its companies shift production out of China following the corona virus pandemic.

Summary of the Debate

Why the world is looking towards India:

  • The shift of global power has now moved firmly to the Indo-Pacific. India through its unique geography not only holds a place on continental Eurasia but with its two oceans looking both to the east and the west it is ideally located as a geostrategic power in line with its economic and military power.
  • So for the USA when it looks to the region to offset Chinese power, India is the absolute natural partner of choice.
  • India is leveraging well not only in domestic terms but also in terms of International connections that we are putting together are reaching out across the world to the largest economy in the world of course the USA but also to the Europeans, the Japanese are certainly one of very large economic parts in the world and all of this conglomerates to good possibilities for India in the near future.
  • European Union’s relationship with the USA has lately been not very comfortable and that will push them further towards India.
  • India is emerging as a major investor in Britain.
  • In that sense India would become both in terms of outflow of FDI and inflow of FDI, of transfer of technology and working together on various platforms.
  • India and EU is already on the table after seven years. Several MoUs were signed when India-EU summit meeting happened, so European Union will become also another attractive region for India.
  • India is seen as locomotive for resilience of the global economy and may not be at the scale that China was contributing up to 12 percent of global growth till recently, but India would be seen as a new source of creating that demand and resilience for global economy will be then making these other countries far more receptive to Indian concern and may be accommodate some of those concerns and those Free Trade Agreement (FTA) which were kind of hanging fire could be revived.

India and its Neighbourhood:

  • As India grows its economy as we become a country which is attractive to the middle classes and growing people in our neighbourhood, what happens is attraction towards us and we being a source being able to supply their aspirations becomes much better and much easier.
  • Countries in our neighbourhood are also growing, they benefitted through globalisation in a very big way. For example Nepal a small country 30 percent of its GDP comes from remittances.
  • Bangladesh is the fastest growing economy in our region.
  • Sri Lanka and Maldives has always been a slightly on the different ballgame.
  • India continues to be a major supply of medical help to these countries.
  • So, all these changes will make India a place which is naturally attracted to them which they know very well.

Impact on India:

  • Just before COVID-19, India has reached the highest mark of FDIs last year, about 44 billion dollars.
  • A large part of FDIs can shift to India.
  • Western countries led by the USA are talking of bringing 10 to 11 democracies together, India is largest democracy on the planet brings another advantage to India.
  • Several initiatives India has taken whether it is doing away with some of the outdated provisions of labour laws, making labour market more flexible, reducing taxes for example to 22 percent for corporate sector and 15 percent through new manufacturing industries. 1.3 trillion dollars of investment promised for infrastructure building.
  • These moves perhaps in that relative situation of global growth could make India the locomotive of global growth post-covid-19.
  • In March, India’s cabinet announced a production-linked incentive (PLI) scheme for the electronics sector with an outlay of over ?40,000 crores.

Regional Comprehensive Economic Partnership (RCEP)

  • The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement in the Indo-Pacific region between the ten member states of the Association of Southeast Asian Nations (ASEAN), namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, and five of ASEAN's FTA partners—Australia, China, Japan, New Zealand, and South Korea.
  • India, which is also ASEAN's FTA partner, opted out of RCEP in November 2019.
  • RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia.
  • In 2018, the 16 negotiating parties accounted for about half of the world's population and 39% of the world's GDP.
  • Without India, the 15 negotiating parties account for 30% of the world's population and just under 30% of the world's GDP.

Way Forwards:

  • There could be a possibility of reviving the Regional Comprehensive Economic Partnership (RCEP) which last year due to India’s concern towards its MSMEs to protect that market, India did not join the 16 countries Free Trade Agreement (FTA).
  • In defence sectors lots of continuous partnerships that particularly for the USA for instance. India could continue to have spin-offs with private partnerships on India engaging in those defence production.
  • India is in a kind of sweet spot at the moment, for instance, economy, demography, and capacities are working in fovour of country and also somehow the global constellation in a variety of manners working in India’s favour. So, it’s a time for India to try and step forward and do something for the people of India for a better life, better economics in the fundamental sense.
  • Something for India is to be recognized as a constructive and positive player in the rule of law in the world.
  • PM Modi in his recent speech at the India-US business council’s idea summit underlined very clearly “Openness Opportunities and Options”. These are important and significant words as what India carries in terms of offering to the USA.
  • Sooner or later India would again be called as the factory of the world just like China was called, partly Chinese are happy to shift out some of the low-value products to other countries and India could be really a major destination.

Important points made by the Guests

Prof. Swaran Singh, Chairperson, Centre for International Politics, JNU

  • Whatever reasons led by the United States, in this case, starting from the trade war now to closing of consulates and all kind of other initiatives, this constant severe rattling is a reflection of how now the large number of countries are joining and expressing anger vis-a-vis China and several companies trying to shift bases from China to at least Southeast Asia, Vietnam, and Taiwan and India is a contender in that sense.
  • So it is in that context the other major driver of global growth so far is now having a certain disadvantage and has become a kind of unacceptable candidate for leading global growth and that creates space for India very clearly. So what is India doing very attractive at this stage.
  • 18 percent of the world population lives in India, so if we can cater to the demands of Indian people, look after their health care and well being, we are already contributing to the global growth rate.
  • So India seems to be fully aware of its advantages and front-loading those advantages to engage the rest of the world. Therefore the inherent niche advantage of India is being front-loaded and shown to the world to attract Foreign Direct Investment.

Patrick Gerard Buchan, Director, Center for Strategic & International Studies

  • The USA’ Secretary in his speech places India on the table as a major strategic partner of the USA on the back of Donald Trump’s successful visit to India several months ago.
  • The unparallel success in many ways of Indian diasporas in the USA  has been an extraordinary commitment to the American ideal over the last 30 years.
  • Indians need to brace themselves that more pressure will be placed on India to play an even greater role in not only securing for the freedoms in the Indo-Pacific but also in offsetting China.

MANJEEV SINGH PURI, Former Ambassador

  • The entire world has been affected by the global recession. In India’s case the growth perhaps back to normalcy would be faster even we are a more frugal economy needs are much more of people and so we could expect to see a v-shape rise from India while a Nike Swoosh might perhaps be more in common with the rest of the world.
  • India has become the fifth-largest economy in the world and the one economy which is on the way to becoming one of the three largest economies in the world at least in the next decade, 15 years or so.
  • We in India tend to take this for granted but the world keeps an eye on this and the potential for India must never be forgotten. So we are on the rise there and that’s a particularly good sign of what is going on and we have done very ell to develop far closer relations with democracies of the world.


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