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India's pace of globalisation pitiably slow, says study

Neena Haridas in New Delhi

India does not figure in the list of the top ten globalising countries. It does not find a place even amongst the countries that are globalising at an average pace. A recent study by global management consultancy A T Kearney's Global Business Policy Council reveals that the country has not been globalising effectively, notwithstanding the commotion in India over its liberalisation and globalisation thrust.

The world-wide study, spanning 34 countries, puts India way behind China and barely ahead of Mexico, Egypt and Turkey.

The rate at which India is globalising, or integrating with other economies of the world, is a pathetic 2 per cent annually. Meanwhile, China has been named in the Globalisation Ledger as an aggressive country globalising at a rate of over 6.5 per cent.

Other countries that have been termed aggressive include Argentina, Chile, Hungary and the Philippines.

Nations rubbing shoulders with India in the moderate category are Brazil, Israel, South Africa and Thailand.

What does this mean for the Indian economy? "The study found that countries that have linked their economies most closely to global markets had faster economic growth rates," says Paul A Laudicina, vice-president and managing director of A T Kearney's global business policy council.

"Moreover, these nations showed sustained improvement in infant mortality and life expectancy, higher literacy rates, more political freedom and higher government spending on social programs. The Globalisation Ledger shows that rapidly globalising countries have enjoyed economic growth rates that were, on average, 30 to 50 per cent higher than their more slowly globalising neighbours," he adds.

India, a moderate globaliser, has failed to achieve sustained improvements in economic growth. As a group the moderate globalisers' growth rate rose only modestly to 3 per cent. This means such countries have slower access to international credit, lesser investment and tourism.

Among the countries that undertook liberalisation, China, Argentina and the Philippines have been successful in opening up their economy. India, however, has been way slow on its reform process.

However, there is some positive angle to the slow pace at which India is globalising. Slow globalisation leads to better distribution of income. Says Laudicina, "Countries that have been aggressively globalising have a case of worsening air pollution and increasing corruption. They also have seen rising income-inequality. Deteriorating income equality in the top tiers of the globalisation spectrum raises serious concerns about gloablisation's economic benefits."

However, this does not mean that slow globalisers are growing wealthy. "This only means that although the wealthy in the rapidly globalising countries enjoy a larger slice of the pie, the pie itself has grown so big that the poor too are now realising more economic benefits," says Laudicina.

Laudicina explains this paradox: "On an average, countries that embrace globalisation achieve substantially higher rates of per capita economic growth. Yet, rapid integration into the world economy may also restructure their economies, creating opportunities for a small minority of citizens to earn a disproportionate share of material rewards.

"In contrast, countries that shy away from globalisation face far less pressure to reorganise domestic markets, helping sustain relatively equitable income distribution patterns. Unfortunately, such countries are less able to stimulate high rate of per capita economic growth."

In simple terms, though income is more evenly distributed in India, there is slower eradication of poverty. This makes it less attractive for foreign investment, tourism and susceptible to brain drain.

This gives some nations the opportunity to grab away India's share of fortune. Leading amongst these are China, Argentina, Chile, Hungary, the Philippines, Colombia, Poland, Portugal, Singapore, Venezuela, Ireland, Italy, the United Kingdom and the United States.

The study reveals that these countries also have population with higher purchasing power and better socio-political environment for investment.

Business