For a better part of the last decade, India, along with China, had been the toast of discussions at Davos, the popular Swiss ski resort, to which global leaders converge every year to discuss geopolitics, economics and development at the World Economic Forum’s (WEF) flagship annual event. One is the world’s factory, the other the global back-office. The two neighbours, housing nearly 40% of the world’s people, were also the hottest growth economies. If China sizzled at 10.16% economic growth between 2001 and 2012, India grew at 7.13% since the start of the new millennium.
Enviable achievements at a time when the United States, European Union and Japan were reeling under recession during the latter half of the same period. Together with Brazil and Russia, the two populous Asian neighbours formed the BRIC grouping with the quartet of nations predicted to form the mass of world economic activity. Given this, it was only natural that emerging economies would dominate conversations at the WEF.
This year, however, the phraseology at Davos, seems to have undergone a subtle metamorphosis. Amid budding signs of recovery in the US, macroeconomic strategists in the developed world are now focussing on ways of ‘re-shoring’ jobs to their countries, as opposed to ‘off-shoring’. This marks a fundamental shift in mainstream economic thinking following the world economy’s Great Crash of 2008. British Prime Minister David Cameron summed it up succinctly at Davos when he cautioned that the West cannot afford to be “starry eyed” about globalisation and that it was about time to bring home the benefits by seizing the re-shoring opportunities.
Both India and China, as the rest of the emerging world, are currently going through a crippling slowdown. The IMF projects that real GDP growth in emerging Asia will be 6.7% this year due to an overall cooling in the global economy, and in particular, a slowdown in China. Experts reckon that China’s current level of investment — 46% of its GDP — was not sustainable and could come down to 36%, within five or six years. The US economy’s expansion, on the other hand, will gather speed to 3% this year from 2% last year spurred by strong industrial growth, rising confidence and an end to the fiscal drag.
This implies that countries such as India and China will have to vie with the US economy not as a buyer of products and services, but as a re-industrialising contender. That said, it would be foolhardy to write India off just yet. With a median age population of less than 30 years, the country remains the largest pool of consumers. The change of idiom at Davos should act as a guide. It is up to India’s policy-makers to formulate policies that keep youth-driven India within the perimeter of the world economy’s emerging epicentre.