Three years ago, US President Barack Obama arrived with the largest delegation, that included the who’s who of American business to visit any country. It was a clear sign that India’s rising economy has never mattered more. The reasons are too obvious for anybody to miss. A 5% growth in 2012-13 is considered a crawl in India; yet seen through a medium term prism, it still is among the world’s fastest growing economies. Since the start of the new millennium, India has sizzled at an annual average growth rate of more than 7% — while the US, the world’s largest economy, grew at about 2%. An enviable achievement at a time when the US, the European Union and Japan were reeling in recession during the latter half of the period amid a piling rubble of the world economy’s worst crisis in eight decades. If India grows at the current rate, it would be the fifth largest consumer market by 2025. The consumption spree of the Indian middle-class, which will swell to more than 700 million in the next 15 years, could reshape global markets, as spending multiplies.
And yet, from a foreign investors’ darling to a slowing economy prone to risky policy flip-flops, the turnabout of India’s image has been as rapid as the sizzling growth it had once peaked during 2004-08. India, it seems, finds itself without friends in the world’s financial capitals when it needs them the most for boosting investment to jumpstart an economy caught in the grip of a crippling industrial deceleration. The critics’ phraseology is uncannily similar: stalled reforms, policy missteps, mounting deficits, galloping inflation, fractious politics and creaky infrastructure — the rough edges are coming off, all at the same time.
Finance minister P Chidambaram, therefore, has struck the right note by hard-selling the India growth story and seeking to reset the India-US business relationship that’s fraught with disputes, some niggling, some serious. India too faces stumbling non-tariff barriers. For instance, the fears of Indian technology firms, which have fuelled the aspirations of millions of middle-class Indians, on the proposed immigration Bill in the US, aren’t unfounded. The two countries can do much better when they work together, and not blame each other as they have done recently, and find ways to overcome challenges brought on by the global slowdown, which shows no signs of letting up. The institutional and regulatory environment in India — across a broad spectrum of issues ranging from intellectual property, dispute settlement, capital markets, legal remediation and others — is far more transparent and rule-based than in many other emerging economies. So to single out India for inconsistent policies isn’t a fair game. Investment decisions, besides yields and returns, are also guided by perception. A well-crafted diplomatic persuasion, like the one the finance minister embarked upon, is clearly the need of the hour to lure precious dollars.