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Tuesday, Oct 15, 2019

Marketplace economics

Both the US and India understand the power of a market economy to effect widespread beneficial socio-economic outcomes, writes Dipak C. Jain.

india Updated: Feb 26, 2006 02:50 IST
Guest column | Dipak C. Jain
Guest column | Dipak C. Jain

Predictions are notoriously difficult on any one dimension, let alone along several, such as the political, economic and commercial dimensions. When we cast our gaze forward more than a decade, prediction becomes even more daunting. Nevertheless, given current developments with respect to global trade and the present political landscape, one may reasonably suggest the following about the likely relationship between India and the US in 2020.

First, the US-India relationship will exist within a much larger, global web of relationships that will include other emerging powers, such as China and, to various extents, Brazil, Indonesia and Russia, among others. With absent macro events such as world war or an international economic depression, we can expect globalisation to continue propelling economies worldwide while eradicating trade barriers and making regional borders more fluid.

Increasingly greater free trade and Foreign Direct Investment (FDI) and portfolio or Foreign Indirect Investment (FII) flows will result in the economies of both the US and India operating more efficiently. This will increase returns on US capital and technology, as well as on Indian labour and skills. Additionally, there will be a more seamless flow of management expertise, co-generation and ownership of intellectual property, as well as large corporate entities operating across both markets.

Much greater IT-enabled services and IT integration into different business processes will result in sizeable cross-border/remote delivery of services and management. The current onshore-offshore model will evolve to a dynamic globally integrated enterprise model that will leverage the differential advantages accessible in each of these countries and create formidable entities with global reach and dominance.

The increased size, scale and competitiveness of Indian firms will result in a greater number of India-based global firms as well as top management talent sourced in India for deployment in the United States and other international firms. Similarly, increasing numbers of US citizens will live and work in India (as India Resident Americans).

Globalisation, however, is not necessarily a panacea, nor are its fruits uniformly distributed among the world’s population. If we are to increase peace and prosperity, economic tools will be essential to bring about this outcome. But if, on the other hand, global trade results in increasing the disparity between the world’s “haves” and “have-nots,” one can expect that billions of poor people may seek redress through means that run counter to our desire for something that more approaches universal prosperity. In particular, terrorism may prove attractive to the very poor who see few other options to level the economic or political playing field.

To minimise this tragic risk, the US and India will have to continue building the strategic relationship that has emerged between them since the end of the Cold War, before which they were seen by some, such as former US State Department’s Dennis Kux, as “estranged democracies.” Both countries have the capabilities and incentives to work together, extending liberty through political institutions and commerce. Both countries understand the dangers of extremism and have a common desire to marginalise agents of terror.

The largest benefits of the globalisation push will be seen in countries that can best leverage emerging technologies. India and the US are, of course, natural allies with respect to this effort, as both possess the intellectual capital to pursue mutually advantageous ends. While India is still emerging as a true economic power, and there are challenges ahead (such as bolstering necessary infrastructure throughout the country), it is clear that India possesses the ability to be a strong global player, and a partner with the US. Indeed, the US has declared its intention to help India realise “global power” status, which will result in a larger role for India in world and United Nations affairs. The win-wins in this situation are apparent.

For instance, the mutually beneficial operation of the “India Factor” will help address some of the demographic challenges and opportunities that are present and evolving, for example, in health services delivery and management, pharmaceutical production, research and development, etc.

India must find ways to leverage the great potential of its existing capital markets and high-tech industries, while moving beyond a governance structure historically mired in bureaucracy. Entrepreneurship and innovation are the lifeblood of vigorous commerce, and rarely have these flowered when slow-moving, cumbersome institutions interpose themselves.

There is much that brings the two nations together, not the least of which is a shared commitment to core democratic principles, fighting extremism and encouraging tolerance. And both understand the power of a market economy to effect widespread beneficial socioeconomic outcomes. There is a great opportunity for both India and the US to keep working with one another as the paradigm-shifting commercial dynamic unfolds across the global stage. We can expect that the Indian Diaspora (NRI/PIO etc) will continue to serve as a good catalyst and the glue that helps bind the two countries together.

India’s interests, and its vibrant and longstanding culture, cannot be expected to converge perfectly with those of the US. Certainly there are regional issues and agendas that involve India directly and which must largely be decided by Indians. The situation in Kashmir may be one such example.

The global sociopolitical landscape in the coming decades will continue shifting, bringing more power to nations that, over the past century, have largely remained in the background as superpowers such as the US and the former Soviet Union dominated world affairs. The challenge for India and the US moving forward in this complex new world is to manage their relationship assiduously, finding critical points of intersection socially, politically and economically.

Doing so will richly reward all involved."

(The writer is Dean of the Kellogg School of Management, Northwestern University.)

First Published: Feb 26, 2006 02:50 IST

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