ternal e tor in ndia 15.23
signalled ‘protectionist’ rhetoric—the Brexit. The might incline many countries to follow
new government in the USA has already taken protectionist policies. This will result into
various protectionist measures by now and many declining global trade hitting India hard.
more are supposed to come in the coming times. (iii) Developments in the US, especially the
Besides, in past few years the world has rise of the dollar, will have implications
seen increased debate on the drawbacks of the for China’s currency and currency policy
globalisation process. Among experts as well as which will impact India and the world—
several nations, a general feeling looked evolving if China is able to successfully re-balance
against globalisation. The negotiations related to its economy, the spillover effects will be
the WTO look almost stalled. At the end of the positive; otherwise quite negative. China
tunnel, by late 2016, the world witnessed rise in with its underlying vulnerabilities remains
the ‘protectionist sentiments’ among important the country to watch for its potential to
economies. unsettle the global economy.
The above-given two events show as if the India’s trade in goods and services both will
world (or at least the economies which matter be important in this case. India’s services exports
most) has started to move slowly away from growth will test the world’s ‘globalisation carrying
the much-celebrated idea of globalisation—de- capacity’ in services—depending on the restrictions
globalisation taking over the world—shrinking in developed countries on two variables—firstly,
scope for multilateral trade and economic inter- the labour mobility and secondly, outsourcing.
dependence. Again, this lack of willingness
It is possible that the world’s carrying capacity
towards globalisation among different economies
will actually be much greater for India’s services
is not of the same degree nor universal to every
than it was for Chinese goods. After all, China’s
economy—better say it looks selective.
export expansion over the past two decades was
India’s prospects of export growth depends imbalanced in several ways—
on its trading partners’ carrying capacity of
the country exported far more than it
globalisation to it. Today, for India, three external
developments are of significant consequence—
(i) In the short-run, global interest rates it exported manufactured goods to
(as a result of the US elections and the advanced countries, displacing production
implied change its fiscal and monetary there, but imported goods (raw materials)
policy) will impact on India’s capital from developing countries; and
flows and exchange rates. Experts are when it did import from advanced
already expecting high fiscal stimulus, economies, it often imported services
more dependence on unconventional rather than goods (though capital goods
monetary policy, etc. to follow in the is a major exception).
developed world. As a result, China’s development created
(ii) The medium-term political outlook for relatively few export-oriented jobs in advanced
globalisation and in particular for the countries, insufficient to compensate for the jobs
world’s ‘political carrying capacity for lost in manufacturing—and where it did create
globalisation’ may have changed in the jobs, these were in advanced services (such as
wake of recent developments. A strong finance), which were not possible for displaced
US dollar and declining competitiveness manufacturing workers to obtain.