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.