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Globalisation at crossroads! What India needs to do to become globally competitive

Isolation under no circumstance is the prescription to economic resilience. Instead, countries, including India, need to make concerted efforts to improve efficiencies at all levels, be it sourcing, logistics, manufacturing, policy provisions and implementation.



Over the years, globalisation was a buzzword that significantly impacted human lives. Conceptually, ‘globalisation’ means integration of all sorts, economic, socio-cultural, financial, technical, etc, among nations across the world.


The word ‘globalisation’ has not only been used too frequently by all sorts of people across societies ranging from hard-core academicians and theorists to corporates and politicians, but it has also been widely misused, both knowingly and unknowingly.


To be a world leader, one has to develop a ‘global understanding’, travel ‘globally’ and promulgate one’s ‘global vision’. Many a times, it appeared that overuse of ‘global’ in one’s discourse evoked mass appeals and became crucial to success. The word was oft-repeated to rise up the ladder and gain mass acceptance. On the one hand, politicians across the world rampantly promulgate ‘global approach’, but they have not spared any opportunity to blame forces of globalisation for failures such as country’s economic chaos, the poor performance of trade, unemployment, even terrorism.


Erudite economists across the world are never tired of carrying out path-breaking research and developing innovative techniques to show integration among nations to promote efficiency and growth. Over the years, traditional economic theories such as comparative advantage, factor endowment, competitive advantage have been extensively researched, and this has led to the evolution of a globalised system of manufacturing and marketing.

Consequently, economic activities worldwide transformed to establish globally integrated value and supply chains systems.


A large number of emerging economies, especially China and some of its South-East Asian neighbours, got their manufacturing activities integrated with Global Value Chains (GVCs) to achieve efficiencies of scale and reap its benefits. Such an approach to integrate Global Value Chains and become an integral part of the Global Supply Chain significantly helped China to become the ‘factory of the world’ and transform itself into a formidable economic giant.

But China, due to the pandemic, has witnessed an economic slump, with a fall in its GDP growth to 6.8% in the first quarter of 2020. This is further expected to tumble in the second quarter.

IMF estimates the world economy to fall by 3% in 2020, the Euro area (-7.5%) and the US (-5.9%) are likely to be the worst-hit whereas it has estimated growth of 1.2% and 0.5% for China and India, respectively. However, these economic predictions now seem too optimistic, as India’s real GDP is now estimated to decline to 5-6% in FY21, and is liable to fluctuations depending upon government actions to contain the virus, and duration and severity of lockdown measures.


India witnessed a steep fall in its composite IHS Markit PMI, that measures both manufacturing and services to 7.2 in April, from 50.6 in March 2020. Manufacturing PMI declined from 51.8 to 27.4 and services from 49.3 to merely 5.4; whereas the during the same period, the composite PMI for France was 13.6, UK 13.8, Germany 17.4, Japan 25.8, Brazil 26.5, US 27%, and China 47.6%. This reveals that India was worst hit primarily due to its rigorous lockdown compared to other major economies due to its rigorous countrywide implementation of lockdown.


China, with exports of over $2.5 trillion, has emerged as the largest supplier in the world. Most of the importers are becoming increasingly wary of their burgeoning trade deficit with China. The countries with the highest trade deficit with China in 2019 were the US ($295 billion), the Netherlands ($63 billion), India ($ 57 billion) and the UK ($ 38 billion). Disruptions of global supply chains consequent to the worldwide lockdowns and overdependence on China has led to increasing concerns of the entire system of global production networks based on efficiency in supply chain systems.


Countries around the world are facing difficulties in making medical equipment and medicines for their citizens. Most countries are helpless and do not have the means to deal with such massive economic calamity coupled with health emergencies. Lack of transparency on the part of China raised the levels of distrust among a large number of its trading partners. And, this has led to a realisation of ‘self-sufficiency’ doctrine, that was long forgotten.


Isolation under no circumstance is the prescription to economic resilience. Instead, countries, including India, need to make concerted efforts to improve efficiencies at all levels, be it sourcing, logistics, manufacturing, policy provisions and implementation. There are no shortcuts to becoming globally competitive.


The author is Professor and chairperson (research), Indian Institute of Foreign Trade, New Delhi


May 30, 2020

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