India emerging as a global power

08 Aug '05

6 min read

India itself, as Prime Minister Manmohan Singh said in Washington recently, is undergoing a “fundamental transformation”, both its economy and society, with rising income levels, expectations and demand for quality products. The country has now world-class firms operating and it is moving into more of knowledge-based activities. India is well positioned to take advantage of multinational firms building global supply chains sourcing components manufacture in low-cost countries.

Large portfolio flows into India's stock market reflect investor confidence in Indian corporates and foreign institutional investors (FIIs) have substantially raised their holdings in many blue-chip companies. The number of companies with one billion dollars of investment by FIIs is also increasing.

India, along with Ireland, are on top in jobs under business process outsourcing by international firms. India has a competitive edge over other countries in both skills and supply of personnel at lower costs. But projections for the future show that the country needs to do much more in both quantity and quality to meet the rapid growth in manpower needed for IT, biotechnology and other knowledge-based industries.

Demographic dynamics will also favour India in relation to not only developed world but also China as it will have a larger share of working age population and increasing incomes which could translate into a higher savings rate. This is one more factor cited in researches published on the configuration of global economic power between 2030 and 2050. India is likely to be the third largest economy after US and China by 2030, according to one such studies. By then, ageing of population would have overtaken most of Europe, North America and Japan with declines in savings rate relative to investment. East Asia and China would also begin to feel the pressures of decline in working population not long afterwards.

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