India's Rise to Globalism

As it celebrates 50 years of independence, India, the world's largest democracy, is intent on transforming itself into a global economic power.

Likened by the former prime minister and nationalist leader Jawaharlal Nehru to an "ancient palimpsest on which layer upon layer of thought and reverie has been inscribed," India today bears the distinct markings of greater economic openness. The pace at which India has adjusted to the transformative world market has surprised even the most cynical observers. Having made the hard decisions to reform its economy, India is easily the most significant test case in the world for whether democracy and capitalism can triumph over mass poverty.

India's economic reforms, commenced in 1991, have succeeded in promoting greater competition and freer trade. With the privatization of such sectors as aviation, electric power, and telecommunications, India has unleashed market forces. A highly trained and educated work force and a diversified industrial base have attracted unprecedented direct foreign investment.

World's largest emerging market

India's gross national product (GNP) growth of 7 percent in 1996 was on par with the "Asian Tigers." With a population of 914 million that will overtake China's population early in the next century and a middle class of 200 million, India provides the largest emerging market in the world.

India fully expects to join Japan and China to form Asia's Big Three. An economy on a scale to which India aspires requires geopolitical stability to function optimally. Indeed, New York Federal Reserve Bank President William J. McDonough says, "History has shown, time and again, that sustained development cannot occur without peace and political stability." Whether India can maintain peace depends on the outcome of its longstanding conflict with Pakistan. Both countries maintain a state of high military readiness. Pakistan currently allocates 30 percent of its GNP to defense; India, with a significantly higher GNP, commits 15 percent to defense.

Cooperating with Pakistan

While there are those in India who view Pakistan as an irredenta, India's forward-thinking prime minister, Inder Kumar Gujral, is a proponent of greater cooperation with Pakistan. Ending a four-year hiatus, Mr. Gujral met with with his Pakistani counterpart in the Maldives last May and opened bilateral talks on a wide range of issues, including Kashmir. Both countries seek expanded trade relations. Such relations would help anchor regional prosperity and stability. Such stability is the sine qua non for South Asia's integration with the Asia-Pacific. And, as Gujral recently speculated before the Foreign Policy Association in New York, the Asia-Pacific region may soon come to produce nearly 50 percent of the planet's GNP.

For the time being, the United States remains India's largest trade partner and foreign investor. In as few as five years from now, as many as 6.5 million American jobs will be dependent on US exports to Asia. US trade with the region already exceeds transatlantic trade and is likely to be twice as large as trade with Europe by 2000. India's readiness for rapid economic expansion affords an unparalleled opportunity for closer economic ties with the US.

As India builds capacity to participate in an expanding world market, an appreciation on the part of more Americans of India's actual and potential significance to the US is a matter of urgent concern.

* Noel V. Lateef is president and chief executive officer of the Foreign Policy Association in New York.

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