Internationalising India: Performance and Potential

In 2010, merchandise exports accounted for 14% of GDP and including commercial services boosted these totals to 21%; on the import side, the corresponding numbers were 22% and 29% of GDP.
So the GDP is having a great boosting due to these features.

But India still ranks quite poorly in terms of many measures of the intensity of cross-border integration. The index presents data on not just trade but also capital, informational and people flows for 125 countries that account for 92% of the worlds population and 98% of its GDP.And India ranks in bottom 15% of them. In terms of measures of inward FDI stock as a percentage of GDP, India still figures in the bottom 10% of the countries. 30% of the countries in the sample rank lower than India on capacity per Internet user.
India is better in the I.T. sector though i.e

Finally, on the people dimension, the intensities of short-run tourist flows, mediumrun flows of university students, and long-run flows of migrants place India second from the very bottom of the sample. India ranks 110 out of 125 countries overall.
The following are the ways to be better in the performance and potential:1) Remove the low level of connectedness :-

Product and service differentiation, improving competitive intensity, normalizing risk, and generating and diffusing knowledge should push the potential gains well past 1% of global GDP, to 2-3%, or maybe more.

An expanding range of services can be delivered internationally, and foreign direct investment offers an avenue for internationalizing even the provision of some nontradables.

 There are substantial gains available from increasing the cross-border mobility of capital, information and people.
Thus this will bring about a increase in the GDP with connection to the global GDP.

2) Policies must promote trade :-

According to World Economic Forums Global Trade Policy Enabling Index, India figures in the bottom tier of countries in terms of the extent to which its policies promote trade. Take FDI friendliness as en example. The big problem here really isnt in manufacturing, where many barriers have been eliminated but the restriction of FDI in business services. Policies explicitly aimed at boosting internationalization should be backed up with policies aimed at improving the domestic business environment.
Corruption levels should also be brought down to make a better environment for business.

3) Need to internationalize economy:-

There is also evidence of a two-way relationship, with international integration acting to reduce corruption as well as the other way around, although that does depend on the details of domestic political arrangements.

 Thus there is tremendous potential for further policy measures to increase the internationalization of the Indian economy and, more importantly, Indian welfare. At the business level, there are significant problems with the mindset of many Indian businesses, even those that have built up substantial presence overseas through exports or FDI.
The companies need to change their mindset to compete effectively in the global arena. And the main top management being in India for all these companies hinders the global mindset.

A Few Punches, Perfect Blocks, Some Humour

BODHISATVA GANGULI: India has a golden chance to showcase itself as an attractive investment destination in a troubled world. Right now we are underperforming because confidence, what is famously referred to as the animal spirit, is quite low. KV KAMATH: Do we need to really look at where will we be in the next 10 years if we do not get this context right? Indeed, there are challenges. There are challenges all over the world. As I look at it, there are so many positives within India which really outweigh the negatives. There are challenges, and in the economic context, the challenges that really confront a common man are inflation and the interest rate scenario. As far as the businessman is concerned, some of the things which were highlighted earlier this year and rightfully so relate to land, mineral rights, the environment, all very relevant points.

JAIRAM RAMESH: There is nothing within the agenda that talks about issues related to corporate governance. It does not talk about compliance with environmental laws. It does not talk about the responsibility of business to follow the rules of the game while it is true that business requires a transparent set of rules and regulations. Now we have a law, we have a draft bill in Parliament, it is going through the Standing Committee. It is not going to please everybody. So in a way, this bill, which brings bothland acquisition and R&R as part of the same legislation, is trying to redress a very grave historical wrong but it is not being forced down anybodys throat.. Unfortunately, in instance after instance, you know this as much as I do, that there are now protests on not just the manner of land acquisition but on the substance of the land acquisition itself. So we must ask ourselves some hard questions why it that land acquisition is becoming such a contentious issue is. Not all of it is politics, not all of it is politically motivated. Some of it is genuine, related to fears of loss of livelihood security and that is what this bill seeks to witness. SALMAN KHURSHID: The Companies Bill is ready to be introduced in Parliament. A lot of work has gone into it. There will still be some dimensions people want improved, but we have had enough debate and it is important now to get the bill passed. The bill will give a lot of interesting opportunities for conventional as well as many nonconventional companies, people on the verge of the corporate sector, etc. We will bring the urban shareholder closer to the rural shareholder and that will be the emergence of a new culture in this country a part of democratic assertion of commerce.

Indias Urban Renaissance Serving The Next Billion

Between 2001 and 2011, approximately 90 million people were added to cities, which accounted for around 60 % of Indias GDP. By 2030, cities will account for over 40% of Indias population, 70% of GDP, 85% of taxes, and create 70% of net new jobs. Emphasizing long-term planning: Few Indian cities have a 2030 master plan that models peak transportation requirements, plans zoning for affordable low-income housing, minimizing sprawl through strategic densification, or has faade control regulations.

 Metropolitan areas must prepare cascading 20-year integrated spatial development plans, made binding on its municipalities. All citizen-centric functions must converge under the Mayor, and in metros, the Mayor should be the chair of the Metropolitan Planning Committee (MPC). The Metropolitan Development Authoritys (MDA) role should be restructured to help MPC discharge its duties. Finally, as recommended by the Second Administrative Reforms Commission, municipal agencies, like Mumbais BEST.

Policies must augment the flow of finance to ULBs and metropolitan authorities. Globally, governments have devised several sources of city funding. The JNNURM-II should: Increase property tax collections to achieve an overall efficiency of 85%, and levy user charges to recover at least 100% of operations and maintenance (O&M) charges. Encourage metropolitan areas to set up ring-fenced city development funds capitalised by levying impact charges, vacant land tax, land use conversion charges, and selling additional FAR calculated based on land values.

Enable municipalities to leverage central or state grants by adopting the public private partnership (PPP) model and raising debt through municipal bonds.

Devolve 18 to 20 per cent of GST to cities, as is done in many countries. Reward performing states: It is vital to create a competitive environment that rewards high-performing, reform-oriented states, by launching an incentive fund.

 Build capacity and capability: States must recruit high quality talent by inducting skilled professionals at senior levels; and India must build world-class educational and urban policy institutions to strengthen its institutional backbone.

Present Tense, Future Perfect?

SHIVANI HANDA A 50,000 crore infrastructure debt fund may be the need of the hour after seeing the dismal 0.1% reported for year on year growth in Indias infrastructure output in October. Infrastructure is hugely capital intensive, and projects like power, roads, airports require financing for longer periods. The three-year short-term loans will not suffice, going forward. Also, keeping the tenure in mind, the interest rate should be reduced from the current 11% by a minimum of 100-200 basis points. DIVYJOT CHAUHAN Indias IPR policy should not only focus on invention patents but also on incremental research patents. Our IP system is one of the elitist in nature and shuts down a large power house of financially burdened innovators and creators due to high costs involved in the process. ANKIT AGGARWAL Real estate industry is one of the largest job creators in India. However, due to lack of quality exit options in India, high interest rates and longer gestation periods, Commercial Real Estate (CRE) has observed slower growth. Real Estate Investment Trusts (REITs) are a great medium to provide exit to such high-ticket CRE assets, thereby increasing participation of retail investors. Further, real estate industry needs impetus in terms of digitization of land records, faster project approvals and swift legal processes that will allow India to catch up with the developed economies.

PALLAVI SAXENA For the agriculture sector, the countrys biggest employer, 51% FDI in multi-branded retail will be a game changer. However, what is worse is that the farmers often end up getting far less than what they actually deserve, which is at times as low as 10% to

15% of the final retail price. Eliminating the middlemen will not only remove inefficiency from the value chain but also empower the farmers as there will be multiple companies vying for their produce.

KARTIK AVR Energy security is a key driver of national economic growth. Demand is expected to surpass this additional capacity soon. In this scenario, seeking help from the private players in the generation market presents attractive option for the government. All independent power producers must obtain licenses for initiating new power projects.A clause for energy side saving should also be included. This saved electricity can be diverted to the agricultural and industrial sectors, to increase production output, leading to increased economic growth. SHAYAN BARDHAN For India to emerge and renew itself, it must change the way it hires its civil service. The need is there to allow qualified people from all walks of life to be a part of the solution and the machinery that drives it. India has produced an enviable number of professionals and academics and yet, these people do not even have the choice of picking civil service over corporate lives, unless they are willing to make enormous sacrifices. SHREERANG GODBOLE India sits at a poor 132 in the World Bank Rankings for Ease of Doing Business. The key challenge is to promote the spirit of entrepreneurship and bring it under the formal fold by simplifying procedures to open a business. We could put our IT infrastructure to good use by laying down systems that facilitate such transactions to be done online at minimal transaction costs.