Indian economy has responded well to the reforms Extract from Mr P. Chidambaram, Minister of Finance speech delivered at the
the New Zealand Institute of International Affairs in Wellington on November 21, 2006
Growth of the Indian economy has been driven by the twin engines of consumption and investment. India has based its reforms on the strength of its domestic economy while leveraging the possibilities offered by the international economy. Demand and production of goods and services are driven by both domestic consumption and investment – a trend that stems from the large size of the domestic market and the growing purchasing power of the consumers.
Taking advantage of its pool of high-quality scientific talent, many multinational companies have established large R&D centres in India. India is fast emerging as a production base and as an export hub for diverse goods, from agricultural products to automobile components to high-end services. Indian firms are now part of global production chains — importing sub-assemblies, adding value to them and re-exporting them. These trends have resulted in a greater integration of the Indian economy with the world economy.
The traditional face of Indian business has also changed dramatically in the last few years. Indian firms are no longer only seekers of foreign technology or producers of staple goods or providers of low-end services. Their engagement with the world has acquired new dimensions. India has become one of the leading nations in software services, and many Indian companies are acknowledged world brands in the IT sector. These companies have gone beyond India’s shores, acquired businesses abroad, become truly multinational both through their presence in many countries and through a multinational workforce.
India is also a major hub for manufacturing and export of manufactured products. India is among the leading producers of automobiles, auto parts and accessories, leather goods, textiles, pharmaceuticals, petroleum products and machine tools. If you will add handicrafts and hand made products, flowers and herbs, the engagement with the world is very broad-based and impressive.
A relatively new facet of India's globalization is the outward Foreign Direct Investment by Indian companies. The outward investment by Indian companies in the last three years has been estimated at $1.5 billion, $4.5 billion and $7.5 billion. The numbers may still be small by world standards; however, in my view, this is only a beginning. Indian companies are hungry to go abroad, acquire manufacturing firms as well as technology, R & D capabilities, patents and brands, and position themselves as serious players in new markets.
India is now increasingly regarded as a capable and dependable centre for research and development and as a source of new ideas in science and technology. A large number of companies that feature among the world’s largest corporations have established a research base in India.
Apart from the industry and services sectors, there is a remarkable revival of interest in Indian culture, books, music and movies. To some extent, this has been spurred by the Indian diaspora which has been vigorously contributing to the growth of the countries of their residence.
All these factors offer us enormous possibilities of maintaining sustained growth. And yet, India’s opportunity is not a selfish one. It offers the world too an opportunity for investment, trade, and of collaborating for mutual benefit.