Imperatives, Challenges and Task Requirements for Becoming a Global Player: The Case of India

Abstract

India's external debt has been rising ever since independence 50 years ago. The debt service ratio has also been rising and touched a peak of approximately 35%. The country also has been facing foreign exchange crisis on account of the above and increasing imports burden. The two make India a disadvantaged player in international trade. Exports alone are not able to meet the increasing demands of foreign exchange. It is necessary that India to generate foreign exchange and develop debt-repaying capacity through alternative means like becoming a global player. Foreign investments inspired inflows, which have provided a temporary respite from foreign exchange crisis, may not be a lasting solution, if necessary structural changes are not undertaken to make India a global player. The investments may dry up soon if they do not fetch expected returns. If they are successful they will generate additional demand for foreign exchange. The structural changes undertaken so far do not seem to be adequate to make India a truly global player. Indeed, it looks that the initiatives taken may lead to India becoming a global market instead. The paper suggests that there is a need for major changes in the present approach, which almost ignores new product development within the country. It identifies the barriers to India's becoming a global player and suggests several action strategies. The paper has been divided into five sections. Section I gives introduction and raises the issues of adequacy of the economic reforms initiated by the government of India six years ago, to meet the long term challenges that the Indian economic system. Section II gives the historical backdrop and current scenario of external debt and foreign exchange and points to the need of India becoming a global player. Section III presents the trends and patterns pf foreign collaborations, import and exports. Section IV explains possible reasons for the same for the present state of affairs. It also presents the findings of a study on foreign companies' interests in India and discusses behaviour of the domestic companies, leading to the conclusion that India may become global market instead of becoming a global player, and possible long-term repercussions thereof. Section V discusses several policy and action strategies required to supplement the current reform measures to meet the challenge that the Indian economy faces today.