Make in India, Largely for India

Author(s): Raghuram Rajan

Source: Indian Journal of Industrial Relations , January 2015, Vol. 50, No. 3 (January
2015), pp. 361-372
Published by: Shri Ram Centre for Industrial Relations and Human Resources

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 Make in India, Largely for India

Raghuram Rajan

Introduction

The danger when we discuss The world economy is growing very

"Make in India " is to assume the slowly in the last couple of years and the
export-led growth path that IMF has repeatedly reduced its growth
China followed. Slow growing forecasts. In fact, after 6 years of a tepid
industrial countries are much post-Crisis recovery, the IMF titles its lat
est World Economic Outlook "Legacies,
less likely to absorb a significant
additional amount of imports in Clouds and Uncertainties". The legacies,
clouds and uncertainties continue even
the foreseeable future. Industrial
countries themselves are now after 6 years after Financial Crisis. Why
adopting capital-intensive flexis the world finding it so hard to resume
ible manufacturing, dispensing the pre- Great Recession growth rates,
with labor but doing what theylet alone restore the levels of GDP which
outsourced, at cheaper cost would have been achieved if the Great

made possible by the fact that, Recession had not happened? Typically,
for example, United States has in most recessions, economies go down
very cheap energy today. Be but come back much faster. However,
sides, when India pushes into in this case we see a slow world in terms
manufacturing exports, it will of levels of GDP as well as growth rates
have China, which still has some many years from the Great Recession.
surplus agricultural labor to
draw on, to contend with. Ex
One answer to why the growth is
port-led growth will not be as
so slow is the overhang of debt.
easy as it was for the Asian
economies that preceded us.
One answer to why the growth is
so slow is the overhang of debt; when
countries have lots of debt it prevents
Raghuram Rajan is Governor Reserve Bank of India.
them from growing fast. Banks can't
Excerpts from the Keynote Address delivered at [Link], households find it difficult to bor
Bharat Ram Memorial Seminar in New Delhi on 12 row and governments can't do
December 2014
Keynesian spending simply because they

The Indian Journal of Industrial Relations, Vol. 50, No. 3, January 2015 361

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 Raghuram Rajan

don't have the fiscal space. It could be Secular Stagnation

one explanation for why there exists what
the IMF Managing Director calls the There is now a different narrative
'New Mediocre'. The implication here
of the pre-crisis period from this
is that growth is unacceptably low rela
traditional view i.e. debt overhang.
tive to potential and more can be done to
lift it through a variety of stimulus poli
cies especially given that so many econo- There is now a different narra
mies are flirting with deflation. So, the the pre-crisis period from this tradit
conventional policy advice urges yet view i.e. debt overhang to explain wh
more innovative monetary interventions efforts at stimulating the economy b
with an ever expanding set of acronyms the pre-Crisis growth paths have not
like QE and QQE, as central banks try successful even six years after the
to inject stimulus. Then just monetary A common term, "secular stagnatio
stimulus will not do, there should be a fis- by Larry Summers to describe this f
cal stimulus too. So, more and more gov- Alvin Hansen's speech in 1938 in the
ernments are urged to do obvious things of the Great Depression, when t
like building infrastructure. There are nomenon of then slow persistent g
voices saying more than this, for example, was called secular stagnation. Di
structural reforms but they are typically economists focus on different versi
deemed very painful and possibly growth- secular stagnation. Larry Summers
reducing in the short run. So, the accent sizes the inadequacy of aggregate dem
is on monetary and fiscal stimulus, and the Keynesian view, and the fact t
as much of it as possible given the dead- terest rate can't be pushed below
ening effect of the debt overhang. Therefore we can't give more mo
stimulus than certain level in a period of
If there is one country which has tried low inflation. The possibility for fin
this for a long time it is Japan. Japan has instability prevents monetary polic
been in a quasi-recession for 20 years being more active. Coupled with th
now, really hasn't got out of the Great don't have tools to stimulate but w
Crash of early 1990s and it has done ev- have headwinds to growth, specia
erything that has been suggested. Inter- ing populations who want to consume
est rates have been low for long, quanti- andthe increasing income share of th
tative easing and massive debt-financed rich whose marginal propensity to con
spending on infrastructure. Japan had is small. Those are the arguments th
very low levels of government debt to made for very slow growth frônft
GDP. Today, it has the highest net gov- mand side,
ernment debt to GDP in the industrial
world. Few would argue that despite do- Total Factor Productivity
ing all this Japan is free of its malaise. It
is out there, scooting ahead; last two de- There are7 others who argue that low
cades have not been good. growth from the supply side has been

362 The Indian Journal of Industrial Relations, Vol. 50, No. 3, January 2015

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 Make in India, Largely for India

productivity growth has fallen and it is

One thing that was not going in the also being held back by headwinds such
right direction was total factor pro as plateau in education levels and labor
ductivity. participation rates, as well as a shrinking
of labor force in some countries because
building for a long time. Prominent among of population ageing. This is particularly
those are Tyler Cowen and Robert Gor- pronounced in Japan and, to some extent,
don who argue that the post-World War it shows us what the industrial world
II years (30 years) of growth was ex- might look like if all these forces play out,
tremely strong. This was because growth subject to very slow growth. Population
was helped by reconstruction in Europe, ageing contributes to both the demand
the spread of technologies such as elec- and supply side reasons for secular stag
tricity, telephones, and automobiles, ris- nation,
ing educational attainments, and higher
labor participation rates. Remember that There is a tendency to save today
women joined the workforce in a big way because of the belief that our employ
post World War II as well as restoration ment prospects and our children's em
of global trade and increasing invest- ployment prospects are not going to be
ments of capital. Everything was going bright and that the society will not be able
in the right direction. Interestingly the one to deliver on the social security promises
thing that was not going in the right di- it has made. Therefore, there is a ten
rection was total factor productivity dency to save; more the saving, today's
which was the highest during 1920-50 consumption demand will be lower. One
when world growth was relatively slow could argue that the West has been head
because of headwinds but since then pro- ing this way for some time, secular stag
ductivity has been falling off. For those nation has been in the works. Once there
who think face book and social media are is secular stagnation happening, there is
wonderful new inventions and the world slow growth and then there are number
has been more inventive and innovative of concerns. One, of course, is in the time
in this period than ever before, think of very high growth (30 glorious fast
about the innovations that happened in growth years after World War II) soci
the early part of the 20th century. There eties made lots of promises in Europe,
was a transition from horse drawn car- Post World War II is when England got
riages to motor cars, from gas lit lamps the pension system and unemployment
to electricity, from coal filled irons which insurance. In the US, Lyndon Johnson
were heavy and required whole lot of Great Society in the mid-1960s again
labor for women to electric irons, and promised of social security, healthcare,
from washing clothes at the stream to r——
washing machine. Compare those kinds There is thus this very volatile
of changes with twitter, facebook etc. and combination of lot of promises to
it can be seen that productivity growth deliver and not enough growth,
was really quite large at that time. So, ,

The Indian Journal of Industrial Relations, Vol. 50

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 Raghuram Rajan

Lots of promises were made in the good on the part of these countries. Public debt
times. Except just after the good times has increased tremendously, private debt
growth collapsed. There is thus this very has also increased and there is still the
volatile combination of lot of promises to need to try and stimulate the way out of
deliver and not enough growth. Initially growth. Besides, if it was an emerging
some promises can be delivered without market which was in trouble during Great
growth, if it is financed by printing money. Financial Crisis, the recommendation of
Economists warn us that this causes in- the international organizations would be
flation. debt reforms. Get your debt straight, cre
ate the underlying growth that you ne
Promises to Deliver don't pretend you can spend your way
out of trouble. Of course, that is not the
The first phenomenon of this slow advice many industrial countries hav
growth was in the 1970s when there were taken, they have tried to spend their w
high levels of inflation when governments out of trouble and got into more trou
tried to finance the spending by printing
money. It however, didn't work. We had Technology &Globalization
the Volcker disinflation in all parts of the
world subsequently. But if the economy Further complicating this envir
can't inflate its way and there is still the ment of slow growth is a growing s
need to spend what does one do? The amongst the middle class in a number
governments issue debt and debt levels countries. Overlaying growth is also
started picking up in industrial countries, differentiation in growth. It is com
At some point, even that became diffi- because of technology, because of g
cult. How much debt can be accumu- bal ization. The routine jobs that used
lated? Then private debt is encouraged, exist have all gone away. Adding up b
One would encourage people to borrow sides of the balance sheet is now tak
and spend, encourage housing loans and up by computers or by somebody sitt
so on. There was the third phase which in India. Routine jobs such as assemb
was an explosion of private lending just line work have also been outsourced.
before the Financial Crisis and that also a combination of globalization and te
proved too much. In the US, it was the nology has taken away the routine b
private debt which was the problem. In reasonably well paying middle class jo
Europe, it was public debt especially in What are left are the non-routine men
the periphery which proved to be the jobs such as flipping hamburgers tha
problem. So, this phenomenon of trying still not automated. Nor is gardening
to increase growth higher than the po- tomated. Haircut is still not automate
tential of the economy eventually came These are still non-routine and relativ
a cropper in the West with Great Finan- low skilled jobs as well as non-rout
cial Crisis. But, post Financial Crisis, the high-skilled jobs such as the consulta
imperative for growth is still there ex- and lawyers etc. So we have got bif
cept now there is whole lot of debt also cation of jobs available, low paying an

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 Make in India, Largely for India

very high paying and nothing in the lots of new technologies which can im
middle. The middle class in a number of prove productivity considerably. There is
industrial countries is desperately anxious, a need to figure out how to monetize
they don't want to slip down but to go them, how to make them pay, how to
up. They realize they haven't had the make them part of the economy. Just an
quality education they need to apply to example, the kids used to go to movies,
the Ivy League. Moreover if they apply Now they spend the same time, enter
to the Ivy League, they don't have the tain on the computer free of charge,
money to afford it. So, there is a very From the economy's perspective, the
great angst in the middle class in Europe amount they spend on movie tickets
about what will happen to them because doesn't show up as income, while, in fact,
they want to go up but there is a prob- they are getting better benefits perhaps
ability that they will slip down. Given this, by sitting there and playing. So, given
populist movements like the Tea Party in that there are real gains to the world
the United States or UKIP in the United economy but they may not be measured
Kingdom have come up. These are all as well. Overtime perhaps all those will
parties that are playing to the middle come in. One of the constants in the age
class angst. The kind of message they of pessimism when things are going
often give is that there is a possibility of down, jobs are disappearing etc., is that
a backlash against technology, global fi- new kinds of jobs emerged that could
nance, and foreign immigration and trade, never be thought of. Today, for example,
saying these are the kind of things that there is a job in advertising trying to esti
hurt and these are the things that have to mate the number of hits a site will have
be kept in check. and then sending advertising dollars in that
direction. That job didn't exist 10 years
So, the bottom line is that there is a ago, it was made possible by Google. The
very mediocre economic outlook. There placement of the advertisement when
are obviously certain things which could you do a Google search. That is a whole
pull the world out. Strong US growth science in its own right. But it is impor
could be the locomotive. Low oil prices tant to plan for a global economy which
are net positive for the world in terms of is not as strong as in the pre-Crisis year
demand because the oil producing coun- and which is also going to be politically
tries typically consume less than the oil more difficult to deal with for a variety
consuming countries. So, more incomes of reasons,
in India would mean a net positive for
world demand. If secular stagnation persists, indus
trial countries will have to figure out ho
Given this, economies may well be to restructure their promises,
moving out of this relatively tepid recov- is debt, social security, or low
ery and over time it may be possible to how to distribute the burden of
figure out how to harness as well as growing economies amongst pe
monetize new technologies. There are example is the city of Det

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 Raghuram Rajan

United States which has seen a massive sively high inflation. Those are the prob
erosion of auto worker jobs. It recently lems which always existed in relying only
filed for bankruptcy but it had to make on domestic demand which is why when
very tough choices, between servicing its one exports efficiently that growth be
pensioners or its debt, keeping its muse- comes very sustainable. That is more dif
ums open or its police force intact. How ficult today. It also becomes more diffi
much of it to be actually kept as a city cult because of the abundance of liquid
ated how much to make in to a green zone ity around the world as a result of the
of forest? That is the kind of choice they ultra-accommodative monetary policies,
had to make. More such difficult choices Any signs of growth can attract foreign
may come if this secular stagnation per- capital, and can precipitate a credit and
si sts. asset price boom and exchange rate over
valuation. It is a concern because even
Export-led Growth tually when monetary policies in the in
dustrial countries tighten, some of the
A few more years of slow growth is capital is likely to depart and depart v
what India will have to face. What this quickly. If emerging markets are v
means is a traditional development path able at that stage they pay a price
for emerging markets - export-led had a mini episode of this kind las
growth has become significantly more in summer when there were some
difficult. Over the last 3 decades, every that money would be withdrawn after
Asian country has developed on the back Fed announced that it would tap
of its export- led growth. In fact, most quantitative easing. That created
recently, Latin America has developed on nificant amount of market disru
the back of exporting to China which has Having weathered those initial squ
exported to industrial countries. Export the "taper tantrums" what shoul
led growth has been a facet of emerging taken away for stable growth ass
markets because relying on domestic that industrial countries are likely to
demand is very difficult due to the temp- slowly for the next few years,
tation to over stimulate. Developing coun
tries when they have to rely on their own The rest of the address would
demand tends to run excessively large on four key aspects: first, as impor
fiscal deficits and have credit booms announced by the Government, is "
which turn into credit bust and exces- in India"; There is a need to figure out h
to do it better. Second, if the industrial coun
—— tries are growing relatively slowly, India
Export led growth has been a facet should also Make for In
make for rest of the world. India w
of emerging markets because re
lying on domestic demand is very aim to make for rest oft
realize for
difficult due to the temptation tomost part there would be reli
over stimulate. ance on domestic demand. Third, there is
to ensure transparency and stability of the

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 Make in India, Largely for India

economy when the reliance is on domestic cially through mobiles, broadband, and
demand because the dangers of it running intermediaries such as business corre
away are extreme. Fourth, work towards spondents. Institutions such as markets,
a more open and fair global system where warehouses, regulators, information
the globe has a tendency of shutting down aggregators and disseminators, etc are
rather than expanding. required. Finally, there is a need for af
fordable and safe homes and work places
Make in India across the country. These are important
elements.

To achieve this goal, the Govern

A second necessity for increasing
ment has to implement its ambi
productivity in India is to improve human
tious plans on building out infra
capital requiring healthcare, nutrition and
structure.
sanitation. Unless the people are healthy
and able they can't participate in the
First is 'Make in India'. The Gov- modern economy. That has to begin but
ernment has announced this and it meant then more appropriate education and
improving the efficiency of producing in skills that are valued in the labor market
India, whether of agricultural commodi- and firms have the incentives to invest in
ties, mining, manufacturing, or services, workers are required. One of the biggest
To achieve this goal, the Government consequences of labor reforms will be to
has to implement its ambitious plans on give firms more incentives to invest in
building out infrastructure. This includes their workers because they intent to re
physically linking every corner of the tain them longer,
country to domestic and international
markets through roads, railways, ports The Government is examining the
and airports. What happens when a road third aspect which is reducing the cost
gets built into a village? Immediately a of doing business in India. The woes of
variety of new activities come up in that the big business are well known but woes
road-horticulture, poultry, dairy farm- of small entrepreneur are even greater
ing because they have access to the as they confront the myriad, mysterious
markets. Once they have some incomes regulations that govern them and the nu
clothing and assorted goods shops be- merous inspectors who have the power
gin to come up. The increasing use of to close them down. The Government
powered vehicles is extraordinary. So, needs to do more because the petty bu
activities start exploding once there is reaucrat, empowered by the kind of regu
physical connectivity. The same can be lations is a virtual tyrant. He or she has
said about highway connectivity. Second to become a help to business. As regula
element is ensuring the availability of tors, the costs and benefits of the regu
inputs such as power, minerals and wa- lations have to be constantly examined
ter at competitive prices. Everyone has and paired them down periodically so that
to be linked electronically and finan- they are just right.

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 Raghuram Rajan

Finally, access to finance has to be phenomenon of the industrial countries

made easier. If we want domestic de- moving into that area,
mand people have to have the ability to
borrow and spend not easily but to a rea- Third, when India pushes into manu
sonable extent. facturing exports, it will have China,
which still has some surplus agricultu
Some Caveats labor to draw on, to contend with. Ex
port-led growth will not be as eas
There is a danger when we discuss was for the Asian
"Make in India" of assuming that it ceded us and, there
means a focus on manufacturing, an at- careful about focus
tempt to follow the export-led growth
path that China followed. In my opinion, The aforesaid sho
such a specific focus is intended. There port pessimism here
is a need to be careful because slow export. India has b
growing industrial countries are much cessful at carving o
less likely to absorb a significant addi- comparative advanta
tional amount of imports in the foresee- to do so. Instead, t
able future. Other emerging markets cer- an export-led strateg
tainly could absorb more. We have to sidizing exporters wi
have more and more regional focus. We well as an underva
have to look at Africa. We have to look simply because it is
at East Asia. But, the world as a whole tive at this juncture
is unlikely to be able to accommodate constant attempt to t
another export-led China. After all we strategy, if tried, pr
are China sized, we will be another ex- far less effective than it
port-led China if we go that way. counterparts. There i
tion against picking a particular
such as manufacturing for enco
The world as a whole is unlikely to
be able to accommodate another ment, simply because it has worke
for China. India is different, and
export-led China.
oping at a different time, and sho
agnostic about what will work.
Second, industrial countries them
selves are now adopting capital-intensive More broadly, such
flexible manufacturing, dispensing with creating an environment wher
labor but doing what they outsourced, at enterprises can flourish, and
cheaper cost made possible by the fact entrepreneurs, of whom we
that, for example, United States has very to choose what they want to
cheap energy today. Any emerging mar- subsidizing inputs to specific
ket wanting to export manufacturing cause they are deemed impor
goods will have to contend with this new intensive, a strategy that has n

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 Make in India, Largely for India

off for us over the years, let us figure out be less accepting of exports. If exter
the public goods that each industry needs nal demand growth is likely to be muted,
and strive to provide them. For instance, there is need to produce for the inter
SMEs might benefit much more from an nal market. The policy makers must
agency that can certify product quality, or work on creating the strongest sustain
a platform to help them sell receivables, or able unified market which requires a
a state portal that will create marketing web reduction in the transaction costs of
sites for them, than from subsidized credit, buying and selling throughout the coun
The tourist industry will probably benefit try. Physical infrastructure will certainly
much more from the recent announcement help in doing this but the need is also
of visa on arrival and a strong transporta- more efficient and competitive interme
tion network than from the tax benefits diaries between the supply chains from
they usually demand. The caution should producer to the consumer. A well de
be on subsidies and tax benefits and focus signed GST bill, by reducing state bor
on public goods that can be provided for der taxes, will create a truly national
by the Government. market for goods and services, which
_____ will be critical for our growth in years
Let us figure out the public goods t0 come"
that each industry needs and strive
to provide them. Make for India" because rest of
the world is going to be less ac
. , j , j. cepting of exports.
A second possible misunderstanding is ft» r
to see "Make in India" as a strategy of —~~"
import substitution through tariff barriers. Domestic d
This has been tried before and it has not responsibly, a
worked because it ended up reducing do- domestic savin
mestic competition, making producers in- undergoing som
efficient, and increasing costs to consum- to learn from
ers. Instead, "Make in India" is seen as evaluation and st
more openness andcreating an environment the immense n
that makes our firms able to compete with will also have t
the rest of the world, and encourages for- as they compet
eign producers to come take advantage of as the recentl
our environment to create jobs in India. It as well as the
is about creating the environment rather finance banks
than picking specific set of terms. task should not
ating impediments in the proces
Make for India ing around, or recovering stressed assets.
The RBI, the Government, as well as the
Second aspect is "Make for India" courts have considerable work t
because rest of the world is going to here.

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 Raghuram Rajan

Financial services have to be spread indicated its intent to stick to the fiscal
because once they learn how to man- consolidation path that has been laid out.
age finances and save they can be re- All these things are good. Whether more
lied on to borrow responsibly. New in- institutions are required to ensure defi
stitutions and new products to seek out cits stay within control and the quality of
financial savings in every corner of the budgets high is something worth debat
country will also help halt the erosion in ing. A number of countries have indepen
household saving rates and lead to a dent budget offices/committees that
more stable financing of our investment opine on budgets. These offices are es
needs. Given that the income tax ben- pecially important in scoring budgetary
efits for an individual to save have been estimates including unfunded long term
largely fixed in nominal terms tilt the liabilities that the industrial countries have
recent budget, the real value of the ben- shown are so easy to contract in times
efits has eroded. We have to find ways of growth and so hard to actually deliver.
to encourage savings once again. One
of the least inefficient ways of tax A ccntra| ba[||i focused primarily
spending is to offer some benefits to . . „ .. , , .
K ® ....... on keeping inflation low and stable
saving. One might think of increasing ,h
the finançai benefits to savings through sustainab
the tax mechanism.

Third, the domestic demand is very On the monetary side, a central bank
difficult to control. It tends to go over- focused primarily on keeping inflation low
board. If there has to be a reliance on and stable will ensure the best conditions
domestic demand institutions that help us for sustainable growth. Of cöurse, we are
control it have to be improved. Countries a central bank in a developing market
typically tend to over stimulate, with large rather than in an industrial country and i
fiscal deficits, large current account defi- has to be recognized that emerging ma
cits, high inflation, credit booms and then kets are not as resilient as industria
only to see growth collapse. To avoid economies are. So, the path of disinflation
such booms and busts a policy frame- cannot be as steep as in an industria
work is required to avoid asking for mul- economy because an emerging market
tilateral help especially because India more fragile, and people's buffers and
doesn't belong to any power blocks. For safety nets are thinner. This is why th
a stable framework critically important notion that we would do a Volker style
is the fiscal framework. disinflation is rejected. India cannot sus
tain a Volker like disinflation. In fact a

Fiscal Spending much more sustainable Urjit Patel glide

path is what has been done in trying to
The Dr. Bimal Jalan Committee's bring down inflation. Over the next few
report will provide a game plan for fiscal weeks, the appropriate time line will be
spending and the government has clearly discussed with the Government after

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 Make in India, Largely for India

2016 as we move to the centre of the the youth of India will effectively create
inflation band of 2-6%. a transparent system which will effec
tively do the same for foreign investors.
Financial Stability We don't have to do special deals; we
have to focus on bringing our young com
In addition to inflation, we have to panies, young entrepreneurs in
pay attention to financial stability. It is a tern,
secondary objective but it may become
central if the economy enters a low-in- International Framework
flation credit and asset price boom. Fi
nancial stability sometimes means regu- As a country that does not
lators, including the central bank, have any power block and also th
to go against popular sentiment. The role export vital natural resourc
of regulators is not to boost the Sensex pendent on substantial com
but to ensure that the underlying funda- ports, India needs an open,
mentals of the economy and its financial and vibrant system of internati
system are sound enough for sustainable and finance. The energy secu
growth. Any positive consequences to the " country, for example, lie not
Sensex are welcome but are only a col- oil assets in remote fragile cou
lateral benefit, not the objective. in ensuring the global oil mar
well and is not disrupted. The requir
Finally, India will, in the foreseeable ment is of strong independen
future, run a current account deficit, eral institutions that can play
which means we will need net foreign impartial arbitrator in facilitat
financing. The best form of financing is tional economic transactio
long term equity i.e. Foreign Direct In- important are the open glob
vestment (FDI), and this has the addi- because of our dependence, sp
tional benefit of bringing in new technolo- inputs, on them,
gies and methods. While there is no need
to be railroaded into compromising Unfortunately, the internat
India's interest to attract FDI - for ex- etary system is still domina
ample, the requirements to patent a medi- frameworks put in place in th
cine in India are perfectly reasonable, no industrial countries, and its
matter what the international drug com- is still dominated by their citiz
panies say. However, to attract foreign fair, it is changing, although
investment policies especially tax policies slowly. But, there is a more
have to be transparent and any redress reason for faster change.
is quick. If it comes easier for young In- growth in industrial countries, a
dian companies to do business, it will also the need to finance large debt l
help in making it easier for foreign com- interest of industrial countries
panies to invest for, after all, both are global system cannot be taken for
outsiders to the system. Doing good to For instance, regulations tha

The Indian Journal of Industrial Relations, Vol. 50, No. 3, Januar

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 Raghuram Rajan

appearance of shoring up safety and in the international arena so India also

soundness of the industrial country finan- starts playing a role in determining the
cial system may have the collateral ef- international agenda,
feet of making it harder for cross border
lending into the emerging market or
India is more dependent on the glo
cross border investment into the emerg
bal economy than is thought of.
ing market. We have to recognize that
unintended or intended slow growth may
direct industrial country economic India is more dependent on the global
policymakers' attention inwards, even economy than is thought of. That it is
while politics turns protectionist. The growing more slowly, and is more inward
multilateral governance system, still looking than in the past means that we
dominated by industrial countries, may not have to look to regional and domestic de
provide a sufficient defense of openness, mand for our growth - to make in India
It has in the past when the desire for in- primarily for India. May be this has to be
dustrial country was to open up the done for the next 5 years till the world
emerging market but now that the boot picks up once again. Domestic-demand
is on the other foot so to speak, it may led growth is notoriously difficult to man
not provide the same defense. age, and typically leads to excesses. This
is why domestic macroeconomic institu
Emerging markets may, therefore, tions may be strengthened so that sustain
have the responsibility of keeping the glo- able and stable growth can be fostered,
bal economy open. For this, not only the At the same time, foreign markets cannot
emerging markets have to work on quota be shrunk further and we have to take up
and management reforms in the multilat- the fight for an open global system. Rather
eral institutions, but importantly the coun- than being reactive, we have to be active
try would have to work on injecting new in setting the agenda. That requires in
agendas, new ideas, and new thinking into vestment in idea-producing institutions -
the global arena. Typically India has been research departments of official bodies,
passive or reactive often reacting to in- think tanks including places like FICCI,
dustrial country proposals. There is a need CII and so on as well as universities. In
to go back to putting some of our own sum, the diminished expectations in the
proposals on the table on development world at large should not be a reason for
institutions. Our research department in India to lower its sights. I completely agree
government organizations, universities, with Dr Manmohan Singh when he ex
our think tanks have to develop ideas that presses the sentiment that the best for
we can feed to India's representatives India is yet to come.

372 The Indian Journal of Industrial Relations, Vol. 50, No. 3, January 2015

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