KOLKATA, Feb. 18
DESCRIBING India as the "stealth miracle economy'' among the democracies of the world in the last two decades, Mr P.K. Basu, Director & Chief Economist, South East Asia and India, Credit Suisse First Boston, Singapore, today predicted that India would emerge as the fastest growing economy in Asia by 2010.
Hailing India's performance in the external sector, especially in manufactured exports, software and other service sectors, he said the country may emerge as a net creditor nation in the none too distant future.
Participating in an interactive session on "West Bengal and China: Is there a similarity,'' organised by the Confederation of Indian Industry (CII) Eastern Region, he said there was no other example of such a huge democracy achieving a 5 per cent growth year-on-year during this period.
He said the lessons for India and West Bengal from rest of Asia are mainly in areas such as export orientation, low direct taxes and a relatively low rate of protection to industry. "What's lacking is leadership, to understand that the basics of industrial strategy should necessarily remain outside the political realm.'' He suggested that West Bengal should follow the Singapore model of MNC-driven FDI approach, as being pursued by Karnataka and Andhra Pradesh Kolkata, he pointed out, had the potential to emerge as the financial centre of choice, as compared to Mumbai and New Delhi.
Citing the example of Asian success stories such as Taiwan and Korea, he called for a greater degree of relative autonomy for the bureaucracy. On foreign direct investment (FDI), he said while India's approach is driven by the domestic sector, in China almost entirely it is driven by the MNC sector, which in turn also drives the export sector despite FDI's vulnerability to relocation choices of MNCs. Stressing on the need to unite the masses and the classes in giving a boost to the manufacturing sector, just as in China, Mr Basu said the surge in China's manufacturing sector growth could largely be attributed to the employer-friendly labour laws.
Describing universal literacy as the basic prop of development, the economist said that India should examine closely China's tremendous success in setting up the special economic zones, where overseas Chinese have invested heavily.
According to Mr Shrish Sankhe, Partner, McKinsey & Co, though India and China has almost the same GDP per capita, the latter's economy has grown much faster, solely driven by the manufacturing sector. Suggesting that India urgently needs to strengthen its manufacturing sector, he said in India the reasons behind China's manufacturing success are little understood,'' and consequently, many myths have arisen''.
Busting the myth that China's growth was driven only by an increase in investments and not by productivity, he said labour productivity in China grew by 8.9 per cent between 1990 and 1999, and proved to be the major driver of GDP per capita growth of 9 per cent in the same period.
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