US Economic Recovery: Can India be an Equal Partner?

Asoke K. Laha
President & MD,
Interra IT

Two months back, I had written in this column that the US economy is on the upswing. But I thought that I should not write about it since one has to discern whether the growth is sustainable or ephemeral. Now, it is almost clear that the US economy is bouncing back, going by the data available on the manufacturing growth, employment pick-up and good performance of the macroeconomic indicators like inflation, current account deficit and the like. 

But what is seemingly a paradox is the buoyancy that is limited to the US economy alone. Europe is struggling; other developed and emerging economies are facing either a standstill growth or sluggishness. How long that spell will continue is anybody’s guess. Apparently, there are no signs of getting back on the rail in these economies. Then, what will be the economic weather forecast to be made. Let me hazard some guesses and unfold two scenarios. One, the US will continue to grow riding on the back of its solid pick-up of domestic demand. Growth in the US spurs growth all-round, leading to a global pick-up.  

Let me analyse both the propositions in a circumspect manner. Does the domestic consumer demand alone can push up recovery of the US economy? The rules of the global economy are changing fast. Many opine that hardly is there any problem situation in the globalized world, which can be resolved in the long run using only tools that are relevant, only to the domestic economy. That is true more in the case of the world’s most developed economy – the US. Its rules are calibrated in such a way as to channelize investment from abroad, be it from Germany, China, Japan and, of late, from India. For a solid employment growth, such a large-scale investment from all over the world is critically important. 

Let us have a look at some of the statistics emanating from the US. The Federal forecast is that the US economy will grow at 2.3 per cent in 2013 and it will further go up in 2014 to 3.5 per cent, provided there is an appreciable growth in the world trade and cross-country capital movement. This would mean that the US growth model itself presupposes growth in other parts of the world.

Viewed against this hypothesis, we have to closely examine what is happening across the world. The three biggest emerging economies – China, India and Brazil – are facing an uphill task in maintaining their growth tempo. Manufacturing growth in China, which was consistently high throughout the last few decades, is slowing down. The Indian growth wagon is up against many imponderables such as a highly-decimated rupee against dollar, coupled with a drastic reduction in growth rates, which had grown over 9 per cent a few years back. The Brazilian economy is beleaguered with development constraints. There are other economies that are facing an uphill task, such as the Republic of Korea, Mexico, Russia and the like. It is imperative to have a coordinated development programme to lift these economies from the morass that they have been sunk into.  

My columns have always some IT elements. Let me bring about some elements of that in this article also. I feel any discussion on the Indo-US trade and economic relations is incomplete, without reference to information technology, which brought our nations closer and, for that matter, put India prominently on the world economic map. There is a feeling that the initial euphoria on IT is waning out. I tend to disagree with that hypothesis. Let me give my line of thinking. Cooperation in IT between India and the US is entering a new phase, like the FDI, which had moved in a unilateral direction a few years back.  The potential of IT has not been fully tapped or explored. Here, we are not talking about the conventional IT tools and concepts like IT-enabled services and software development. We have to move up in the value chain in the IT, particularly in the areas like robotics, artificial intelligence, evolving effective governance models, etc which are increasingly demanded by countries across the world, be they developed, emerging or developing economies. Let me take a real-life situation from India. It is the avowed objective of the Indian government to move towards Goods and Services Tax (GST), which is designed to give a major overhaul to the tax structure in India. One of the reasons that the implementation being put off is on account of lack of digital infrastructure to track down the movement of goods and services. Similarly, the Supreme Court of India has embarked upon a major drive towards digitizing court records and proceedings primarily to reduce the huge pendency of cases at various levels of judiciary. Hopefully, in the near future such initiatives will give rich dividends.  

Yet, another area is the use of robotics in mining, oil exploration, etc to cut down the human drudgery and loss of lives on account of frequent accidents and due to natural calamities. If India needs these technologies now, somewhere down the line, say in three or four years, many countries would look forward to have such technologies. Could we incubate such technologies and innovations in India to tap the enormous potentials for such technologies worldwide? These are the futuristic businesses that will unfold sooner or later. The first movers will always have the advantage. India and the US have the required brain trust to tap these seemingly large business opportunities. The pertinent question is then what prevents us from coming together to work in unison for the common good. That also should be the focus of the strategic dialogues, which we hold amongst ourselves.