Mixed blessings

Even as experts debate whether the worst is over for the global economy or there is still some pain to come, the World Bank has come out with its prognosis of where we are headed.

According to a new report, the world economy will shrink further in 2010 and 2011, but those of India and China will grow. India’s growth will be higher than that of China says the Bank.

This is a mixed blessing because both the countries and the rest of the developing countries are keen that the industrialised, western economies bounce back because it is good for their own growth prospects. At the same time it suggests that India and China, once over-populated and poor, are now emerging as leaders of the global economy.

There is however a need to take this forecast with a bit of caution. India can grow more and faster but it is not yet in a position to be the engine for global growth. That is somewhat in the future. India has now to content itself with the fact that it is in a position to weather the global economic downturn without being sucked into the crisis. That is an achievement in itself, though it throws up paradoxes of its own.

The reason for this relative stability is due to the fact that unlike China, India’s dependence on world economy through exports is far less while domestic demand continues to grow. But there is a need to expand India’s exports base because that will contribute to the overall growth rate of the economy. And that can happen only if the world economy is booming too. So it is in India’s own interest that the global downturn last for as short a duration as possible.

While considering economic growth prospects, one cannot be limited to the next year or the one after; the long view is equally important. China has managed to grow at impressive rates consistently and thereby improved the standard of living of its own citizens.

To achieve that momentum the Indian economy will have to improve its performance levels by a large margin. It would mean that we cannot afford a large below-the-poverty line segment or millions of children out of school or an unskilled labour force. These are the problems that Indian leaders will have to fix before setting eyes on the heights of the global economy. Even so, to continue growing at a more than satisfactory pace at a time when the rest of the world is contracting is a comforting thought.