India’s economic future has to be linked to that of Asia, say Mukul Asher and Rahul Sen.
 
There is a strong case for bringing India in to partner rest of Asia —that includes the 10 countries of the Association of Southeast Asian Nations (ASEAN), and also China, Japan, South Korea, and possibly Australia and New Zealand) in shaping the Asian Economic Community (AEC).
 
First, if Asia is to increase its weight in global affairs, it should have an organisation such as the AEC or JACIK (AEC minus Australia and New Zealand) which represents Asia in an inclusive and unified manner. India's calibrated globalisation is projected to contribute to about 12 per cent of global economic growth during the 2006-20 period (next only to China and the US), equivalent to 8.8 per cent of global GDP in 2020.
 
Between 2005 and 2020, India's share of global new jobs is projected to be 30 per cent, the highest of any country. The large size of the Indian economy, and its large youthful worker and consumer base, will provide many profitable business opportunities. The rest of Asia has thus an important stake in India’s successful adjustment to globalisation as this would contribute to Asia's stability and prosperity.
 
Second, India’s economic growth strategy is based on domestic demand, private entrepreneurship, and relatively more efficient allocation of capital. The share of external sector and FDI though increasing is relatively low. This provides an opportunity to Asian countries to diversify their global risks. This is because growth in other major Asian economies such as Japan, China and South Korea is primarily driven by investments and the external sector, with particular emphasis on manufacturing exports. Investments from India's largely private sector companies are undertaken for strictly commercial reasons. This permits investment risk diversification for Asian countries, particularly those in ASEAN.
 
Third, the 1997 East Asian crisis underscored the importance of developing East Asia's capital markets, particularly the bond market. India’s Bombay Stock Exchange (BSE) is to launch a corporate debt trading platform during this fiscal year. India has a thriving government debt market, and is making progress in developing commodity exchanges as an important risk management tool. India’s stock market capitalisation of nearly US $ 600 billion and its large pool of well managed companies have been recognised as an important attraction for discerning investors, including private equity investors. India’s over US $ 160 billion in reserves could also enable it to cooperate constructively.
 
Fourth, contrary to what may emerge from conventional merchandise trade focused research, India's integration with the rest of Asia is for greater, deeper, and of high quality. India ranked as the 5th largest exporter and the 4th largest importer of commercial services in Asia in 2004. The presence of more than 100 of Fortune 500 companies in India undertaking research which may lead to future high technology products suggests that India contributes to a vital part of electronic product-distribution chain. Even in merchandise trade, East Asia accounts for a quarter of India's merchandise trade, higher than the European Union (21 per cent), and the US (12 per cent). China is currently India’s second largest trading partner.
 
India is projected to receive US $ 12 billion in FDI in 2006. Encouragingly, companies from East Asia, particularly from Japan, South Korea and Taiwan expected to contribute significant proportion of the total. India’s outward flow of FDI is also increasing significantly. Southeast Asia in particular is expected to be main beneficiary of India’s FDI outflows, thus diversifying the region’s source of investments and technology.
 
As comfort levels and communication between India and rest of Asia continue to improve, and as the role of Indian Diaspora in such countries as Japan becomes more varied and sophisticated, India’s integration with East Asia will also become deeper.
 
It is essential that Indian establishment, including the media, contribute constructively and purposely to improving perceptions about India in rest of Asia. The importance of soft power cannot be overemphasised. India still needs to make considerable progress in this area.
 
India has demonstrated its commitment to partnering the rest of Asia in playing a more meaningful role through its constructive economic cooperation and security initiatives and together enable Asia to take its rightful place in the 21st century.
 
The writers are with the Institute of Southeast Asian Studies, Singapore. The views expressed are personal.