Symposium on globalisation

The Alumni Association of the Lancaster University Management School organised a mini symposium on globalisation, in New Delhi on January 17th 2004. The symposium was based on a collection of essays titled " Making Globalisation Good" edited by John Dunning (Oxford University Press, 2003: Paperback Edition 2004). The theme of the book- moral challenges posed by globalisation, is addressed by a constellation of academics, politicians, business leaders and religious leaders. The contributors to the volume include the Nobel Laureate Joseph Stiglitz, Dame Shirley Williams, Chief Rabbi Jonathan Sacks, Khurshid Ahmad of the Islamic Foundation and Gordon Brown. John Dunning's incisive essay on the moral imperatives of global capitalism sets the stage for the varied and extensive discussion of the main theme of the book. The New Delhi Symposium with commentaries on the book by three of India's eminent commentators and analysts of issues of globalisation provides an Indian perspective on the issues discussed in John Dunning's book. This discussion paper presents an edited version of the introductory remarks by John Dunning and comments by N.K. Singh, Professor Narasimha and Ashok Desai.

The Enigmatic Services Sector of India

The share of services in India’s GDP, at round 60%, is much higher than that in other emerging economies including China. Since the year 1991 Growth of services in the economy has surpassed that of agriculture and manufacturing, a feature that defies received wisdom on the growth pattern of economies. Received wisdom, grounded in the Kuznets paradigm, is that growth in the productivity of agriculture and agricultural incomes provides the manufacturing sector both low cost agricultural raw materials and a demand for its output. In time, the continued growth in incomes promotes the growth of the services sector both through a demand for consumer services and for services as growth promoting inputs into manufacturing and agriculture. India’s services sector, though, has grown alongside an agriculture sector that is none too productive, and a manufacturing sector that accounts for a relatively low 20% of the GDP. This paper provides an explanation, grounded in the country’s history and economic policies of the pre- liberalization era, for the growth of the services sector and argues that, contrary to popular opinion, it can lead the economy

Why do Indian firms go abroad?

Overseas investments by the emerging economies are a feature of globalisation. Investments by Indian firms, though not large in volume, differ from that of other emerging economies such as China in their composition, destination and modality of investments. A relatively high proportion of their investments are in the manufacturing and services sectors of the developed economies such as the UK and the USA. A number of statistical studies have attempted to identify the factors motivating Indian firms to invest abroad. Most of these studies attempt to ground the analysis in the received theory of foreign direct investment centred on the ownership advantages, location and internalisation (OLI) paradigm. This paper argues that statistical tests cannot fully account for the unique nature of India’s investments abroad. The pattern of investments that differs from that of the other emerging economies is to be attributed to India’s endowments of entrepreneurial skills centring on exploration of investment opportunities and astute management of complex organisations. These endowments are an inheritance from history augmented by the contribution of India’s diaspora abroad. The lukewarm investment climate at home may also be a factor in the decision of Indian firms in technology and skill intensive firms to venture abroad. Explanations for the unique nature of overseas direct investments by Indian firms have to be sought in the organisational structure and history of Indian business houses

Kerala and Tamil Nadu:differing pathways to development

Kerala and Tamil Nadu, neighbouring states in South India, have each in its own way attracted much attention from development economists in India and abroad. Kerala is known for its development record illustrated by the high levels of literacy of its citizens and health related development indictors. Kerala’s record of development has generated debate on the primacy of growth as opposed to investments in health and education as propagators of development. Kerala is supposed to have achieved development with little growth. The other striking feature of Kerala’s economy is the relatively low contribution of manufacturing to its growth and the preponderance of the services sector in both growth and employment. Tamil Nadu, in contrast to Kerala, possesses a manufacturing sector led by high tech automobiles and low tech textiles sectors amongst others. There is evidence to support the thesis that whilst Tamil Nadus’s growth path over the years conforms to the Kuznets inverted U curve paradigm, Kerala’s growth path is far from it. This paper argues that it would be erroneous to claim that Kerala development record is based on low levels and illustrates the returns to be had from emphasising investments in health and education. That which is important for development is a flow of investible resources. Kerala in the earlier years of its development relied on public borrowing for such resources and in recent years it has had heavy inflows of remittances from its diaspora in the Gulf states. Tamil Nadu’s record is largely based on growth and foreign direct investments in its manufacturing sector. This paper argues that the differing growth paths of the two states and their development record is to be traces to history and the institutions, especially the education and political institutions in place in the two states. Kerala possesses a comparative advantage in tourism and health services and should promote these sectors if it were to sustain its development record with a sustainable growth path that is not dependent on uncertain and fluctuating remittances from abroad. Tamil Nadu that has entered the services phase of the Kuznets cycle is likely to grow with services sustained manufactures