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Partnership Summit Theme Document January 2015

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Partnership Summit Theme Document January 2015

  1. 1. 1. Understanding ‘Shared New Realities’ 1 2. Emerging Economies Balancing Global Growth 3 Emerging Economies Advance Share in World GDP¾¾ 4 Emerging Economies Scoring High on Trade¾¾ 6 Emerging Markets Attracting More Investment¾¾ 9 3. Partnerships for Shared New Realities 11 G-20 Agenda for Shared Development 1¾¾ 2 UN Global Development Agendas Beyond 2015 1¾¾ 5 WTO Towards a Multilateral Trading System 1¾¾ 7 4. Rise of Regional Economic Integration 19 5. How Should India See the Rise of Trading Blocs 21 6. State of the Indian Economy 23 7. Domestic Reforms Would Take India Forward 29 Make In India – An Exciting New Initiative 3¾¾ 1 Path for Economic Reforms 3¾¾ 3 8. Preparing for A New World 35 Contents
  2. 2. The Partnership Summit 2015 Theme Paper 1 1. Understanding ‘Shared New Realities’ During the last few years, even while developed countries were struggling to recover from recession and revive economic growth, a group of emerging economies including India have continued strongly on the growth path and helped shift global trade. Amidst this, the rise of Multi-National Enterprises (MNEs) changed the Global Value Chains (GVCs). The new GVCs help MNEs break down goods and services and locate them in different parts of an increasingly global production system. They undertake different production stages in countries as per comparative advantage, including services such as RD, design, marketing and branding. During these years of tumultuous change in the global economy, there has been a notable shift in global share of GDP, merchandise trade and flows of investment among major countries. Advanced economies, especially the Europe, Japan and the US remain leading contributors in all three areas but their share has been gradually falling. When the world passed through two recessions in 2003 and 2009, robust economic growth of South Korea, China, Singapore, Russia, Brazil, South Africa, Hong Kong and India stabilized global growth. Declining demand in the North is compensated for by growing consumption levels in emerging markets. On the other hand, emerging economies look to the advanced economies for markets, technology and investments. These developments are encouraging nations and global institutions to share resources for shared growth and development. In effect, the tilt in global economic balance has now gained momentum and new realities are coming into play. The key to growth is now shared between the emerging
  3. 3. The Partnership Summit 2015 2 Theme Paper markets and developed economies. The world needs to develop new strategies and partnerships to lift global growth and support global rebalancing. Within these global shifts, India stands at an exciting moment in its economic journey. A renewed investor confidence is apparent after a historical majority attained in the recent General Elections and the institution of a new Government led by Prime Minister Narendra Modi. In the last six months, the Government has proactively announced a slew of reforms aimed at reviving economic growth, targeting the areas of manufacturing, investment climate, financial inclusion, urbanization and others. The Indian economy is now universally viewed by analysts as a focal point for expanding growth in a global economy that remains fragile. India cannot underestimate or overlook the rise of these new developments. It needs to take a considered view on the implications of their emergence. It should adopt a balanced approach and calibrated strategy not only to cope up with the changes but also to leverage these changes for its own growth and development as well as for the benefit of the world. To do that, India must be able to compete in a fiercely competitive global business and economic environment. India needs to strengthen its manufacturing sector and must relentlessly strive for manufacturing competitiveness by undertaking crucial reforms in the areas of infrastructure development, internal tax reform, boosting entrepreneurship, reducing transaction costs, skill development programmes and others.
  4. 4. The Partnership Summit 2015 Theme Paper 3 2. Emerging Economies Balancing Global Growth Increasing global economic interdependence calls for enhanced partnerships for shared new realities. Isolation and protectionism are incompatible with growth and development. The rise and leadership of G20 recognized the global power shift of a multipolar world. The 2014 Brisbane joint communiqué reconfirmed G20’s commitment for strong, sustainable and balanced growth. It demanded an integrated policy approach to ensure inclusive economic growth, social development, peace, security and environmental sustainability within a development agenda that responds to the aspirations of all people for a world free of want and fear. This global integration that we witness today is not sudden and accidental but a very careful and progressive attempt by all countries - developed, developing and least developed countries – to shape the forces of globalization and improve living conditions of their people. As industrialized economies turned towards raw material sources in developing economies, economic growth of the supplying economies was bolstered. On the other side, witnessing the rapid progress achieved by the advanced economies, developing and least developed economies have opened their economies to overseas investment, technology and knowledge. These partnerships have led to massive cross border trade and investments. The rise of emerging economies has been well substantiated by the notable changes in share of global GDP, merchandise trade and foreign investments by different countries and regions especially over the last few decades. This trend is bound to continue. Europe is stagnant and recovering slowly. Japan is still mired in near-
  5. 5. The Partnership Summit 2015 4 Theme Paper recession. The US is recovering slowly but steadily and will take time to entrench a stable growth path. As a result, contribution of emerging-market economies to the global GDP and trade is fast increasing. Realizing the importance of globalization, India embarked on economic liberalisation in the 1990s, leading to significant rise in foreign investment, foreign technology and knowledge share. Large-scale computerization and change in India’s education outcomes helped grow its services, specially the ITeS to what it is today. Emerging Economies Advance Share in World GDP There has been a shift in the share of GDP by world’s major economies during the second half of the 20th century and first half of the 21st century. Realizing the speed and scale, WTO’s World Trade Report 2014 termed the rise of the developing world as one of the four major trends that have characterized the last decade. The report highlighted the rise of seven Asian economies including China, Hong Kong, Malaysia, Singapore, the Republic of Korea, Chinese Taipei, and Thailand in recent years. During 1980 to 2008, these economies have seen growth rate of 8% annually. However, the picture was different in the developed countries. The GDP growth of the US started slowing down to an annual rate of 2.4% since early 1970s. The scale and speed of development that Europe and Japan witnessed during 1950s and 1970s due to rapid GDP growth and rise in per capita income concluded for most of these countries by the 1990s. The annual GDP growth rate of Western Europe was 4.8% between 1950 and 1972 but came down to 2.1% during 1973 and 1998. It has further declined in the first decade of the 21st century. The future projections by various global institutions indicate a sharp rise of the emerging nations. According to the report ‘Global Development Horizons 2011 – Multipolarity: The New Global Economy by the World Bank, the fast pace of economic growth witnessed by six leading emerging economies including Brazil, China, India, Indonesia, South Korea, and Russia will collectively account for over half of global growth by 2025. The report says that America’s global share of GDP is expected
  6. 6. The Partnership Summit 2015 Theme Paper 5 to shrink from 25% in 2005 to 19% by 2025 and that of Europe will decline from 23% to 19%. On the other hand, China’s share of world GDP will increase from 7% in 2005 to about 16% by 2025. Source: World Bank China India Brazil Russian Federation Japan United States Euro area Other industrial Other emerging Source: World Bank China India Brazil Russian Federation Japan United States Euro area Other industrial Other emerging An OECD report called ‘Looking to 2060: A Global Vision of Long-term Growth’ projected annual global growth rate of 3% where emerging economies are expected to grow much faster than advanced countries which are expected to witness decelerating growth rates. The table below shows the percentage contribution to world GDP in both 2030 and 2060.
  7. 7. The Partnership Summit 2015 6 Theme Paper The combined GDP of the two largest emerging economies, China and India, will surpass that of the G7 economies and will exceed that of the entire current OECD membership by 2060. Moreover, India’s per capita income will see over seven-fold increase from its current level. While China will remain the fastest growing economy until 2020, both India and Indonesia will assume that role after that. Emerging Economies Scoring High on Trade The shift in global trade is also an important indicator of shift in global economic activity. Europe and America enjoyed leadership position in trade till the first half of 20th century. Japan, South Korea, Germany and China joined the league in the second half of 20th century following massive economic growth. Though the advanced economies continue to score high on global trade share, emerging economies are catching up and are substantially increasing their global trade share. Global trade saw exponential growth preceding the 2008-09 economic crisis. The US and European economies were hit hard by recession. This was reflected in the declining growth of global trade. According to WTO’s World Trade Report, global Source: OECD Economic Policy Papers No. 3
  8. 8. The Partnership Summit 2015 Theme Paper 7 merchandise trade growth was at 2.2% in 2013, nearly identical to the previous year’s growth of 2.3%. However, this yearly growth trend is substantially lower than the average merchandise trade growth of 5.3% recorded during 1993 to 2013. It was even lower than the 6.0% average annual growth rate achieved during the 20 years preceding the 2008 recession. World trade growth continues to be sluggish with a growth of 2.1% in the first quarter of 2014. While the outlook for global trade growth seems to be becoming brighter, there are however several downside risks. Slower recovery and falling demand in Japan, the US and Europe is leading to deceleration in global trade growth. There is a correlation between trade growth and GDP growth. Global trade growth rate has been significantly better than global GDP growth pace. According to WTO, while annual average world GDP growth was around 3% over the last decade, the world merchandise trade growth averaged just over 5% annual rate during the same period. Growth in the Volume of World Merchandise Trade and GDP, 2005-15a: Source: WTO
  9. 9. The Partnership Summit 2015 8 Theme Paper The future global trade also looks brighter for emerging economies. The Global Connections Report published by HSBC in October 2013 covering 23 countries showed how the participation of emerging economies in global trade could rescue and balance global growth as the share of advanced economies declines. According to the report, as barriers to trade are removed by countries and regions realizing the need of greater transparency and support to boost trade, the global merchandise trade is projected to grow at 8% per annum till 2030, outpacing the world GDP growth rate. As emerging countries are stepping up investment to strengthen their manufacturing capacity and infrastructure development, trade in infrastructure-related goods is expected to increase to 54% of total goods exports by 2030, from 45% in 2013. India’s imports of infrastructure-related goods will increase from 67% in 2013 to 71% by 2030. According to the same report, India will overtake the US by 2020 to be the largest importer of intermediate goods for infrastructure development. While China will remain the largest exporter of both types of infrastructure goods, India will become the third-largest exporter of intermediate goods by 2030. Change in World Market Share Source: HSBC Global Connections Report, October 2013
  10. 10. The Partnership Summit 2015 Theme Paper 9 Emerging Markets Attracting More Investment Foreign investment and technology transfer are two critical priorities for growth especially for emerging economies. Foreign Direct Invest (FDI) has close proximity to GDP growth and merchandise trade. The rapid growth in emerging nations is often due to free and rapid flow of capital and technology. Moreover, FDI flow has positive correlation with economic growth. While high flow of investments boost economic activities and thus economic growth, nations with higher GDP growth and more liberal foreign trade policy attract higher FDI. The flow of foreign investments has seen gradual rise over the last decade barring the disruptions due to recessionary pressure first in 2003 and then in 2008 due to recessionary pressure. This led to rapid economic growth and productivity rise. The global FDI touched $1,400 billion in 2000 before it fell by 60% in 2003 following the recession. FDI saw a peak in 2007 when it crossed $2 trillion line but fell by 45% in 2009 following another recession. Though things started slowly falling in shape by 2014, previous trends have largely continued with some evidences of weakening in outward investments. OECD figures show that global FDI flows fell in the first quarter of 2014 before rebounding to about $325 billion in the second quarter. In Europe, the outward investment in the first quarter of 2014 was $6 billion only due to a very large transaction in which Vodafone of the UK sold its interest in Verizon Wireless to Verizon Communications of the US for a reported $130 billion. It has increased to $20 billion in the 2nd quarter of 2014. This compares poorly to combined flow of about $92 billion in the 3rd and 4th quarters in 2013. On the other hand, inward investment went up to $152 billion compared to $114 billion in the first half of 2013. Outward FDI in the US was $143 billion in the first half of 2014, substantially lower than the $193 billion recorded in the first half of 2013. Inward investment in the 2nd quarter of 2014 was $64 billion compared to $57 billion in the 3rd quarter and $72 billion in the 4th quarter of 2013. In India, FDI inflows from April, 2014 to September, 2014 reached $21.5 billion as against $36 billion during full year of 2013-14. FDI into China reached $106.24 billion, up by 0.7% from January till November, 2014 while the ODI investment touched $89.8 billion during the same period.
  11. 11. The Partnership Summit 2015 10 Theme Paper It is quite difficult to draw a direct comparison of FDI flows across countries as different countries follow different FDI measures. Keeping that aside, the US, Germany, Japan, Switzerland, and China remain the top sources of direct investment and the US, China, the UK, Brazil, and Canada continue to be the top destinations. There are strong linkages between GDP, trade and investment flows. Increase in foreign investment leads to higher GDP growth and higher GDP growth can attract more FDI. Increase in investment flow also means greater chance to increase share in global trade and vice-versa. Increase in trade often becomes an engine for GDP growth. Though high-technology remains the preserve predominantly of developed nations, the above analysis proves that there has been a notable shift in global share of GDP, merchandise trade and flows of investment among major countries. Europe, Japan, and the US along with other OECD economies remain leading contributors in all three areas. But recession has hit these economies hard. During the last two recessions in 2003 and 2009, the robust economic growth of China, India, Singapore, Russia, Brazil, South Africa and Hong Kong balanced and supported global growth. These developments are promoting the efforts of countries and global institutions to share resources for global growth and development. They are thus calling for partnerships for ‘Shared New Realities’. Global FDI Flows From 1999 to 2013 (USD billion) Source: OECD and IMF. Data for 1999 to 2012 can be retrieved from OECD International Investment Statistics database.
  12. 12. The Partnership Summit 2015 Theme Paper 11 3. Partnerships for Shared New Realities Under the theme of partnerships for ‘Shared New Realities’, both the advanced and emerging economies are looking for new ways to collaborate in order to achieve common growth. Individual or isolated growth is no longer feasible. The last few decades have seen some changes. Firstly, the world is no longer dependent on the growth of advanced economies. Secondly, there is conclusive evidence that isolation and restrictive trade policies will not help to bring about growth and development. Thirdly, collaborations and open policies adopted by emerging economies lately are resulting in robust economic growth. This increasing economic integration among developed and developing economies is strengthening the need to share common concerns and resources and develop shared goals. The first decade of the 21st century saw remarkable progress towards collaborations for shared new realities. Three important developments are testimony to this fact. Firstly, the world agreed to replace the G-8 with a more participative G20 forum to discuss and coordinate economic policies and conduct dialogue on global challenges. This was a response to the 2007-2009 financial crisis and recognition of increasing role of key emerging economies. The comprehensive 2014 G20 Brisbane Action Plan further re-defined the role of the forum. Secondly, the WTO has attained a new lease of life this year. With India and the US agreeing on food stockpiling, full and prompt implementation of WTO Trade Facilitation Agreement struck in Bali last year has made progress. By agreeing to implement TFA, WTO re-established itself as the single stage platform for world trade dispute resolutions.
  13. 13. The Partnership Summit 2015 12 Theme Paper Third, the unmatched popularity and widespread acceptance of the UN Millennium Development Goals (MDGs) to fight against world’s common challenges is a positive example of global collaboration. G-20 Agenda for Shared Development The reshaping of G-20 has been the biggest development towards a multipolar world in the 21st century. The 2014 G20 Brisbane Action Plan proved its commitments towards ‘Shared New Realities’. It has prioritized agendas that matter not only to the member countries but also to the Least Developed Countries (LDCs). Some of the areas/sectors and pertinent commitments G-20 adopted at the Brisbane summit are listed below. Financing Growth To lift the G20’s GDP by at least 2.1% by 2018 - equivalent of adding $2 trillion• to global output Committed to support recovery and address deflationary pressures when• needed Ensure work on infrastructure benefits low-income countries• To take strong practical measures to reduce the global average cost of transferring• remittances to 5% and to enhance financial inclusion Financial Stability Board (FSB) proposal - requiring global systemically important• banks to hold additional loss absorbing capacity that would further protect taxpayers if these banks fail Increased representation of emerging economies on the FSB and other actions• to maintain its effectiveness. Trade: Reforms to facilitate trade by lowering costs, streamlining customs procedures,• reducing regulatory burdens and strengthening trade-enabling services
  14. 14. The Partnership Summit 2015 Theme Paper 13 To ensure our bilateral, regional and plurilateral agreements complement one• another, are transparent and contribute to a stronger multilateral trading system under WTO rules. Commit to implement all elements of the Bali package and to swiftly define• a WTO work programme on the remaining issues of the Doha Development Agenda to get negotiations back on track. Continue to provide aid-for-trade to developing countries in need of• assistance Begin to exchange information automatically among countries by 2017 or end-• 2018, subject to completing necessary legislative procedures Infrastructure Global Infrastructure Initiative - a multi-year work programme to lift quality public• and private infrastructure investment The G20 Food Security and Nutrition Framework will strengthen growth by lifting• investment in food systems Human Capital Reduce the gender participation gap by 25% by 2025 and to bring 100 million• women into the work force in G-20 countries Reduce youth unemployment - investments in apprenticeships, education• and training, and incentives for hiring young people and encouraging entrepreneurship Address informality, structural and long-term unemployment by strengthening• labour markets and having appropriate social protection systems. Improve workplace safety and health. Anti-Corruption Endorse the 2015-16 G20 Anti-Corruption Action Plan that includes building• cooperation and networks, enhance mutual legal assistance, recovery of the proceeds of corruption and denial of safe haven to corrupt officials. Commit to improve the transparency of the public and private sectors• by implementing the G20 High-Level Principles on Beneficial Ownership Transparency.
  15. 15. The Partnership Summit 2015 14 Theme Paper Taxation Actions to ensure fairness of the international tax system and to secure countries’• revenue bases. Committed to finalize the G20/OECD Base Erosion and Profit Shifting (BEPS)• Action Plan work in 2015 To prevent cross-border tax evasion, G-20 endorses the global Common Reporting• Standard for the automatic exchange of tax information (AEOI) on a reciprocal basis Will work with member countries to build their tax administration capacity and• implement the Automatic Exchange Of Tax Information AEOI of developing countries Energy Climate Change Endorse the G20 Principles on Energy Collaboration. Energy ministers to meet• and report in 2015 on options to take this work forward. Action Plan for Voluntary Collaboration on Energy Efficiency, including new work• on the efficiency and emissions performance of vehicles, particularly heavy duty vehicles; networked devices; buildings; industrial processes; and electricity generation; and on financing for energy efficiency. Commitment to rationalise and phase out inefficient fossil fuel subsidies that• encourage wasteful consumption. Encourage parties that are ready to communicate their intended nationally• determined contributions well in advance of COP21 (by the first quarter of 2015 for those parties ready to do so). During its Chairmanship of the G20 in 2015, Turkey has stated its intention to implement the 2014 Brisbane commitments with a special focus on Infrastructure, Food Security (sustainable food systems, food losses and waste), Financial Inclusion and Remittances. While 2014 agenda was development, Turkey will aim to cover other crucial areas to ensure inclusiveness in its approach. It will also aim to reach out to non-G20 countries to communicate that the work of the G20 is relevant for strong, sustainable and balanced growth for the world economy. While G-20 growth strategy is expected to boost non-G20 GDP by over 0.5% by 2018, Turkey will seek to conduct an impact assessment survey of ‘the implementation of
  16. 16. The Partnership Summit 2015 Theme Paper 15 2.1% collective growth on low income developing countries’. In order to promote private sector engagement and inclusiveness in business, Turkey will attempt to create G-20 Inclusive Business Principles/Guidelines. Focus areas will include increasing awareness of successful private sector engagement in development, local procurement and distribution, affordable products/services, training workers, access to loans/finance and public-private partnership principles. UN Global Development Agendas Beyond 2015 In 2000, the UN developed eight international development goals popularly known as Millennium Development Goals (MDG) at the Millennium Summit and decided that by 2015,the world would attempt: To eradicate extreme poverty and hunger1. To achieve universal primary education2. To promote gender equality and empower women3. To reduce child mortality4. To improve maternal health5. To combat HIV/AIDS, malaria, and other diseases6. To ensure environmental sustainability7. To develop a global partnership for development8. The MDG goals have a full year to go but the world has made commendable progress in the respective areas. This commitment of the UN has helped to create massive awareness in the society. Moreover, this helped non-governmental organisations (NGOs) to streamline their priorities. It also motivated corporates and other non- government bodies to dedicate more funds to support the cause. As a result, global poverty has halved ahead of the 2015 timeframe. About 90% of children in developing regions now enjoy primary education with substantial fall in gender disparities. An estimated 3.3 million deaths from malaria were averted between 2000 and 2012 due to progress in medical interventions. The likelihood of a child dying before age five has been reduced by 50% over the last two decades which means that about 17,000 children are saved every day.
  17. 17. The Partnership Summit 2015 16 Theme Paper India’s achievement in respect of the MDGs is mixed. India ranks well in some indicators including arresting poverty target, Net Enrolment Ratio in primary education, sustainable access to an improved water sources, the spread of HIV/ Aids, Malaria and TB. The all-India Poverty Head Count Ratio (percentage below the national poverty line) has declined by 15 percentage points from 37.2% in 2004-05 to 21.9% in 2011-12. In respect of some indicators, India is expected to reach close to the target level by 2015 in sex ratio of girls to boys in schools. At an annual reduction by 3 percentage points in the Under Five Mortality Rate during the last 3-4 years, India is expected to reach close to the target of 42 per 1000 live births by 2015 from its 52 per 000’ live births in 2012. The concerned areas are share of women in key decision making platforms. Keeping in mind the success achieved in MDGs, the Secretary-General constituted a 27 member UN System Task Team to design Global Development agendas beyond 2015. The Secretary-General has indicated to propose six agendas at the special summit on sustainable development to take place in September 2015. They include (a) Dignity: To end poverty and fight inequality; (b) People: To ensure healthy lives, knowledge and the inclusion of women and children; (c) Prosperity: To grow a strong, inclusive and transformative economy; (d) Planet: To protect our ecosystems for all societies and our children; (e) Justice: To promote safe and peaceful societies and strong institutions; and (f) Partnership: To catalyse global solidarity for sustainable development. This integrated set of six priorities is provided to help frame and reinforce the sustainable development agenda beyond 2015. The change of priorities proves that the approach beyond 2015 is progressive in nature. Initial MDG goals were preventive. The new agendas are moving towards development for a world of prosperity, equity, freedom, dignity and peace. The UN now aims to redesign its development agendas beyond 2015. The UN System Task Team is conducting a survey called My World Survey which has 14 priorities in its list: A good education¾¾ Better health¾¾
  18. 18. The Partnership Summit 2015 Theme Paper 17 Better job opportunities¾¾ An open and responsive government¾¾ Affordable and nutritious food¾¾ Protection against crime and violence¾¾ Access to clean water and sanitation¾¾ Support for people who can’t work¾¾ Equality between men and women¾¾ Better transport and roads¾¾ Reliable energy at home¾¾ Freedom from discrimination and persecution¾¾ Political freedoms¾¾ Protecting forests, rivers and oceans¾¾ Phone and internet access¾¾ Action taken on climate change¾¾ The survey asks participants to vote top six priorities according to them. Based on this survey and recommendations from the task force, it will set its new priorities beyond 2015. The change of priorities proves that the approach beyond 2015 is progressive in nature. Initial MDG goals were preventive. The progressive nature of the new agendas also proves its success over the present MDGs and moving ahead towards development agendas for a world of prosperity, equity, freedom, dignity and peace. WTO Towards a Multilateral Trading System The Uruguay Round and its successful culmination in formation of a new global trade body called World Trade Organisation (WTO) in 1995 raised a new ray of hope for large number of poor and small countries, who were never active participants in multilateral trading system. Their optimism got further boost when WTO members launched a new Doha round of trade negotiations with an explicit mandate to address the development concerns of developing and poor countries. However, their hope
  19. 19. The Partnership Summit 2015 18 Theme Paper and expectations were short-lived as Doha round hit one roadblock after another, taking unusually long time to conclude. The Doha round addressed new agendas by slashing barriers and subsidies in farming, further trade liberalization to make globalization more inclusive and help the world’s poor, and more assistance to developing countries. However, Doha Round remained uncertain until the Bali Package was adopted in December 2013 by the Trade Ministers of WTO Members. This was practically the WTO’s first major success under the ongoing Doha round of trade negotiations. According to the United Nations Conference on Trade and Development (UNCTAD), the average cross-border customs transaction involves 20-30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60–70% of all data at least once. This is not only burdensome but also costly. The cost of complying with customs formalities often exceeds in many instances the cost of duties. That is why global institutions are calling for harmonization of documents, streamlining of customs procedures (such as pre-arrival clearance), and transparent flow of information on what tariffs apply to specific products or rules of procedure. Some recent developments brought the WTO closer to success. The WTO Trade Facilitation Agreement (TFA) protocol was finally adopted following India and the US resolved their disagreements on food security issues in November, 2014. Once two-thirds of the WTO’s Members ratify the protocol, TFA will come into force, although the path may be complex. Trade ministers at the Ninth African Union Conference of Trade Ministers held in Addis Ababa, Ethiopia in December, 2014 reiterated the concerns of LDCs. The Ministers requested WTO to prioritize work on issues regarding duty-free and quota-free market access, Preferential rules of origin and Cotton. They sought clarity on waiver decisions by developed countries and indicate sectors and modes of supply where they intend to provide preferential treatment to LDC services and service suppliers. Though full implementation has a long way to go, the incremental steps forward are helping WTO to create a conducive environment towards a multilateral trading system by promoting multilateral trade and removing tariff and non-tariff barriers. All these developments are also indications of the journey towards ‘Shared New Realities’.
  20. 20. The Partnership Summit 2015 Theme Paper 19 4.  Rise of Regional Economic Integration Today regional economic collaborations are taking economic relations to new heights. Regions are making regional trading blocs for mutual gains. While bilateral relations remain relevant for most countries, regional economic blocs like NAFTA, EU, SAARC, ASEAN, etc. have enhanced economic activities exponentially and emerged as bigger and better decision making platforms. The concern of smaller member countries regarding economic dominance by larger economies was eclipsed by the rise of many successful blocs which benefited them equally. Transatlantic Trade and Investment Partnership (TTIP) is another proposed free trade agreement between Europe and the US expected to be finalized by the end of 2015. They together constitute 60% of world GDP, 33% of global trade in goods and 42% of world trade in services. While the current trade volume stands at $964 billion, Europe believes that if it is signed, the treaty would boost trade by as much as 50%. Even the present American foreign investment in Europe is three times of its investment in Asia. Likewise, the EU investment in the US is eight times more than its combined FDI in India and China. In addition, 12 countries on two sides of the Pacific Ocean comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam are in talks to create another gigantic and powerful trading bloc called the Trans Pacific Partnership (TPP). TPP represents 37.5% of world GDP ($28 trillion), 11.2% of the world population and a quarter of world trade. The Regional Comprehensive Economic Partnership (RCEP) draws equal world attention. With
  21. 21. The Partnership Summit 2015 20 Theme Paper ASEAN at the core, RCEP brings Australia, China, Japan, Korea, India and New Zealand under one large trading bloc. As the agreement is scheduled to be signed by 2015, it would bring 45% of the world’s population and $21.3 trillion global GDP in a single market.
  22. 22. The Partnership Summit 2015 Theme Paper 21 5.  How Should India See the Rise of Trading Blocs India certainly cannot underestimate or overlook the rise of these and dozen other regional economic collaborations. It needs to take a considered view on the implications of the emergence of these blocs. It should adopt a balanced approach and calibrated strategy to expand economic relations with each of these blocs. Each regional bloc promises to bring unique advantages for India. India’s economic relations with ASEAN need continued special focus after the implementation of the India-ASEAN Trade in Goods Agreement and the upcoming agreements on services trade and investments. India’s trade with ASEAN has been growing at a steady pace over the past couple of years. India’s export to the ASEAN region witnessed a Compound Annual Growth Rate (CAGR) of 13% during 2009-10 and 2013-14. India’s imports witnessed a CAGR of 10% during the same period. 2010-11 stands out in particular as both exports and imports witnessed a massive jump. This can probably be attributed to the implementation of the India – ASEAN FTA. India needs to pay special attention at its trade relations with the RCEP. In spite of the fact that India is a member country of RCEP, India has a trade deficit of a whopping $63 billion which certainly raises some serious concerns. While the Indian imports are at $125 billion (28% of total Indian imports), its exports remain lower at $62 billion (20% of its total export).
  23. 23. The Partnership Summit 2015 22 Theme Paper For the first time, RCEP will bring two largest emerging economies India and China into one trading bloc. For a very long time, Indian exporters are facing Chinese protectionist policies. RCEP would push towards lowering trade barriers which would have positive impact on the $35 billion trade deficit exists between India and China. While Chinese firms enjoy access to Indian markets, Indian firms still don’t have the right push to venture Chinese markets. Coming under one FTA umbrella can boost it. India already has trade agreements with many of these blocs as well as member countries. India has agreements with ASEAN, Japan and Korea. It is in negotiations with Australia for an FTA. India’s foresighted approach would not only give it access to the vast global market for its products and services but also provide balanced and diverse import options apart from access to technology and investment. India’s trade with TPP member countries totaled $148 billion during the period of 2013-2014 which comprises India’s exports worth $76 billion (24% of cumulative exports) and imports at $72 billion (16% of the cumulative imports). TTIP will remain a special trading partner as its export is heavily dependent on services export. India’s trade with TTIP touched $163 billion. While India’s export value reached $91 billion (about 29% of total exports) and import at $72 billion (16% of total import). To be able to leverage forthcoming mega-trade agreements, India needs to initiate massive economic reforms internally. Unless the economy is ready to compete with the external business environment, India would not be able to meet its growth potential to the fullest. India should relentlessly strive for manufacturing competitiveness by undertaking crucial reforms like infrastructure development, internal tax reform, boosting entrepreneurship, reducing transaction costs, skill development programmes and others.
  24. 24. The Partnership Summit 2015 Theme Paper 23 6.  State of the Indian Economy The strong government has ignited hopes and excitements. Investors have driven markets to new highs, believing in the compelling narrative of the India growth story. In the last six months, the government is making a concerted effort for enhancing the attractiveness of India as an investment destination. Efforts have been made to improve the ease of doing business in India by measures such as digitization of approvals and clearances, eliminating unnecessary laws and regulations and making our policies transparent and predictable. Several policy changes have been proposed. Restrictions on foreign direct investment have been eased in key areas like railways, construction, defence and insurance. The idea is to expand the engagement of overseas investors in the Indian economy. Problems that had emerged in the fuel sector are being sorted out on an urgent basis so that non-availability of power does not become a constraint to growth. The government is following a multi-pronged strategy of improving access to fuel supply, improving the bankability of projects in the power sector and improving the electricity mix with greater focus on renewable energy sources. Statistics provide a positive economic outlook. Despite the GDP slowing down to 5.3% in the second quarter of the current fiscal (2QFY15) from 5.7% in the previous quarter, the first-half GDP figure of 5.5% did seem to indicate that growth has sustainably bottomed out. Deceleration in the second quarter was on expected lines, and growth could have slipped further if it was not for surprisingly healthy performances by agriculture and government spending components. The two key
  25. 25. The Partnership Summit 2015 24 Theme Paper enablers of growth, viz, industrial output and investment spending, however, continued to disappoint. The H1 growth at 5.5% has placed the economy on track to achieve our expectation of full year growth of 5.5-6.0% given that the second half is likely to be better. However, the mix in growth needs to change in favour of investments going ahead in order to move to a sustained path of higher growth trajectory. After remaining subdued for the last two months, industrial output growth accelerated to 2.5% in September 2014 from 0.4 and 0.5% in July and August 2014 respectively. After contracting for two consecutive months, manufacturing output improved to 2.5% in September 2014. Capital goods output too moved to the positive territory after languishing in the red for the last two months. On a cumulative basis, industrial output grew by 2.8% in the first half of the current fiscal as compared to 0.5% in the same period last year. The sequential momentum as indicated by the movement in the seasonally-adjusted month-on-month series too showed that industrial output growth improved in September 2014 (from -1.0% in August 2014 to 2.0% in September 2014). WPI based inflation moderated sharply to 5 year low of 1.8% in October 2014 from 2.4% in the previous month. The fall in WPI inflation was attributable to all round moderation in all its sub sectors. CPI inflation too fell to 5.5% in October 2014 from GDP at factor cost (y-o-y %) Source: CSO
  26. 26. The Partnership Summit 2015 Theme Paper 25 6.5% last month driven by a fall in food inflation (fell to 5.6% from 7.7% in September 2014). Core CPI inflation remained broadly unchanged – falling slightly from 6.0% last month to 5.9% in October 2014. This is the lowest core inflation recorded since the beginning of the new CPI series. A significant decline in crude oil prices globally contributed to the downward price pressures in transport and communication and fuel CPI inflation. The moderation in both WPI and CPI inflation would give RBI the necessary legroom to cut interest rates in its forthcoming monetary policy in order to spur demand conditions in the economy. The fiscal deficit in the first seven months of the current fiscal (April-October) stood at Rs 4.75 lakh crore which translates into 89.6% of the budgeted figure for the entire financial year. The jump in fiscal deficit was underpinned by rise in expenditure growth and contraction in revenue growth. However on a monthly basis, fiscal deficit declined by 19.4% to Rs.369.25 billion in October 2014 as compared to the same month a year ago. This was the lowest level of the deficit in the last three months. Both, expenditure and non-debt receipts declined on a y-o-y basis in October 2014. However, a sharper fall in expenditure vis-a-vis non-debt receipts led to the contraction in the fiscal deficit. The government would need to tighten its purse strings and boost revenue growth in order to meet the fiscal deficit target for 2014-15. To be sure, in order to lower the fiscal deficit to 4.1% of GDP in 2014-15, the government is betting on both revenue and expenditure growth of 12.9% as compared to the revised estimates for 2013-14. In order to achieve the revenue growth target, tax revenues, which form around 80% of total revenues, need to prop up. Moreover, the nature of expenditure compression needs to be kept in mind as trimming of capital expenditure will further slow down the economic recovery process. The state of Indian Economy can also be assessed by the CII’s Business Confidence Index (CII-BCI). Indicating a sharp improvement for the second consecutive quarter, the CII-BCI for July-Sept quarter FY15 has shot up to 57.4, up from 53.7 during April-June quarter and 49.9 in Jan-March quarter this year. During the same quarter last fiscal, the index had touched the all-time low value of 45.7. A score above 50 indicates positive confidence while a score above 75 would indicate strong positive confidence. On the contrary, a score of less than 50 indicates a weak confidence index.
  27. 27. The Partnership Summit 2015 26 Theme Paper Continuing improvement in the index second time in a row can mainly by attributed to the determination shown by the new government at the Centre to provide an impetus to growth along with reviving the ‘feel good’ factor. The positive developments like pick up in global economic recovery, reduction in current account deficit, buoyant foreign capital inflows, stabilising rupee and moderating inflation have also been supporting the upward march in business confidence index. In order to capitalize on the early signs of improving business sentiments, it is imperative that this momentum is maintained going forward. The 88th Business Outlook Survey is based on responses from over 150 industry members. Majority of the respondents (44 per cent) belong to large-scale sector, while medium scale companies comprise another 12 per cent. Around 38 per cent and 6 per cent respectively are from the small-scale and micro firms. Further, 60 per cent of the respondents are from manufacturing and 36 per cent are from the services sector. The respondents in the survey were asked to provide a view on the performance of their firm, sector and the economy based on their perceptions for the previous and current quarter. The CII-BCI is then constructed as a weighted average of the Current Situations Index (CSI) and the Expectation Index (EI). The Finance Minister has assured that the government has just begun a long journey of reforms. This would involve many areas including land, labour and taxation which have emerged as key bottlenecks in the process of industrialization. Finding solutions that meet the expectations of all sections of society is a challenge, for example in areas such as land acquisition, mining, and others. Yet, this government has taken up the challenge and encouraged state governments to go ahead with reforms. It is encouraging that these issues are being addressed for the first time. Although progress may seem to be slow at times, the direction remains constructive. The forthcoming Union Budget is likely to be the next stepping stone for policy changes including an overhaul of the taxation structure and restructuring of public sector units. The indirect tax structure in India is fragmented across states and needs to be unified under a single Goods and Services Tax (GST). Under direct taxes, the government is working to make its transfer pricing regime more transparent. In the infrastructure sector, plans have been revived to build new ports and airports, lay networks of roads and gas pipelines and construct 100 new smart cities. One
  28. 28. The Partnership Summit 2015 Theme Paper 27 major project being developed by the Government of India is the Delhi-Mumbai Industrial Corridor (DMIC). It is being developed as a global investment and manufacturing destination supported by world class infrastructure and enabling policy framework. Greater connectivity not only through roads and highways but also through the Internet and broadband makes it possible to develop newer markets. The Jan Dhan Yojana, which has been launched in mission mode to provide bank accounts to the unbanked is expected to improve access to credit, insurance and pension facilities. A major initiative to improve India’s competitiveness is the Make in India program launched by the Prime Minister by which he has invited global and domestic manufacturers to set up facilities in India to service both the domestic and export markets. India has a vast pool of labour that can be employed in the manufacturing sector, which has a high propensity to absorb semi-skilled labour. It is a young country with over 60% of the population in the working age group of 15-59 years. Between now and 2025, India will have to create 220-250 million jobs if it has to exploit its demographic dividend. A key advantage for India is that it remains competitive in terms of cost of doing business. Multinationals in a range of sectors including consumer products, automobiles, capital goods, IT and IT enabled services, healthcare and pharmaceuticals, banking and financial services have made India their preferred destination. A large pool of skilled professionals is available in India at relatively lower cost. For example, it is estimated that costs in the country’s IT services sector is approximately 3-4 times less than in the US. Similarly, in the manufacturing sector, businesses gain from the easy availability of raw materials and the relatively inexpensive workforce, the ingredients for a sound manufacturing ecosystem. The government is creating manufacturing zones with quality infrastructure and a facilitative regulatory regime. With 100% FDI in manufacturing, global players such as Toyota, Ericsson and Samsung are setting up their manufacturing facilities in India. Additionally as India becomes more integrated with the rest of the world with each passing year, international trade has become very important today. It accounts for over 40% of India’s GDP compared to about 20% ten years ago. Hence, strengthening
  29. 29. The Partnership Summit 2015 28 Theme Paper trade and commerce with every part of the world is important to us. In particular, greater integration with the East Asian region is imperative for delivering the growth that we seek.
  30. 30. The Partnership Summit 2015 Theme Paper 29 7.  Domestic Reforms Would Take India Forward Greater participation in global trade is pertinent for India’s robust economic growth. Major economies of the world have been adopting manufacturing led growth as manufacturing can create large-scale jobs and promote inclusive growth. The historical electoral mandate of the present government raised some hopes. In his Independence Day Speech, Prime Minister Modi announced a renewed focus on manufacturing. “Come, make in India” was his clarion call. India has the capacity to manufacture a diverse range of products such as electricals, chemicals, automobiles, processed food products, pharmaceuticals, paper, satellites and submarines amongst a whole host of other products. For years, Indian manufacturing has been awaiting a major boost. Our share of global manufacturing has grown from 0.9% to 2.0% during over last few decades while our GDP share has grown from 1.2% to 2.5%. Despite this encouraging growth, the relative share of manufacturing in the Indian economy has remained unchanged, dashing hopes of an economy based on manufacturing-led growth. In this context, the recently announced ‘Make in India’ policy by the new government aims to push manufacturing growth to the next level. India saw its foreign trade expand remarkably in the past decade. Although, the pace of exports growth was punctuated twice by sharp slowdown in world economy during 2008-09 and during the last two fiscal years, India’s trade prospects have continued to grow over time. In fiscal year 2003-04, India’s exports were worth $64.0 billion. By 2013-14, they more than quadrupled to $312.6 billion. In the current
  31. 31. The Partnership Summit 2015 30 Theme Paper fiscal, cumulative exports have reached $189.8 billion in the first seven months of the fiscal (April-October 2014) as compared to $181.2 billion in the same period last year, thus registering a growth of 4.7%. Going forward, the government’s new foreign trade policy (2014-19) to rev up exports is expected to be put in place by early next year and will have a strong thrust on manufacturing to bring it in sync with the Prime Minister Narendra Modi’s ‘Make in India’ goal. India sets an ambitious target that its manufacturing sector contribution to GDP should reach 25% by 2030, create 10 million jobs each year and to have 5.2-6.1% of world merchandise trade share. To achieve this target, manufacturing sector needs 11% growth rate per year. This is certainly not an easy task and India would need to undertake domestic reforms as well as greatly strengthen its collaboration with countries across the globe to meet the target. Among the major reforms initiated by the new Government are a slew of new campaigns and missions including: Make in India to increase manufacturing presence in the GDP with special focus• on attracting FDI Digital India for delivery of major government services online and to extend the• reach of the digital platform to each village Prime Minister’s Jan Dhan Yojana to enhance financial inclusion• Swachh Bharat Abhiyan to inculcate the systems and strengthen institutions• towards a clean India Smart City project to create 100 cities with smart infrastructure• Clean Energy Mission to expand India’s renewable energy mix• Shram Suvidha to facilitate labour reforms and administration• Skill development through a new Ministry of Skill Development and• Entrepreneurship
  32. 32. The Partnership Summit 2015 Theme Paper 31 Make In India – An Exciting New Initiative The Indian manufacturing sector achieved high rates of growth since the turn of century at close to 8.2 per cent annually till 2011-12. Since then, India has experienced two years of slow growth, and this year, we are seeing tentative recovery. However, manufacturing has emerged as the new buzzword in India today, after the launch of the seminal Make in India campaign launched by Prime Minister Modi on 25th September. While manufacturing has always received high policy attention, a new spin has been given to the endeavor by the new government. There are several key pillars of the Make in India campaign. The first is fast-track movement on industrial corridors, National Investment and Manufacturing Zones or NIMZ and industrial parks which are expected to provide a complete and holistic ecosystem for manufacturing. A special authority for industrial corridors is being established. The identified industrial corridors include Delhi-Mumbai, Chennai-Bengaluru, Bengaluru-Mumbai, Vishakapatnam-Chennai and Kolkata-Amritsar. 17 NIMZ are on the drawing board, and a renewed effort has been made by the PM personally to attract investments, particularly FDI, into these dedicated manufacturing regions. These industrial corridors will be linked to ports for rapid evacuation of goods to designated markets. For this, the modalities for port development and railway connectivity are also being addressed. The second is to considerably improve and facilitate the business environment. The architecture of procedures and regulations is being addressed to eliminate outdated laws and regulations, shorten processes and place them online, and simplify forms and use them for multiple purposes. The e-Biz platform launched shortly to bring many procedures under the digital medium. Industrial Entrepreneur Memorandum and Industrial Licenses for particular areas have been relaxed. The Digital India mission would be synchronized with the Ease of Doing Business indicators for industry so that a single window online platform is created. The e-Biz digital platform is already underway, and the government has commenced the task
  33. 33. The Partnership Summit 2015 32 Theme Paper of placing forms and applications online. For example, Industrial Entrepreneurship Memorandum forms are accessible 24x7. The third pillar is to attract FDI as a key participant in the manufacturing process. Enhancing FDI limits in the defense sector and some segments of railways is a major step forward. FDI is also expected to be a significant contributor to the Smart City initiative which would be part of the manufacturing endeavor and for this, FDI in real estate has been liberalized. Four, labour reforms, skill development and research and development are also part of this mission. The labour inspection system for SMEs has been rationalized to avoid stressful inspections. Under the skill development endeavor, a new ministry is taking charge of the mission and is addressing issues such as curriculum development and upgradation of industrial training facilities. In addition, the government has announced several new initiatives that present many new opportunities for global businesses. The Swachh Bharat Abhiyaan for sanitation and cleanliness offers potential for sewerage and waste management equipment as well as construction equipment. The Clean Energy mission with a special focus on renewable energy and energy efficiency opens the doorway to manufacturing inputs and green goods. The water conservation program under the Clean Ganga campaign likewise will be scaled up and require many more manufactured items. Digital India promises to bring transparency and good governance. It also aims to connect India by high-speed internet networks. Broadband connectivity will be used to revolutionise health and education especially the rural India by broadband enabled education in rural areas and telemedicine for the poor. A research paper by McKinsey shows that Digital India could boost India’s GDP up to $1 trillion by 2025. The other social reform initiative called ‘Swachh Bharat Abhiyan’ also aims to improve cleanliness of the country and boost tourism. PM Modi’s ambitious project of financial inclusion is called the Pradhan Mantri Jan Dhan Yojana (PMJDY) which provides zero balance bank account to Indian households with no bank accounts. According to government figures, 85 million accounts have already been opened under this scheme, which also offers credit facilities and health insurance, and the target has been enhanced to 100 million by end of January, 2015.
  34. 34. The Partnership Summit 2015 Theme Paper 33 A landmark reform has recently taken place in the introduction of the Goods and Services Tax (GST) to replace the VAT system of indirect taxes. After many years of deliberations, the central and state governments have agreed on the model of the tax that would retain the federal character of the country while also make it a single market. The relevant Constitutional Amendment Bill was introduced in Parliament in December 2014, kick starting the process of introducing GST at central and state levels to subsume most other indirect taxes, reduce administrative procedures at state borders, and simplify tax payment. Widely touted as the single most important reform measure in the last decade, GST represents a huge success for the new Government and is expected to inject a boost of 1.5% points to India’s GDP growth rate. Path for Economic Reforms However, to make India a manufacturing hub and economic powerhouse, it has to initiate systematic reforms in varied sectors. Some of the areas that Government has focused attention on include: Labour Reforms: The launch of the Shram Suvidha portal has been a key initiative to start the procedure of labour reforms. This portal aims to facilitate filing of labour returns and make labour inspection more transparent, particularly for smaller enterprises. In addition, the government needs to introduce a dialogue on labour reforms expeditiously. Other reform areas include simplification of procedures, flexible working shift for women, overtime work provisions, redefining small establishments and most importantly flexibility in engaging contract labour in the workplace. Focus should be given to improve productivity, easier compliance mechanism and incentivizing scale of production. Attract Investments: Separate strategies should be formulated to attract both domestic as well as foreign investors. Unless domestic investors show confidence investing in the manufacturing sector, foreign investors will remain speculative. Critical areas of reform concerns include taxation, competitive regulatory efficiency and promoting attractive zones for FDI. The Finance Minister has assured investors that the government is working towards an Indian tax system that is stable, simple, predictable and non-adversarial.
  35. 35. The Partnership Summit 2015 34 Theme Paper Ease of Doing Business: The Government has committed to elevating India’s ranking in the World Bank Doing Business Index from current 142 to 50 within three years and is addressing multiple areas to ensure this. Some areas that need attention are land acquisition, procedures for starting a business, payment of taxes and trading across borders. Infrastructure: It is perhaps the most important concern for India currently. India needs to aggressively build basic transport infrastructure – Railways, roadways and waterways. Energy should be made cost competitive. Government should encourage greater private sector participation in infrastructure development. Clear focus should be made over developing export-oriented infrastructure. New PPP projects should be implemented to accelerate construction of rail and road connectivity to ports. Ports are important centres for trade. Hence, enough attention should be paid over ease of port administration. Innovation Technology: RD investment is one of the key development areas. SMEs should be encouraged heavily to boost RD investment. Active participation of Indian SMEs is less than 10% of the total RD investment India should promote and Incentivize patent commercialization. A significant innovation of the ‘Make in India’ call by Prime Minister Narendra Modi, given on August 15, was the addition of ‘Zero Defect, Zero Effect’. This translates into a manufacturing mission that is high on quality as also environmentally sustainable. In fact, the two goals are complementary - a nation’s development is sustainable only when the producers of products and services deliver highest levels of quality, at lowest cost, most efficiently, with minimum environmental impact and most responsible use of resources. A range of areas need to be addressed to make industry competitive and quality-compliant. The use and adoption of proven and time-tested quality tools and techniques, green technologies, management systems, excellence models, fundamental concepts and innovative approaches, and coordinated and time-bound processes using a defined roadmap with clear outcomes will be some of strategies that Indian industry would need to deploy. Industry would need support in terms of training, consultancy and advisory services that would assist firms in adopting these proven methodologies. Multiple modes including awareness dissemination, personalized interventions, audits, assessments and cluster mode would be required to achieve the twin goals and build necessary internal capacities and capabilities for vibrant and sustainable enterprises.
  36. 36. The Partnership Summit 2015 Theme Paper 35 8.  Preparing for A New World This is an exciting time for India and an interesting period for the world as a whole, poised as it is on the cusp of a renewed thrust towards growth, development, trade and global partnerships. It is a certainty that India would play a prominent role on the global economic stage as a leading emerging economy, rich in talent and resources and willing to drive partnerships with all regions and countries of the world. Indeed, India’s own resurgent path to development opens up many new horizons for the world as 1.2 billion consumers and 500 million workers, two-thirds of them under the age of 35, enter more forcefully into the global platform. As India embarks on its new growth path, growing multilateral and multidimensional economic collaborations between nations and regions are not only bringing multiple benefits to the world but also redefining the Global Value Chains. This new era of globalization gave birth to the rise of multinational enterprises (MNEs). According to UNCTAD, there were just 7,000 MNEs in 1969. The number has gone up to 111,000 in 2013 (16 times increase). According to WTO, the newest wave of integrationist technologies like containerization, air freight, telecommunications and informatics is leading to end of the need to perform most manufacturing stages near one country to another. As a result, the cross-border-intra-firm trade between MNEs and their affiliates gained largest share in international trade in goods and services. Global reach of MNEs allows them to conduct different business activities like research, development, design, assembly, production of parts, marketing and branding activities in many different countries around the world. These global value chains are offering different opportunities to emerging economics.
  37. 37. The Partnership Summit 2015 36 Theme Paper Moreover, global economic collaborations also lead to technology and knowledge transfer. Research shows that more than two-thirds of growth in emerging markets arises from adopting technology, and acquiring knowledge from the advanced countries. The GDP per capita gap between the advanced and emerging economies reflects the gap in the technology levels, capital intensity, human capital and skills. Thus, emerging countries including India should adopt innovative approaches to harness available knowledge, technology and innovation. They will have to engage all stakeholders like the private sector, civil society, academia, government institutions and global institutions. As emerging countries assume a more defined role with time, the world will face new challenges to ensure sustainable shared development. According to OECD, education and productivity will be the main drivers of future growth. Thus, these should be the policy priorities worldwide. In this era of ‘Shared New Realities’, the world would also like to see an active engagement and collaboration with India and stimulate discussions among key stakeholders - political, institutional, business, media and academia - on the way forward by looking at the best strategies for both developed and developing economies to encourage and build new bridges which foster balanced and equitable growth.

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