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THE GIST of Editorial for UPSC Exams : 10 November 2019 (Opportunities for India in the Asian Century (Mint))

Opportunities for India in the Asian Century (Mint)

Mains Paper 2: International Relations
Prelims level: Not much
Mains level: Asian Century

Context

India is at an inflection point. Its recent period of significant growth—faster than the global average.

Slowdown in growth

India has stalled in the face of global headwinds against trade, volatile commodity markets, stagnant private investment, weaker domestic consumption and constrained government spending in the wake of recent fiscal and monetary reforms.

Potential in Asia

Asia is becoming the world’s powerhouse and economic center.
New research from the McKinsey Global Institute finds that Asia could generate more than half of the world’s GDP by 2040 as cross-border flows shift toward the region, which is rapidly integrating; with 60% of goods traded, 56% of greenfield foreign direct investment (FDI) and 74% of journeys by Asian air travelers taking place within the region.

Asian connectivity

This research identifies 4 distinct sub-Asias—diverse groups of economies with characteristics that complement each other, which are fast becoming increasingly interconnected.
As a result, dynamic new flows and networks are appearing, redefining globalization as we know it.
The new era will be one of regionalization, and Asia is taking a lead. Historically, India—and other countries in ‘Frontier Asia’ (Bangladesh, Sri Lanka, Kazakhstan, Uzbekistan, etc)—have had relatively low levels of integration when compared with the rest of the region; only around 31% of their flows are intra-regional.
Yet, how they now respond to these shifting flows, and the opportunities they present, could be key in defining and delivering its next chapter of growth.
Chinese President Xi Jinping’s recent meeting with Prime Minister Narendra Modi could catalyze accelerated economic collaboration between the two countries.

What India offers?

India offers key major ingredients to the broader Asian economy:
Services: It’s account for 53% of India’s GDP;
A young labour force (younger than China’s median age by around ten years);
New markets for the rest of the region.
Growth: Even factoring in the downturn, GDP in India is expected to grow at well above 5% for the coming period, and incremental consumption is expected to reach $2.4 trillion by 2030.

Adding the Asia focus: Manufacturing

Advanced Asian countries like China move up the economic development ladder, phasing out manufacturing in favour of a shift to R&D and more knowledge intensive manufacturing.
There is room for India to seize the baton and become a larger sourcing base for global supply chains.
The global sourcing value of mobile handsets is over $500 billion in scale, and India could aspire for a 15-20% share of this footprint.

What needs to be done?

Investments are needed to improve the logistical backbone supporting manufacturing, incentives are needed to encourage future investments in R&D, and large-scale innovation hubs need to be developed to move manufacturing to the next phase and help to capture the demand opportunity.
The recent move towards an attractive corporate taxation regime could provide the much-needed ignition to attract more investment for Make in India.
Capital flows and investments:
There are opportunities for India to benefit from the flows of capital and investments powering development as Asia integrates more closely.
‘Advanced Asia’ (Japan, South Korea, Singapore) and China have been huge contributors to the development of ‘Emerging Asia’ (small highly interconnected economies like Indonesia, Malaysia, Philippines, Thailand, Vietnam, etc), with China accounting for 42% of total Asian outbound FDI in 2013-17 and 43% and 61% of Emerging Asia’s imports and exports respectively.
India and China have a history of competition, thus flows between the two countries both in terms of trade and people are not as strong as with other countries across the region.

What needs to be done?

India is beginning to attract investment from firms across Asia—Softbank.
It has led several rounds of funding for Indian unicorns—more needs to be done to realize the potential opportunity of investment flows from other countries, and this may mean ‘looking East’.

Innovation

East Asia has emerged as a leading hub, rivalling the leading innovation hubs globally. East Asia has already gained pole position in driving innovation relating to key disruption themes such as electric mobility, 5G telecom, and renewable energy.
Nearly 65% of global patents stemmed from Asia between 2015 and 2017, derived from the 50 fastest rising innovation cities in Asia, with an opportunity for Indian firms to be a part of this Asia-wide innovation arc.

Growth:

A rapidly growing Asia is catapulting its major cities into leading consumption centres, that offers a ripe market opportunity for Indian businesses ranging from IT services, tourism services, generic pharmaceuticals, automotive components, agrochemicals, and so forth.
Just with China alone, India runs an over $50 billion of trade deficit, that could be narrowed down by targeting these export opportunities.
Our previous MGI research found that about 420 cities in emerging markets could generate 45% of global growth, many of them residing in Asia.

Conclusion

The Asian century is well and truly underway.
As globalization gives way to regionalism, and Asia takes a leading position, India could look to many of the opportunities arising out of the region’s rapid integration and shifting networks and flows to help drive its next chapter of growth.
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Prelims Questions:

Q.1) With reference to the ring time for calls fixed by TRAI, consider the following statements:
1. In a new regulation, the Telecom Authority of India (TRAI), has fixed the ring time for calls made to mobiles at 50 seconds, and those made to landlines at 90 seconds.
2. As per specifications by the International Telecommunication Union (ITU), the timer value for international calls or circuits is in the range of 1.5 minutes to 3 minutes.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2