India need to keep close watch on global developments: Survey

India will have to keep a close watch on political backlash against globalisation and also developments in China as both have implications on the domestic economy, the Economic Survey 2016-17 said today.
From India's perspective, it said, the political carrying capacity for globalisation is relevant not just for goods but also services. The world's service exports-GDP ratio is about 6.1 per cent.
"If India grows rapidly on the back of dynamic services exports, the world's service exports-GDP ratio will increase by 0.5 percentage points -- which would be a considerable proportion of global exports," the Survey said.
Put differently, India's services exports growth will test the world's globalisation carrying capacity in services.

"Responses could take not just the form of restrictions on labour mobility but also restrictions in advanced countries on outsourcing," the document tabled in Parliament today said.
The Survey further argues that it is possible that the world's carrying capacity will actually be much greater for India's services than it was for China's goods. In contrast, India's expansion may well prove much more balanced.

"India has tended to run a current account deficit, rather than a surplus; and while its service exports might also displace workers in advanced countries, their skill set will make relocation to other service activities easier; indeed, they may well simply move on to complementary tasks, such as more advanced computer programming in the IT sector itself," it said.

On the other hand, the Survey said that since skilled labour in advanced economies will be exposed to Indian competition, their ability to mobilise political opinion might also be greater.
"In sum, the political backlash against globalisation in advanced countries, and China's difficulties in rebalancing its economy, could have major implications for India's economic prospects. They will need to be watched in the year - and decade - ahead," the government document said.
During the boom years between 2003 and 2011, India's real GDP growth averaged 8.2 per cent, and exports grew at an annual rate of between 20 and 25 per cent (in real dollar terms, for goods and services).

"So, assume conservatively that India aims to grow at 8 per cent for the next decade and that requires growth in exports of goods and services of 15 per cent," the Economic Survey added.
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