Bric, India and the knowledge economy

Aug 03, 2011 Letters

Dear Editor,
Not too long ago, the economic invincibility of the developed world seemed immovable. But then BRIC (Brazil, Russia, India, and China) came along as serious contenders. The ‘BRIC’ countries, with more than 40 per cent of the world’s population and a third of its land mass, attained a level of economic importance in 2005 that may see no turning back.
It was circa 2005 that the emerging economies started to prevail over developed economies through their greater share in the world Gross Domestic Product (GDP). ‘BRIC’ countries were the key players in the emerging economies’ dominance.
Nonetheless, there are many poor economies that continue to improve their economic indicators; and with the emerging dominance of BRIC, some economies in the developed world are now on the defensive.
‘BRIC’ countries are transforming Wallerstein’s world system theory inter alia, where for decades, if not centuries, under different ideological labels, there have been unequal economic and political relationships between the developed and the developing world. ‘BRIC’ countries persisted in the knowledge and applications that they will not allow themselves to remain in a state of permanent dependence. And they have moved on by removing the foundations of permanent dependence vis-à-vis making a dent on export dependency, the debt trap, and multinational corporations.
Nevertheless, let me say a few things about India, drawing mainly from the World Economic Outlook, as it is, debatably, the least of the ‘BRIC’ countries in terms of economic dominance. And using India, and perhaps any of the other ‘BRIC’ country, may demonstrate that poverty is not a permanent condition, and many small, poor economies could strive for betterment vis-à-vis applying the BRIC model, where appropriate. Of course, you would need far more than the BRIC model to transform poverty into surplus.
India carried a 3.5 per cent economic growth rate from the 1950s through the 1970s, sporting a stagnant economy for almost three decades. But in the period 2000-2005, India experienced just over six per cent average GDP growth rate, less than fie per cent inflation, and all ‘BRIC’ countries had about 10 per cent unemployment; and India’s GDP volume was about US$800 billion and its GDP per capita tottered around US$1,000 in 2005.
Among ‘BRIC’ countries in terms of GDP composition in 2004, India had the largest agricultural sector with a growing service sector; India had no current account surplus in 2005, when the other ‘BRIC’ countries did; and in the same year had a small amount of foreign reserves, approximating US$150 billion.
Today, India hovers around an average of eight per cent growth per year. The high growth rate is necessary for a growing population and a growing workforce. Nonetheless, India would need an active Knowledge Economy (KE) to sustain a high growth rate.
The World Bank projected that India’s Total Factor Productivity (TFP) will grow by more than 50% in 2020 than what it was in 1991/92. TFP is the nation’s capability to create and use knowledge. The World Bank (2005) noted that India would need to develop policies concentrating on effectively utilizing knowledge to increase productivity and the nation’s welfare. And, invariably, some people refer to this knowledge economy as ICT industries; the World Bank suggests that this concept is broader; the KE refers to how an economy channels and applies new and existing knowledge to raise productivity and total welfare; for this reason, the KE will make a difference between poverty and wealth. India is forging ahead at a brisk pace with its KE. And perhaps, small, poor countries around the world, in order to rid themselves of their poverty, would have to show more than keen interest in KE, and start intensively building KE to spur economic growth.
In fact, the macroeconomic mechanism of raising interest rate to curb inflation may not be enough anymore; the KE approach is the way to go, as it will resolve more than ‘inflationary’ problems.
Prem Misir

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