Manipal: Pranab Mukherjee Speaks on Role of India in Asian Economy

kemmannunewsnetwork, 26-05-2012 15:18:18

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Udupi, May 26: Union finance minister and Congress leader Pranab Mukherjee visited Manipal to participate in a seminar and to inaugurate the academic block at Manipal Institute of Technology, Manipal, here on Saturday May 26.

He then participated in a national seminar on "21st Century as the Asian Century: Role of India and China" organized by Manipal Centre for Asian Studies at Fortune Inn Valley View. 

Dr Arvind Kumar, proffessor and head of Manipal Centre for Asian studies was the convener of the seminar. Manipal University chancellor Ramdas Pai was also present.

FM’s speech at the two-day national seminar on “21st Century as the Asian Century” being organized by Manipal Centre for Asian Studies at Fortune Inn Valley View on May 26, 2012.

It gives me great pleasure to be here at the inaugural of this national Seminar organized by the Manipal Centre for Asian Studies. We are only 12 years into the new century and yet, the changes, social, cultural and of course, economic that we are witnessing worldwide are significant, rapid, awe inspiring and sometimes even dislocative. In that context, to infer how the 21st century would unfold for Asia is not gong to be easy. Yet, I would like to emphasize with some determination and hope that the 21st century could well be shaped by Asia.

I cannot say whether we are destined to make this an Asian Century, but I am sure that we have to strive for such an outcome. I am fully aware that challenges that we face to fulfill such a vision are not exclusively economic, but I intend to briefly share some thoughts relevant to this discussion, primarily focusing on economic factors.  

Asia embodies immense social, cultural and economic heterogeneity. Yet many Asian economies share a common pattern of historical evolution and economic development. In this vastly populous continent, we also find economies that are at various stages of maturity. At one end of the spectrum are economies like Japan that have experience sustained economic prosperity and now find themselves in a phase of relatively sluggish economic growth. At the other end are economies like China and India that are experiencing rapid growth even as the world is gripped with uncertainty and highly volatile markets. Apart from the so-called newly industrialized Asian Economies like South Korea, Hong Kong, Taiwan and Singapore that have done well over the past few decades, economies in South East Asia, most prominently, Indonesia, are on their way to catching up with major emerging economies. China has already overtaken Japan as the world’s second largest economy. 

This transformation in Asia must be understood in the context of shifts taking place in the world economy. As we are all aware, following a staggered recovery from the economic crisis of 2008, widespread economic problems have surfaced in Europe, presenting a further setback to the global economy. The sovereign debt crisis in the Euro Zone has deepened without a decisive resolution in sight. In this context, the growth performance of Asian economies in the short to medium-term is crucial not only to keep the ‘engine’ of global growth running by also to haste recovery from the present global slump. 

The current situation presents some unique opportunities. A crisis of the magnitude that wer are witnessing compels us to take notice of our deficiencies, suitably reorient policies and redefine priorities. While economic challenges faced by each Asian country are unique and there is no one-size-fits-all future trajectory of economic development, there is worldwide recognition of the fact that most Asian economies, including India are poised to attain sustained long-term growth, notwithstanding some short-term policy challenges.

Timely policy interventions helped most of the Asian economies, including India, to recover quickly from the 2008-09 global crises. In 2012, as per IMF estimates, Asia’s real GDP growth of around 8.2 per cent outpaced growth in other regions of the world with China and India being in the forefront. The Indian economy, in particular, recovered with an average growth of 8.4 per cent in the two years flowing the crisis in 2008-09. Since then, factors including monetary and fiscal policy tightening, uncertainties in capital flows and slowdown in external demand have impacted the growth performances of these economies to varying degrees. India’s growth in 2011-12 is estimated to have slowed to 6.9 per cent. With heightened uncertainty in the Euro Zone, the short term concern, at present is regarding reversal in FII flows leading to increased currency volatility in several Asian economies. We in India are witnessing unprecedented depreciation of the rupee vis-à-vis the US dollar with the current account deficit widening to around 4 per cent of GDP. Even in such a scenario, which is being addressed via a slew of policy measure, the IMF expects growth in Asia and Pacific region to gain momentum in 2012, with growth projected at 6 per cent in 2012 and 6.5 per cent in 2013.

7. With a reasonably quick recovery, emerging economics in Asia are generally better placed vis-à-vis other emerging economies to withstand the fresh round of global economic turmoil. In the long term, a key advantage that Asian economies, prominently India and China, possess is high rates of saving and investment. Large size of the domestic market coupled with mechanisms to harness potential demographic dividends can lend robustness to the Asian growth story. India’s resilience, in particular, results from the fact that the bulk of India’s GDP is driven by domestic demand. A calibrated approach to capital account convertibility by India has. To a significant extent, prevented surge and reversal of debt creating capital flows. India’s banking sector is robust and export basket is increasingly getting diversified with developing countries being our largest export market. Our evolving financial sector robustness in the economy. These policy measures by India are slowly gaining recognition as best pratices, in Asia and elsewhere, worthy of emulation in a post-crisis world. China’s policy too has started emphasizing a growth strategy that is more dependent on domestic demand.

8. Asian economies, in general have evolved to be attractive destinations for Foreign Direct Investment (FDI) which is aiding innovation in these economies. As per the Global Innovation Index 2011 (published by  INSEAD and the World Intellectual Property Organization ( WIPO ) several Asian economies including Singapore, Hong Kong, Korea, Japan and China count among the world’s leading innovators. Many of these economies are not just successful growth stories but also examples of successful public policy experiments that achieved growth via export orientation, marcoeconomic stability and innovative institution-building. It attracted investment, which in turn propelled them up the manufacturing value chain. Needless to say, we all need to keep drawing appropriate lessons from these economies while they need to sustain their achievements to perform even better in the course of the ‘ Asian century’.

9.  There are however several challenges that we face. A major one is to devise ways in which the fruits of high growth can benefit the poorest of the poor. Poverty and inequality, with their associated ills continue to be single  most common challenge. Going forward, GDP growth in many developing nations must be accompanied by measures aimed at fulfilling the aspirations of a young population just as social security compulsions would assume prominence in aging societies. We need to ensure adequate investment and utilization of funds in sectors like health, education and skill-development that are crucial for human capital build-up. We must also create employment opportunities so that there is a broad-based stake created in the growth process. Successful models of financial inclusion need to be replicated to address the economic well-being of the disadvantaged. Most importantly, governance structures in Asia need to evolve to address these requirements.

10. Resolution of long-standing politics conflicts, managing urbanization, addressing climate change issues and containing adverse effects of a rapidly deteriorating natural environment that is facing pressure from burgeoning populations are some of the other emerging challenges that confront many of us in Asia. Lack of infrastructure and dearth of resources to finance large-scale infrastructure initiatives stand in the way of achieving inclusive growth in many economies including India. Energy needs that are sure to grow as the benefits of growth get further dispersed are a major concern. Investment in renewable energies as well as in technologies that make such sources of energy cost-effective must therefore gain pace. 

11. I must stress that collaborative efforts are a must to tackle these issues that result in strengthening of cross-country institutions and delivery mechanisms within countries where these are needed the most. While recent efforts like setting up of an ASEAN infrastructure fund would surely address some of the problems outlined above, Asian economies need to collectively think on channels of engagement with each other that create synergies directed at addressing common challenges. We must appreciate that to gain in unison, we need to act in unison. Even in existing multilateral for a including the G-20 and IMF we should aim to coordinate more in areas where there is significant collective gain to be achieved. 

12. Finally I would like to underscore that the existing divide between advanced and developing Asia must be bridged to make the 21st century an Asian century. To this end, while advanced Asia must maintain its economic ‘miracle’, an environment must be created for the rest to catch-up and prosper. Ultimately it would depend on how individual Asian economies manage their ‘rise’ strategically in order to co-exist and co-prosper.

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