Developing Economies in A Borderless World

The “Death of Distance” will be the single most important economic force shaping the society over the next half century with geography, borders and time zones becoming irrelevant with the new communication revolution. The world trade has increased manifolds since World War II and the merchandise exports have increased to about $6,000 billion today from just $50 billion in 1950 while the trade in services is increasing faster and stands at about $1,450 billion as the economies are opening up and integrating with the world economy. As evident from the experience of the countries that followed open-market and free trade policies, achieved higher growth rates in their GDP, per capita GDP, and the exports than the closed economies. As more and more countries are opening their economies and integrating with the world economy and the revolution in IT, we are heading towards a “borderless” world with free flow of trade and resources. The autarkic strategies for economic development followed by India since its independence inevitably cut the economy off from the technological advancements in rest of the world and as a result India still remains way behind the industrialised economies. Also, despite above average growth in India's GDP and exports since 1970s than the world average, India's per capita GDP is among the lowest at $370. Even the most populous country in the world, China has per capita GDP of $860. The balance-of-payments crisis in mid-1991 forced the Indian policymakers to make a paradigm shift, though under IMF-led bail out package and prescription for structural adjustments, in its economic, industrial, and trade policies more commonly known as the “economic reforms”- liberalisation and globalisation of Indian economy. While the reforms have helped overcome the liquidity crisis and the economy broadly got back to the growth charted in 1980s, yet the structural adjustments have propelled investment in non-traded goods and in buying out of well performing Indian companies and brands by the MNCs than actually increasing the gross fixed capital formation in the manufacturing sector with the modern technologies. It is under this background and the similarities in cultural, political, ethnic and alike factors among the South Asian countries, that the present paper aims at analysing and learning lessons from the progressive aspects as well as failures of India's economic reforms, while the South Asian countries emulated the same.