banking services inindia

Topics: International economics, Macroeconomics, United States public debt Pages: 43 (9554 words) Published: September 25, 2013
Prof. Krishna Kumar
Indian Institute of Management, Lucknow
India's external debt has been rising ever since independence 50 years ago. The debt service ratio has also been rising and touched a peak of approximately 35%. The country also has been facing foreign exchange crisis on account of the above and increasing imports burden. The two make India a disadvantaged player in international trade. Exports alone are not able to meet the increasing demands of foreign exchange. It is necessary that India to generate foreign exchange and develop debt-repaying capacity through alternative means like becoming a global player. Foreign investments inspired inflows, which have provided a temporary respite from foreign exchange crisis, may not be a lasting solution, if necessary structural changes are not undertaken to make India a global player. The investments may dry up soon if they do not fetch expected returns. If they are successful they will generate additional demand for foreign exchange. The structural changes undertaken so far do not seem to be adequate to make India a truly global player. Indeed, it looks that the initiatives taken may lead to India becoming a global market instead. The paper suggests that there is a need for major changes in the present approach, which almost ignores new product development within the country. It identifies the barriers to India's becoming a global player and suggests several action strategies.

The paper has been divided into five sections. Section I gives introduction and raises the issues of adequacy of the economic reforms initiated by the government of India six years ago, to meet the long term challenges that the Indian economic system. Section II gives the historical backdrop and current scenario of external debt and foreign exchange and points to the need of India becoming a global player. Section III presents the trends and patterns pf foreign collaborations, import and exports. Section IV explains possible reasons for the same for the present state of affairs. It also presents the findings of a study on foreign companies' interests in India and discusses behaviour of the domestic companies, leading to the conclusion that India may become global market instead of becoming a global player, and possible long-term repercussions thereof. Section V discusses several policy and action strategies required to supplement the current reform measures to meet the challenge that the Indian economy faces today.



1.1. Introduction
In 1991, the newly elected Prime Minister of India Mr. P.V. Narasimha Rao, announced major changes in government's regulatory policies, to overcome deficiencies in the Indian economic system. The measures aimed at reducing the restrictions imposed on the Indian industry through licensing system, and opening up the Indian economy to the foreign companies. The foreign investors were also encouraged to invest their capital. These measures were expected to make Indian industry more competitive, not only nationally but also internationally. The latter was especially a very attractive proposition. Liberalisation and globalisation became the buzz words, expected to take India to commanding heights in world economy. Six years have passed since. It is time to take a stock of the achievements. To what extent the economic reforms have fetched results expected? What are the trends visible? What may be the repercussions? Is India emerging as a global player or is India becoming more of a global market only? An analysis is important as it has serious implication not only for economic development, but also even for the sovereignty of the country in the long run. 1.2.

Significance of India becoming a Global Player

Before we delve over the above issues, it is...

References: Emil Herbolzeimer," India Can be A Global Player, Not Just A
Global Market", Economic Times, Sunday June 26, 1994
Nitin Srivastava and Shishir Prasad "The Great Indian Myth" The
Strategist Quarterly April, 1997
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