India
Rising Through the Slowdown

EXECUTIVE SUMMARY

This chapter examines both the impact of the global financial crisis and economic slowdown on India’s economy and the consequent geopolitical implications.

MAIN ARGUMENT

Since the early 1990s India has sought to reenter the global economy through a strategy of gradual and graduated economic liberalization combined with risk-averse prudential regulation in the banking and financial sector. These reforms helped limit India’s exposure to the recent financial crises and the subsequent global economic slowdown. With a 7% growth rate likely for 2009, India’s major economic vulnerabilities remain internal—weak public finances and inadequate investment in social and economic infrastructure, which are problems that will need to be addressed if India is to continue its rise as a free-market democracy.

POLICY IMPLICATIONS

• India’s improved economic performance in recent years had encouraged the country to become more globally and regionally integrated. This process is unlikely to be reversed by the current global economic slowdown, given the economic and strategic benefits India has derived so far.
• By pursuing policies in Asia that are supportive of India’s economic rise, the U.S. will strengthen the foundations of open societies and plural and secular democracies in the developing world.