India’s rising role in Asia

Compared to East Asia, India’s growth strategy has relied relatively more on domestic markets, consumption rather than investments, decentralised entrepreneurial rather than state-led development, and on financial and capital market intermediation in allocation of savings (Das, 2006; Huang, 2006; Morgan Stanley, 2006). India’s defacto growth strategy is consistent with bottoms-up diagnostic approach to reforms advocated by Rodrik (2006).

However, as India begins to pursue policies leading to higher savings and investments, and as the role of external sector increases, differences in India’s growth characteristics on the one hand and those of East Asia may narrow. India is also attempting to develop a robust diversified manufacturing base (Bradsher, 2006); and modernise its agricultural and plantation sectors. The emphasis is thus on creating a more balanced and resilient economy, and increasing India’s share in the world economy. India’s growth strategy and trajectory thus provide an avenue for global risk diversification for businesses and investors from around the world.

It is in the above context that this paper examines India’s rising role in Asia, and argues that India’s integration with the rest of Asia is qualitatively and quantitatively far deeper than has been acknowledged in academic and policy research, and by policymakers and the media. Moreover, this market based integration will continue to become deeper and wider.

The analysis in this paper suggests that India has been far more intricately integrated into the rest of Asia than has commonly been perceived or acknowledged. This is particularly the case if overall value chain division is defined to include research and development, physical production, distribution, customer servicing and feedback. Over concentration on gross merchandise trade flows in the conventional literature appears to have distorted the analysis of economic integration. This integration has been primarily market and private sector driven.