India could lead global job growth,says UN trade arm

Although the withdrawal of government stimuli around the world will likely cause a further slump in worldwide employment.

Although the withdrawal of government stimuli around the world will likely cause a further slump in worldwide employment,the United Nations arm on trade and development believes Indias long-term projections could put it in a place to dictate growth and employment around the world.

India is nowhere near reaching that kind of potential,reads the UNCTAD Trade and Development report,2010,released worldwide today. India may play an equally (if not more) important role as China as a future engine of growth and employment creation in other countries, reads the report. But to reach such a level,India and much of the developing world will have to succeed in their emphasis on domestic growth.

The report refers to a rebalancing in trade strength and prowess between the United States and China as a result of economic fall-out. In a simulation of economic rebalancing,the report states that China will not be able to replicate the demand stimulus which the United States had provided,despite increased consumption in China. This is because the absolute value of China’s household consumer spending is much smaller than that of United States households, reads the report. The net effect of the two adjustments taken together would be deflationary for the world economy,while they would not be sufficient to unwind the large global imbalances.

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The rebalancing will likely result in a further expanding trade-gap for India by about 1.2 percentage points despite a 1.1 per cent increase in the price of exports over imports. Similarly,India’s share of trade balance in GDP would fall by 7.7 per cent,if the simulated rebalancing were to occur as projected.

However shifts in trade winds will likely carry little weight in India which accounts for less than 2 per cent of world trade. This could be one of the strengths which actually leads to an India’s increasing influence in the world market. If India leans toward self-sustainability,it will be importers who will be clamoring for a piece of the Indian market,according to the report. Countries that are often suggested as possible future markets for countries that pursue export-oriented growth strategies are some large emerging-market economies in the south,particularly India, according to the report. However,the import potential of Brazil,India,Indonesia and South Africa combined is not even equivalent to that of Germany.

The report also referred to government withdrawals from fiscal expansions as premature, calling the effort to restore the confidence in financial markets by ending stimulus measures as “counterproductive. Much of the recovery in 2009 after a 23 per cent fall in world trade in the first half of last year was in large-part due to financial investments from the government. With much of the developed world still floundering,UNCTAD has called the upturn as fragile and uneven, calling for developing markets to turn toward self-sustainability rather than export-oriented economies like China.