India fifth in global economic power: Survey

NEW DELHI: In an interesting first, the Economic Survey 2010-11 measures the government’s ‘economic power’ or the ability of the government to project itself in the international sphere. The index is composed of four variables: government revenues, foreign currency reserves, export of goods and services and human capital and has been developed by the Finance Ministry for 112 countries over a 10 year span 2000-2009 .

It shows India in good light at number five in 2009 (up from number 10 in 2000), behind the US, China, Japan and Germany. The four variables capture the government’s ability to raise resources , its credit-worthiness and credibility in international financial markets, its influence on global economic activity and its representational strength or how much of the global economy, including its global manpower, it can claim to represent and includes a normative element .

The ranking corroborates what the Survey calls the changing dynamics of global economic power as reflected both in India’s membership of the G-20 and its increasing voice in the global arena. It shows the rapidly-growing clout of emerging markets.

Thus two of the three top-ranking countries of 2000, US and Japan , show a much slower rise in index values while the third, China , rose rapidly and after surpassing Japan in 2004 is now almost neck-to-neck with the US. The indices for China and India also show remarkable robustness , unlike the other top 10 countries of 2000, all of which had a lower index for 2009, mirroring the global slowdown.

The direct correlation between the growth in economic power between 2000 and 2009 and the change in GDP between the postcrisis period of 2009 and 2010 suggests a strong link between growth in economic power as measured by the index and the ability to recover from the crisis. The Survey, however, clarifies that this does not in itself establish a causal relationship. An important clarification as the previous paragraph talks of India ranking a lowly 134in the World Bank’s Doping Business in India Report!