The Soft Power of India Viewed from Its Economic Reform

WU Yongnian

The Soft Power of India Viewed from Its Economic Reform

WU Yongnian

It has been almost twenty years since India carried out economic reform in 1991. Up to now, the economic growth ofIndia is in a good way. So, the media and experts inside and outside India considered that “in the next ten years, India that hasbeen developing slowly and steadily would exceed China. The experience would prove out that sustainable economic and socialdevelopment depends more on self-dependence.” This does not mean that total economy of India would exceed China, despite thesoft power.

So, how about the soft power of economic growth in India?In order to make clear the issue, it is necessary to understand:Why India carried out economic reform in 1991? Where was the starting point? What is the nature of soft power, with its advantages and strong points? How about the trend of development and its future? This paper endeavours to elaborate on how the soft power of India has pushed forward its economic reform.

I. The Economic Reform Started with Financial reform

The power of a country mainly depends on its comprehensive national strength. The strength could be divided into hard and soft parts --- finance belongs to the category of soft power. There were three reasons that the economic reform started with financial reform.

First, former PM Rajiv Gandhi began the plan of economicadjustment before 1991 and the achievement was great, especially the electronic industry, software, petrochemicals, atomic energy,aerospace, biotechnology and pharmaceutical industry developed very well, but many central and local governmental officials did not have good understandings upon the reform policy, and, did not have the sense of urgency, initiative and impetus to push forward the economic adjustment. Therefore, they were not very alert to the problems that emerged after the implementation of the policies and measures. Ultimately, India stepped into the difficult situation of overloaded foreign debt that summed to US$20 billion.What made things worse was that the world petroleum price soared at the beginning of 1991, which caused India to be trapped into the most serious crisis of foreign exchange and international payment. What was more, an additional $100 million NRI deposit flew away. The total foreign exchange reserve of India was just$400 million and it could only afford two weeks’ import. The credit grade of India decreased sharply in the international credit market. In order to pay back the urgent debt and deal with the crisis, the Indian government was forced to take out the gold reserve and change it into $400 million in Bank of England in London.

Second, while facing the complex international financial crisis,the Indian government was wondering how to solve the difficult problems. The WB and IMF pointed it out seriously to the Indian government that India must carry out essential reforms, or Indian economy would stop to grow and the result would be rather bad.But, how to start the economic reform? The WB and IMF designed a project of financial reform for India. After analyzing domestic economic situation and reviewing the project repeatedly, the then financial minister Manmohan Singh and his assistant agreed with the advice and project ultimately and decided to reform the financial system.

Third, it was a very challenging task for FM Manmohan Singh and his assistant to solve the crisis in such a short term, but the decision must be made in time. In order to solve the pressing foreign exchange reserve crisis and push forward Indian economy for long-term growth, the FM Manmohan Singh took five innovative measures:

First, to devalue the rupee by 20% twice to encourage export,take 40% foreign exchange of the exporters to governmental account, while the remaining 60% foreign exchange was controlled by the enterprises, it could be exchanged freely in the open market. Moreover, all kinds of raw materials, accessories and most of machinery could be imported with self-arranged foreign exchange;

Second, to reform the trade policy, to simplify and even cancel the export licence mechanism so that enterprises could get more chances to import raw materials. For the foreign investors,they could import needed machinery and equipment under the limitation of twenty million rupees. For foreign investors, the top share proportion for those in export enterprises could reach 51%,registered export enterprises may open foreign exchange account in banks. For the entirely export-oriented enterprises and FTA, it was to simplify the licence mechanism further and shorten the sanction time limit, and to sell some state-owned trade enterprises to the private sector;

Third, to implement international accounting in strict accordance with the international practice and standard, the RBI kept close contact with international financial institutions, brought forward a series of its own ways for the currency exchange and accounting in international finance. The Ministry of Finance and any body were forbidden to intervene the business activity of financial institutions. Inside Indian financial system, he set up and consolidated independent organizations and establishments for bank supervision, to supervise national foreign exchange, trade settlement and currency exchange, to punish illegal operators in accordance with the international standard;

Fourth, to cancel the restriction on FDI, to set up Foreign Investment Promotion Board to encourage foreigners to invest and build factories or open trade agencies in India, to cancel the regulation that FDI must transfer technology, to simplify the examination and approval procedure that means FDI application would be accepted within 48 hours and would be passed after being registered in the RBI. For foreign investors to set up branch offices in India, there were no more complexity of examination and approval, only registration at local government was necessary;

Fifth, to reduce financial deficit and curb inflation, to sell 20%shares of state-owned enterprises, to increase the rate of corporate tax and interest tax, to reduce financial subsidy from 95 billion Rupee in 1990 to 78.24 billion Rupee in 1991, to raise interest rate from 10% to 12%, to raise deposit reserve ratio to 10%, to stop reloan business for commercial banks(except export credit),strictly limit mortgage credit to commodities having great influence on CPI index. Strive to eradicate problems such as low efficiency, low profit, low quality of investment and bad debt in bank, to instill competitive mechanism, strengthen the status of the private bank. To set up Securities and Exchange Board, reform the stock market, and to allow foreigners to buy the stake of local enterprises. In addition, to allow foreign businessmen to buy foreign exchange in commercial banks, freely export it and borrow from the banks.

Apart from the above, FM Manmohan Singh and his assistants took many incentive policies and measures to promote industrial and agricultural development, made active adjustment on regulations related to FDI field, stake-holding proportion, trade marks, credit and buying real estate, set up new institutions to absorb foreign investment to participate in Indian economic construction, created opportunities for India to enter the international market in the future. For Indians, the year of 1991 was filled with fortune and hope. The favorable time encouraged and created the innovative team led by Manmohan Singh, they carried out comprehensive and deepest economic reforms since India`s independence under the support of PM Rao. The reform recovered Indian economy in 1992 and then embarked on a path of rapid economic growth. A colorful and changing India was emerging in front of the Indian people and the world.

II. Reviewing the advantage of soft power from the economic growth

Generally, hard power refers to natural resources, economic strength, scientific technology and military power and so on. The soft power covers a wide but uncertain area, including the national-cultural tradition and heritage, domestic politics such as political system, religious and ethnic factors, diplomacy, education,human resources, financial system and international influential power. It is important for us to know about the advantage of soft power, the relation between soft and hard powers by reviewing the experience and lessons in Indian economic development. Then we would learn much from that.

First, the experience, lessons and specialty of Indian economic development.

During the over forty years’ time from independence to 1991,Indian economic development has experienced a rough phases from 1947 to 1956. India spent about ten years to recover her economy to a certain level. From 1957 to 1966, under the instruction of industrialization-strategy policy by Nehru, India built up an integrated industrial system. But because the government invested a majority of fund, human resources and materials into industrial development, the agricultural development was comparatively ignored, so it came to a crisis of food shortage. In order to meet Indian people`s basic need for clothing and food, the Indian government spent 13 years to adjust the economic development strategy and measures. During this course, the Indian government carried out historic agricultural reform and solved the basic problems through the successful“green revolution”. From 1980 to 1990, on the basis of successful adjustment during the past decade, PM Rajiv Gandhi decided to cancel the limitation on high-tech industry development. But the development depended on huge loan from IMF, which led to the most serious crisis of foreign exchange since independence, green light turned red in the economic growth, the entire country were in deep panic.

After overview and in-depth analysis of the whole process of Indian economic development sine independence to 1990, we found that there were three features emerged in the Indian economy. First, the coexistence of state-owned economy and private economy. Nehru`s design of “Indian-style socialism”decided that Indian economy would learn from the Soviet Union,and India started a large-scale “nationalization” policy. The Nehru government nationalized the industry left behind by the British colonists, bought out a large number of foreign and private enterprises in India, even concentrated funds and other resources to invest in construction of new-style state-owned large enterprises, such as basic industries, heavy industries,transportation industry, military industry and financial system. In order to develop the Indian economy in many aspects, the Nehru government did not force all private enterprises to transform into state-owned enterprises, but took measures to encourage and support with appropriate restriction policies. Thus, Indian private enterprises were developing to a certain extent, but not so fast and large compared with the state-owned enterprises. We believe the development of the private enterprises would provide a significant space for Indian economy`s fast growth in the future and could avoid collapsing situation when Indian economy suffer from difficulties. On the other hand, it has also spawned a number of private multinational enterprise groups, which played a decisive role for Indian economy rapidly marching into the world.

Second, the coexistence of planned economy and market economy. India carried out the first five-year plan since 1951. It became necessary to adjust the economy because of the shortcomings of planned economy. When the government adopted a full market economy policy, it made India transform to market economy smoothly because of the existence of a large number of private enterprises. The reform of the state-owned enterprises attained good effects through strenuous efforts, just because of the good basis of private economy. It was easy and smooth for Indian economy to align with the international market.Indian market economy has become increasingly mature, and embarked on a path of benign circle after coming into the 21st century.

Third, India has always been more adept at utilizing foreign capital for economic development. The foreign exchange crisis was triggered by too much debt for the development of high-tech industries, but many western economists still regard India as typical among all developing nations that made an earnest and successful use of foreign capital to develop domestic economy.Successive governments in India have been interested in developing economy by utilizing foreign capital. There are a large number of new style enterprises set up successfully by utilizing foreign capital all the time and all realms, especially high-tech industries. It is these foreign-funded enterprises and joint ventures that brought to India not only high-tech but also new operating philosophy with international standards -- these helped India to become the “software kingdom”.

The specialty, strongpoint and advantage of Indian soft power:

In short, from the experience, lessons and specialty of Indian economic development, we could find the indications of influence by Indian soft power. After comprehensive analysis and deep research, we found Indian soft power has four differences or advantages as compared with other developing countries.

First is the specialty and advantage of Indian culture. India is one of the four largest nations with ancient civilization, its traditional culture is not only voluminous, profound, but also mysterious and fascinating. This culture has abundant connotation, profound accumulation and unique specialty, its values and philosophy are full of irreplaceable advantages and sophisticated nature. Indian culture has multi-aspects of superiority and advanced character, mainly displayed as follows:

The philosophical nature of Indian culture. Generally speaking, Indian culture has strong philosophical nature, the cultural products such as literature, arts, music, dancing, drama,painting, carving and mathematics all have strong philosophical features. India’s first philosophical works “Upanishads” had discussed materialism vs. idealism. India’s famous philosophical book “Bhagavad Gita” has had a better performance, affecting all aspects of Indian society. During the course of Indian economic reform and development in modern times, philosophy has always been the wisdom origin of intellectual and creative ability for reformers, enterprisers, businessmen, scientists and managers.

Indian culture’s exclusiveness. The splendid and time-honored Indian culture is good at absorbing advantages of different cultures for enriching itself. We could find that cultures of different religions, ethnic groups and races in the world have affected Indian culture; moreover, in the great environment of Indian culture, excellent parts of the culture can carry forward as well as the backward parts could continue to improve themselves through self-transformation. It is the exclusiveness that helps Indian culture to flourish through absorption, transformation and creation; it also benefited India in the economic reform and development.

Integrated diversity and unity. It is the integrality that made Indian culture become a major system in the world. Indian culture records all aspects of human society’s development and every phase of human social history. It claims that “regulation”,“benefit”, “desire” and “disengagement” are the basis of life balance as well as four goals of life. Moreover, different kinds of culture meet together in the Indian cultural system, they could learn from each other, develop together and exist respectively.

The underlying advantages and advanced character of Indian culture have played important roles in the economic growth and social development, and it helped the Indian government make more wise choices while avoid wrong policies. The coexistence of state-owned economy and private economy, the fostering of market economy, the success of “green revolution” in agriculture and the effective utilizing of foreign capital all have causal relation with the philosophy, exclusiveness as well as integrated diversity and unity in Indian culture. The present international economic crisis caused by the American sub-prime mortgage crisis does not exert a very strong and destructive impact on Indian economy.The Indian financial system could deal with it calmly and at ease,because India has already completed the entire economic reform and built independent perfect financial system and regulations in 1991. It is very clear that cultural advantages and specialty could play a huge role for economic development.

Second, parliamentary democracy system with Indian characteristics.

At the beginning of independence, the political elite led by Congress chairman Nehru followed the parliamentary democracy system left by the British colonists, but they knew that the political system must be revised appropriately and made it suitable for Indian condition and tradition. During the years since India’s independence, the parliamentary democratic system experienced many severe challenges and difficulties. “It has consolidated foundation in Indian politics, was accepted by all levels of the society especially the new rising middle class. Indian parliamentary democracy was based on the social basis of non-democracy and inequality, but the rapid social mobilization mechanism under electoral system quickly promoted the people’s democratic consciousness and political awareness, improved the political participation rate and turned India into a highly politicized nation.” “In general election, the Indian people always keep high political enthusiasm, and the electoral result reflects the public opinion.” The people could nullify an unsatisfactory government through election. So, it created a few ups and downs of the Congress as well as the collapse of BJP government led by Vajpayee. Of course, the Indian electoral system has its shortcomings; some are inherent from western parliamentary democracy, whereas some others are new problems arising from the Indian soil, such as religious and caste group’s electoral politics, and slowness in decision-making procedure. These resulted in much waste of time and opportunities for India. In addition, the ordinary people are mostly political tools and furnishings. “Indian democracy is not the achievements through efforts by the people but the presents donated by a minority of political elite.” But, we have to admit that the Indian electoral system, supported by the active participation of the ordinary people, destroyed social obdurateness and backwardness,represents public opinion and pushes forward social progress and development. This, therefore, is the positive factor of the parliamentary democracy system with Indian characteristics. So, it is considered that the greatest victory is the building up of parliamentary democracy since India’s independence.

It is known to all that India has various religious and caste factions, with complex problems and frequent conflicts, and the society is not so peaceful. So many parties and groups insisting their own opinions lead to the unsteady political situation and frequent change of government. It seems as if India is in a disordered situation, here is an explosion, or there is a terrorist attack; here is a political gathering or parade, while there is religious or caste conflict. But, India’s political situation won’t be fundamentally changed, the economic growth won’t stop, the state machine will continue to work, the people will live orderly despite of some chaos. Moreover, affected by the parliamentary democracy system over 60 years, the ordinary people have ever-stronger notion of democracy and consciousness of law, they are good at protecting their benefits and rights through democratic and legal way. This is another achievement originated from the parliamentary democracy.

Third, Indian education and personnel training. Successive governments since independence have been well aware that it is very important for social progress to develop education and human resource training. For instance, the Indian government invested 3.68 percent of GDP in education, 0.81 percentage higher than that of China. The Indian government has put forward the“universal education”, “to eliminate adult illiteracy” and“strengthen university education” slogans in education policy.India’s constitution also stipulates that free education would provide for children under 14 years. According to the 2001 census,the literacy rate above seven years has reached 65.38 percent.There are 520 thousand primary schools, 130 thousand secondary schools, 140 universities, 5246 technological academies, 3.5 million students in high schools, the third largest in the world.

However, when we summarized the experience in India’s education since independence, we found that the Indian government paid less attention to universal education than its“elite education” in university. At present, only 20 percent of primary schoolers could enter secondary schools, and 20 percent of students of secondary school could enter high schools.Moreover, the hardware for universal education is rather poor,One-third of primary schools could not provide chairs for the pupils, 50 percent of schools have no sports facilities. Because the Indian government thinks that they should invest the limited financial resources in the most urgent and necessary university education, as only the youth trained from higher education could play a decisive role for India’s economic growth and science-technological development. When Nehru confirmed the policy of taking university education as priority at the beginning of the independence, he pointed out that “University represents humanitarianism, tenacity, good sense, progress and exploration for truth. It represents that mankind steps forward to higher purposes. The universities would be beneficial for the nation and the people if it fulfills its responsibilities.” He said that India had a large population, as long as to keep a balance between universal education and university education; it would not affect India’s economic and scientific development process. So, India set up university commission at the beginning of independence to guide and decide the policy for university education and development.Because the central and local governments pay more attention to university education, at present, India has 201 universities and 12342 professional academies. The total number of the undergraduate students and junior college students has been more than 8 millions. Now, there are too many graduates, so they have to go abroad to find jobs. Indian students are quite welcomed by western countries in Europe and America because they can speak English fluently and have good intellectual quality. There are innumerable Indian science-technological workers and teachers in the famous universities, national labs and research institutions all over the world. They have not only earned much foreign exchange for India, but also enhanced scientific and cultural communication between India and other countries. Many Indians who have succeeded in study or undertakings abroad return to India for development, and this is very helpful for India’s scientific progress. So, the Indian government takes more favorable measures to encourage overseas Indian talent to return to homeland. Many national laboratories and institutions having been set up for research in advanced science and high-tech are named after these persons.

In addition, India makes efforts to develop vocational and technical education. These schools provide a large number of skillful engineering and technical personnel for society. It is very important to develop manufacturing industry and service sector.At present, there are 356 specialized vocational and technical schools at national level; at the same time, the government encourages private investment in these schools. There are about 200 thousand students in private technical schools. There are also more than 300 industrial technical schools with 3-4 year courses in India that recruit 56,000 of students each year. It is the base for training middle level technical personnel, providing about 60,000 graduates to the industrial and mineral enterprises annually. At present, India has the largest number of scientific and technical talent with good English knowledge, and is worthily called “the engineering’s bassinet” of the world.

Fourth, highlights in Indian financial system. It has been mentioned above that India’s economic reform started with finance. The basically sound financial system turned out to be stronger and internationalized through almost twenty years development, so that it could deal with the impact coming from the international financial crisis with its own means. In this international financial crisis, the Indian financial system was affected by domestic inflation and stock market’s crash, but it put forward respondent policies and took different measures calmly and smoothly, so it was praised by the international community. It was admitted commonly that the Indian financial system has become more advanced and internationalized. Then, how did India build a perfect financial system with international standard and its own character? What are the highlights and specialty?

Learn from and surpass the west. It is known to us all that since independence, India accepted all the institutions and administrational system including financial system and managing establishment, left by the British colonists. But the political elites led by Nehru made some appropriate revisions to the financial system and managing establishment, so that they could be suitable for India’s national condition and development demands. These include: building and improving independent financial regulatory system with Indian character, foreign exchange managing establishment, trade policy, credit and stock market managing regulation.

Most importantly, the Indian financial system is not controlled by any governmental department and not interfered or affected by anyone. Any financial policies and measures aimed at solving the conflicts and problems emerging during the course of functioning of the financial market are decided by the changes in the financial market and developing demands, without any artificial element. So, the Indian financial system has been the important assistant and advisor for the Indian central government.To a certain extent, it played a protective role for the economic development. Over the past few decades, the Indian bank has a low bad debt ratio. Since the international crisis, many western countries especially the US have taken many measures to rescue the market.

India also took some measures such as reducing interest rate,increasing investment and stimulating domestic demand. Mostly,it was the reflection and supplement for Indian financial system’s normal function under the economic globalization.

Indian talent on international finance managing. The Indian financial system is praised by the international community because it is managed and operated by the first class financial talent with international standard. They speak English fluently as well as have finance managing intelligence and experience with international standard. Many of them have studied in foreign universities and institutions systemically, some of them have worked in the financial institutions and banks. The present PM Manmohan Singh graduated from the Oxford and obtained doctor degree. He has worked in the international institutions and trade organizations for a long time. Hence, he has deep knowledge and research experience in international economy and financial system,which made him capable of implementing extensive reforms while he was FM of the Indian government. In India, even ordinary bank workers must be educated and trained with international financial intelligence.

High rate of return on investment. Being managed and operated by the first-class talent, the return rate on investment is always about 10% high. To invest in India, it is important to be familiar with Indian laws, religions, customs and social surroundings. However, India’s financial system and personnel could make plans for their clients and investors. Some Chinese enterprises in India, however, have low rate of return on investment, even at a loss. One of the reasons is not familiar with Indian laws, religions, customs and surroundings; the more important reason is that the leaders and managers have not made good use of the first-class financial personnel in India.

III. Evaluation on the future of India’s soft power

The development of a country’s comprehensive national strength mainly depends on the result of the interaction of hard and soft powers. Mistakes or bad performance of the soft power will weaken the development of the hard national strength, even sometimes do harm to the existence of the country. And, a strong hard power will improve the internal quality and external performance of the soft power. So, the national cultural heritage,social unity, political stability, the building and improvement of all kinds of regulation and system, education and training will promote the development of hard power. It is mentioned above that in the past years since its independence, India’s hard power has been increased and the interaction between soft powers also has had a good record. Then, after entering the 21st century,following the rapid economic growth and scientific-technological development, how about the development and performance of the soft power?

First, cultural advantages. Because “Indian culture is still coordinated with modern civilization, so, it has the potential to create modern spiritual civilization and material civilization.”Indian philosophical notions, especially the “Advaita Vedaita”and “Brahmatmaikyam”, have advocated for equality and harmony between human and nature. They have laid a solid theoretical foundation for India’s sustainable economic development. Moreover, the tolerance and non-violent ideas originated from traditional culture and habits have created perfect human environment for India’s sustainable economic growth. The values of “emphasizing spirit, neglecting material” has reduced the pressure of taking material resources from the nature, kept a good balance between human and nature, helped India to choose the sustainable model. India has the custom to respect knowledge and talent, so it makes India understand more than any other nations that knowledge is the motivate for human society’s development, and talent is the fundamental factor for scientific and technological development. Naturally, in traditional Indian culture and practices, poor sense of time, low efficiency in work,stupid conservation as a legacy of the feudal society and religious culture, plus contradictions and conflicts between religions and castes, inevitably play negative roles for India’s economic growth and hard power’s development. After entering the 21st century,especially the government led by PM Manmohan Singh, has been well aware of the harms caused by the bad habits of the traditional culture, religious conflicts, and caste problems. He has emphasized it repeatedly that Indians should carry forward the fine tradition of Indian culture, rectify and overcome the stereotypes, strengthen the sense of time, improve work efficiency,fight against inertia, be united to strive forward, construct India into a genuine powerful country in the world.

Second, India’s multi-party politics and parliamentary democracy. With thousands of parties and political groups nation-wide, India is also a multi-cultural and multi-religious country. Therefore, since independence, intense domestic political contest, complex religious and caste conflicts have led to national economic or political crises. Since 1990s, India’s government has not been steady and changed quite often. In the last decade of the 20th century, there had been 8 governments in India and the shortest term of the government was only 13 days. However,within the parliamentary democracy neither radical upheaval nor destructive crisis has occurred in Indian society. The situation is basically steady. Every general election reflected public opinion fairly. The competition between parties and political leaders was peaceful and equal. As long as any party or party alliance achieved support of majority, it could organize government at central or local level. So, the Congress which has hundred years’history experienced ups and downs and the Indian Communist Party has been in power in West Bengal state to date. In the 21st century, the multi-party politics and the situation in the ruling coalition will last for a long time, but it will not shake the basis of the stable politics or affect the economic policies.

Otherwise, it should be taken into account that the parliamentary democracy weakens the authority of the central government. So far, it is very difficult to coordinate the central and local governments. In the parliamentary system, some major policy decisions related to national development and people’s living are frequently suspended in discussion without reaching any decision, which has wasted much time and missed many opportunities. The annoying religious, caste and ethnical issues,low work effeciency, traditional stereotypes will make India suffer from unimaginable difficulties and problems. Therefore, some economists predicted “the important driving force for economic growth in Asia is losing vitality obviously.”

However, on the whole, the Indian parliamentary democracy provides a long-term and relatively steady political situation for India, while the negative impact is not decisive. To overcome these drawbacks, it will take time to solve these problems and contradictions and it is necessary to bring into play Indian wisdom and take creative measures.

Third, India’s education and personnel training. India has made a significant success in university “elite education”, with immense number of talent and personnel playing remarkable roles for economic growth. At present, India’s universal education is not so excellent as its university education, even fails the demand of social development. However, the present Indian government has been aware of this point clearly. They are making efforts to improve the ability of the teachers and the hardware equipment.However, the developments are different and the potential and demand for economic growth are not identical in different regions,so many problems could not be solved in a better and quicker way in the democratic system. All of these will nevertheless limit the development of universal education. Furthermore, the Indian government has increased the expenditure for tertiary education significantly in the budget of 2009-2010, which amounted to $3.7 billion. The government also planned to set up new colleges for adapting to the situation of economic growth and technological development. “Elite education” in university is still the priority of educational task. Neglecting universal education is harmful for India’s long-term economic growth and social progress. However,India has a huge population, especially with a great proportion of young people, so India could provide enough talent and personnel to meet the demand of economic and social development in the long run. India would still be the country owning the largest first-class talent and personnel in the world.

India also has first-class financial system. Since independence,India’s financial system has been constantly reformed, adapted and improved. The market institutions of India’s financial system have a long history of experience and have kept close ties with western financial industry. So, the Indian financial industry has relatively distinctive features and advantages, i.e. it has its salient characteristics, a sound legal system and a more sophisticated microscopic basis than other developing countries. India’s banking system has a good reputation in the world as well as a greater advantage in quantity, structure, functional mechanism and credit business in the capital market. India also has a high degree of interest rate marketization, and a higher degree of financial liberalization, marketization, globalization and openness than other developing countries. So, the Indian financial industry has a strong international competitiveness. It is also appreciated for its capability on risk mitigation and reduction. In the face of present international crisis, the Indian financial system has performed calmly, quickly and securely. In addition, the Indian financial system has a perfect record on reducing bad debt rate, an experience worthy to be studied by other countries. Ultimately,the Indian financial system is managed and operated by the first-class talent and personnel, and that’s why it could minimize the unnecessary risks and losses. In a word, the Indian financial system will still be first-class in the world.

WU Yongnian is senior research fellow of Shanghai Institutes for International Studies.