One clear reason for quiet optimism has been India’s sudden elevation to the international high table. Both intangibly, in terms of what appears to have been the respectful attention paid to India’s particularly well-prepared views at the recently concluded G-20 summit in Washington, and tangibly, such as in the invitation to join a souped-up Financial Stability Forum. To an establishment accustomed to dozing in the back rows of the General Assembly, even the first glimmerings of a world in which international conditions might be something India helps set rather than has to accept with ill-grace are welcome. Still, questions are already being asked: if we increase our representation at the IMF, or are expected to take on a role at the FSF, where’s the trained manpower coming from?

There’s also trade. The memory of the Depression’s tit-for-tat trade wars means that everyone — even the generally obstructionist French — has committed to pushing the Doha round of trade talks forward, which were considered effectively dead before the meltdown. India has nothing to be ashamed about in its performance in the round so far; but the hardest part of hammering out a deal, the US’s cotton subsidies and Indian and Chinese industrial and emergency agrarian protections, are still to be negotiated. The payoffs will be big: but such talks always need careful thinking, planning, and preparation. Will there be enough time, and enough capacity?

Here’s another source of optimism, evident at, for example, the World Economic Forum’s India meeting this week: India expects to be a lot more stable than other countries. Relatively stable not only in its macroeconomic indicators — which, given the real size of the fiscal deficit, nobody should really be sure about — but also relatively stable in terms of government reaction, of savings and investment, and even, perhaps, employment. The last is particularly interesting: India is well-placed to adapt quickly, given that its labour markets are flexible; and a younger workforce means that retraining is quicker, and less painful socially. The private sector is rushing to reassure the country that massive retrenchments aren’t planned: but, even if some current jobs are lost, the internal cost structure faced by trans-national companies should cause them to want to move additional jobs here. This won’t be back-office work. We’ve already seen some of that happening: the 80 American companies that spend the most on research and development send over half that money overseas. Another aspect of US’s labour flexibility: a lot of the brightest people that we’ve grown up with in India but haven’t seen around for a bit will suddenly start thinking that now would be a good time to return here for a few years.

... contd.