I hope I am not cheating too much by disclosing an unusual element of the mid-year review of the Indian economy, which the economist Saumitra Chaudhuri will soon spell out at the India International Centre later.
Chaudhuri begins his review of the economy with an extensive discussion of not the Indian but the global economic situation: growth, inflation, productivity, oil, and so on.
The meaning is clear: what goes on in India is now influenced by global trends, and no review of the Indian economy can be done outside the framework of the world situation.
On the same day that Chaudhuri's review landed on my desk, came the printout of a set of Power-Point slides by Ruchir Sharma, a global fund manager with Morgan Stanley.
These argue a theme that Sharma has maintained for some time: whatever happens on the Indian stock market is fundamentally a reflection of what happens in other emerging markets.
In other words, our stock prices are really determined by global capital flows.
The figures and charts are striking, in terms of one-year price movements, five-year movements, correlation numbers and much else.
So, if the Indian stock markets are buoyant, is that related to what is happening in corporate India, or is the larger explanation the surge in global liquidity -- driven by the twin American deficits?
A moment's reflection should tell us that the Indian economy is, more than before, a part of the global system. If growth rates in India are up, so are they in the world as a whole and in other emerging markets.
If companies in the metal sectors (steel, aluminium, etc.) are doing well, the primary reason is the upsurge in global metal prices. If interest rates have started climbing, they mirror what is happening in the US and elsewhere.
If the rupee is gaining against the dollar, so are other currencies. If there is a threat to the Indian economy, it is the global price of oil. And if there is the fear of growth slowing, trace it to the US and Japan losing steam. In short, if you want to understand Indian trends, look at the world.
There are many reasons for this. Import controls have gone, and tariff levels have come down; so global trade swings are now reflected in India's numbers.
If our exports have been buoyant, the fact is that global trade has been booming. And trade affects GDP more than before, because the share of trade in India's GDP is twice what it was a decade ago.
International capital has been welcomed and global capital flows therefore affect our capital markets (more than $10 billion may come in this year, in various forms). People (and ideas) are moving in and out like never before. The old argument, both convenient and ego-salving, that India is sui generis (a category by itself), simply does not hold.
It is important to understand what this global integration means. Fundamentally, India is now in competition with every other country for markets and resources.
If the global textile trade is opening up, policy debates about handlooms and powerlooms and textile mills yield ground to the urgent question of whether we can compete with China and prevent the Chinese from taking control of every textile market in the world.
If the flows of foreign capital are so important, making yourself attractive to investors becomes more important than before.
(Note that companies that have good valuations today are uniformly those which have been favoured by foreign institutional investors, and these look among other things at the quality of corporate governance; so whether you can cultivate the UTI chairman becomes irrelevant.)
If the ability to compete has to become central to our concerns, the policy implication is that efficiency must gain precedence over other concerns (primarily, equity).
India could mess around with the "growth or equity" debate for decades, when it was a relatively closed system. Today, if you intend to be a winner, that luxury is no longer available. That is a politically incorrect statement to make just now, but it remains a fact.
The UPA government rightly wants to address equity issues, but if it does that at the cost of efficiency, India will be the loser.
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