The Inter-American Development Bank (IDB) unveiled today a new study calling for India and Latin America to foster closer economic ties in order to tap into “massive” trade and investment opportunities between these two distant partners.
The IDB launched today the book “India: Latin America’s Next Big Thing?,” during a seminar in Washington D.C. co-organized by the IDB, the Woodrow Wilson Center and the Asian Society. The study looks into recent development and economic trends in India and their possible impact for Latin America and the Caribbean. The study argues that India has the potential to mirror the recent economic performance of China, which has become a major market for Latin American and Caribbean exports but also poses a challenge for the region’s manufacturing sector.
“Potential exchange of goods and services between Latin America is nothing short of extraordinary,’’ said IDB President Luis Alberto Moreno during the opening of the event. “Both have made extraordinary progress in finding their way back to the world economy. And the results are for everybody to see: posting high rates of growth even during the deep financial crisis. They have left behind years of relative stagnation.”
With 1.1 billion people and a scarcity of natural resources, relative to other continent-size nations, India has the potential to be a large buyer of agricultural and mineral goods, Latin America’s main exports, according to the study. Currently, India represents just 0.8 percent of this region’s overall trade, compared with China’s 7.7 percent share.
“We have a lot to gain not only by cutting tariffs but by also reducing transport costs,” said IDB economist Mauricio Moreira Mesquita, summarizing one of the main conclusions of the study.
Recent economic and political changes in both India and Latin America are creating greater opportunities for more integration, according to Indian Ambassador to the United States Meera Shankar. In the case of India, the country’s growing liberalization and strong domestic demand has helped fuel economic growth in recent years and she expects that tariffs and other trade barriers, particularly in the agricultural sector, could gradually be reduced.
“India’s trade profile is going to change and that will provide great trade opportunities for Latin America,’’ she said during the seminar. India’s gross domestic product is expected to grow 8.5 percent this year, up from 6.9 percent during the global financial crisis, she added.
For Arvind Panagarya, professor of economics at Columbia University and one of the panelists of the seminar, India’s trade potential with Latin America depends on how fast it will grow in coming years. The country, which is now the world’s 11th biggest economy, could become the world’s third or fourth largest if its GDP grows 10 percent annually in real dollar terms over the next 15 years.
During the seminar, participants also called for the two regions, which have signed numerous cooperation agreements covering 21 economic sectors in the past decade, to increase opportunities to exchange valuable development and economic lessons.
According to the study, India can provide important lessons based on its success in creating dynamic information technology services, burgeoning aerospace microfinance and pharmaceutical industries and top-notch universities to train its leaders, just to name a few areas. Latin America, on the other hand, can provide success stories in agriculture, mining, aeronautics, biofuels, private pension schemes and poverty alleviation programs, all of which could help India address some of its economic growth constraints.
- Romina Tan Nicaretta