The flow of money: crucial to globalization
Friday, June 5, 2009 at 2:45AM BUSINESS DAY: "A Subcontinent Stalled: India's Economy Is Suddenly Starved For Investment," by Vikas Bajaj and Somini Sengupta, New York Times, 5 May 2009.
The key thing that drives globalization's expansion has always been money that will cross borders.
The bad news is that Western money is staying home right now, so the main players are rich Arab oil states and China, both of which are keeping up their investment flows in places like Africa despite the downturn.
India has relied heavily on foreign investment flows, much of which comes from ex-pats. In 2005 such investments amounted to 25% of the national GDP. In 2008 it was up at 39%.
Naturally, a big drop so far this year. Last year saw about $14B in FDI and this year looks to be well under $10B. So Indian companies are increasingly forced to rely on Indian banks, who are notoriously stingy.
The old bit holds: nobody develops their economy without solid access to foreign money.
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