For its economy, India must get closer to the world

There is a general sense that India is an inward-looking economy. After all, agriculture makes up a fifth of the economy, and India is more domestic demand-driven than some export-led Asian neighbours. Having said that, we find that India has grown at its fastest pace in periods of rising integration with the world. We use the rolling correlation between India and world growth as a measure of global integration and find that 2000-2010 stands out as a period of rising global integration. Back then, India was slashing import tariffs and integrating further into global trade networks, resulting in a higher…