Introduction and Summary

India and the People's Republic of China (PRC) were by far the richest countries in the world 2,000 years ago. Even in the early 19th century their share of global gross domestic product (GDP) was nearly 50%. However, by 1950 this share had fallen to a mere 8% as the industrialized countries in Europe, North America, and Australasia developed further. This balance persisted until the 1970s (Maddison, 2001). As India, after the mid-1980s and early 1990s, and the PRC, after 1978, began to open up and liberalize, their share of world income began to rise again. By 1998 it had risen to 16% and by 2005 to 21%. As the PRC and India continue to grow and integrate further into the global economy, their economic prospects will depend more and more on how they manage globalization. The muchquoted 2003 Goldman Sachs study (Wilson and Purushothaman, 2003) forecasts that by 2050 three of the four largest economies in the world will be in Asia and in this order: the PRC, the United States, India, and Japan. The 2007 Goldman Sachs report (Poddar and Yi, 2007) forecasts that India will overtake the United States faster than expected and be the second largest economy in the world by 2050 after the PRC. During the 1980s and 1990s, other South Asian countries also started to opt for greater openness and began the long process of realigning their economies with those of the rest of the world…