Since the dawn of the 21st century very few nations have been recognized or emerged to have the largest economic stability in the world. Leading nations like the United States entered the 21st century with an economy that was bigger, and by all means more successful, than ever. Despite enduring two world wars and an everlasting depression in the first half of the 20th century, it faced challenges which ranged from a 40-year Cold War with the Soviet Union to the existence of sharp inflation, huge unemployment, and enormous government budget deficits in the second half of the century. Finally this great nation had the opportunity to relish a period of economic calm in the 1990s. Prices on goods were steady, unemployment dropped significantly, the government posted a budget surplus, and the stock market experienced an unprecedented boom.
The United States, however, has been undergoing philosophical economic change right at the start of the 21st century. They witnessed a wave of technological innovations in telecommunications, computing, and other biological sciences, which profoundly affected Americans work and play. At the same time, the growing economic strength of Western Europe and the emergence of powerful economies in Asia and the increased global integration of business and finance posed new opportunities as well as risks. All of these rapid changes resulted or lead to the Americans in re-examining everything from how they manage their workplaces to the role of government. Perhaps this is the reason why many workers, while contented with their current status, looked to the future with uncertainty.
Moving to the third world, according to economics experts and various studies as conducted across the globe envision, India and China should rule the world in the 21st century. It been over a century since the United States has been the largest economy in the world but major developments have taken place in the world economy since then, leading to the shift of focus from the US and the rich countries of Europe to the two Asian giants India and China.
With the arrival of the 21st century, there has been a dramatic shift in India’s approach to external sector management in accordance to the changing situations. With the materialization of marginal current account surplus, the sustainability of India’s current account deficit may not be a problem though the deficit on her trade account persists and has been increasing. The main providers to the positive outcome in India’s current account are workers’ remittances and export of software, both being a result of the process of global integration. The exchange rate system, as well as external debt management, has served India well. The new policy regime assisted India to withstand several global crises while maintaining a respectable growth. It has become obvious that the management of the external sector is closely linked to the domestic sector and the major thrust of Indian public policy is now on managing the integration.
Further, the simultaneous emergence of China and India with significant competitive strengths in trade in goods as well as services will have to be accommodated by the global economy. Thus, the future for both these nations seems to be bright as they struggle to correct current global imbalances. In brief, India has moved from managing external sector to implementing an optimal integration of domestic and external sectors, thus providing itself a better position when it comes to the global economy.