Ajay Banga, president of the World Bank, stated that India has three to five years to capitalise on the China+1 opportunity as businesses seek alternative manufacturing sites to diversify their supply chains.
India has demonstrated greater resilience and emerged from the pandemic relatively stronger than other nations, according to Banga, who added that he is more optimistic than before because the nation is concentrating on economic growth and employment, the two most important factors in reducing poverty.
Former Mastercard CEO Banga, 63, was appointed World Bank president last month.
"India's current opportunity is to capitalise on the China+1 opportunity," said Banga. "This opportunity will expire in ten years. This is a three-to-five-year opportunity when supply chains begin relocating or... let's say, not relocating, but expanding in another location."
This was one of the topics discussed with the Indian government, according to Banga.
China+1, a post-Covid phenomenon, refers to the establishment of manufacturing outside of China to mitigate supply chain disruption risks resulting from one-country concentration.
Banga stated that India's only advantage is the "extremely high" proportion of its gross domestic product (GDP) derived from domestic production.
"Your exposure to the typical effects of global slowdowns, caused by a trade slowdown,... is cushioned by the relatively high proportion of the economy that comes from domestic consumption, which is very helpful at this time," he said.
The Indian economy expanded by 7.2% in FY23, and the World Bank anticipates 6.3% expansion in FY24.
Banga emphasised that India is able to maintain this momentum and that growth and employment are the most effective means of combating poverty.
Regarding the demographic dividend, he stated that 15-20 million employment must be created, some of which will come from manufacturing and technology while the majority will be in the service sector.
As a result of the Covid pandemic, climate change, fragility, wars, and excessive debt, the global progress made to reduce poverty over the past three or four decades has been reversed, he stated.
He stated, "Growth and employment are the most effective means of eliminating poverty." With all the ongoing infrastructure development and investment — digital and physical, skilling infrastructure — I am currently more optimistic.
Regarding the global economic outlook, he stated that there is a greater danger of a slowdown at the beginning of next year.
"Predictions are not fate, so you shouldn't assume that the forecast is accurate," he said.
Additionally, the head of the World Bank called for private capital investments to support global renewable energy funding efforts. The lender estimates that developing nations will require $1 trillion for the renewable energy transition in order to reach their net-zero goals.
"We will still require various forms of concessional capital," Banga stated. "We will also require various forms of multilateral bank capital, government capital, and philanthropic capital in order to take first-risk positions or enable blended financing to proceed."
Regarding hybrid capital, he stated that the evolution roadmap has been shared with all nations and philanthropies. In October, the World Bank and International Monetary Fund will hold their annual meetings.
"The United States has already signalled their intent to commit to...The first is to reduce our loan-to-equity ratio from 20 to 19, which does not require additional funding because it is within our control," Banga explained.
According to the head of the World Bank, the capacity to lend over a decade increases by $5 billion to $7 billion for every $1 billion that is contributed, depending on repayment patterns.
"We will need a pool of ready, bankable projects," he said.
The World Bank has established a private sector investment lab, led by the former governor of the Bank of England, Mark Carney, and consisting of 15 CEOs, to identify the obstacles to the expansion of private sector investments. Banga stated that the first lab meeting will occur shortly.
"There are a few things we can do to mitigate some of the hazards that the private sector does not comprehend in emerging markets. It could be foreign exchange, regulatory policy, or insurance against political risk," he explained.
Banga also conferred with finance minister Nirmala Sitharaman, with whom he discussed India's current G20 presidency. He also discussed the World Bank's relationship with India.
"We talked about everything we did at the G20 and how the meeting went," he said. "We discussed what the World Bank and India can do in addition to the G20's role. India is the greatest market for the World Bank's portfolio in this region. There is considerable interest here."