"The growth per capita of India is only one quarter of that of China. With the right policy, growth can be potentially above 7% and that is going to lead India to become a very strong economic power. Also, the country is also going to become a major geopolitical power, both in Asia and globally, given the size, its role, and the fact that you need a strong power to manage the relation also with a rising China," says Nouriel Roubini, Professor of Economics and International Business at New York University Stern School of Business.
Roubini said: "In the tech sector there is a level playing held; any hrm can enter the tech stack, it allows new entrants to provide hnancial and other services. It is very dynamic. It is very competitive. It is very productive."
How do you look at India?
I am quite positive about India. I think there is a good chance that India is going to be the most important country in the world over the medium-long term. You have a population the largest in the world, young and growing -1.4 billion people - which can, with good education and skills, lead to strong economic growth.
Secondly, there is going to be a catch up of growth. The growth per capita of India is only one quarter of that of China. With the right policy, growth can be potentially above 7% and that is going to lead India to become a very strong economic power.
Finally, the country is also going to become a major geopolitical power, both in Asia and globally, given the size, its role, and the fact that you need a strong power to manage the relation also with a rising China.
You have analysed economic growth models of so many countries over decades. How are you analysing the economic development model which India is practicing over the last couple of years?
In some dimensions, the economic model of India is similar to the other growth success stories. For example, the East Asian growth model was based on exports as a leading source of economic growth. In the case of East Asia, it was traditional manufacturing; in the case of India, until recently, it was more exports of services - IT, tech, and other services but export-led growth is actually one of the ways in which a country can become more dynamic and competitive.
There are other ways in which the lessons of Asia also can be learned because in parts of Asia, the economic model can be one of using national champions -the Xi Jinping model in China; the keiretsu model of Japan or the chaebol model of Korea. For a while, those national champions were a source of economic dynamism, but the reality is over the medium term when there is too much concentration of economic power among a small group of conglomerates.
You are reducing potential growth because you are hampering innovation and restricting new entrants, there is not as much competition and total factor productivity growth depends on having a very competitive sector. What is happening in India? In the tech sector for example, there is a level playing field; any firm can enter the tech stack, it allows new entrants to provide financial and other services. It is very dynamic. It is very competitive. It is very productive.
I feel that in some parts of the old economy, the existence of very powerful conglomerates that represent forms of crony capitalism is going to hamper economic growth and that is why the potential growth of India is stuck around 6%. It is not going higher in spite of the policy reforms. It is chronic capitalism that keeps you behind.
India is trying to do a lot in a very small span of time and challenges are very big. Our policymakers, our regulators, are all working together to ensure that there is manufacturing-led growth. Our financial markets are very efficient. The Reserve Bank of India managed the Covid crisis, without throwing away money or handing over money in people s hands. How do you see all stakeholders coming together to achieve the larger objective of structural economic growth?
Well, so far, I would say India has done quite well. Of course, in India, you have to have the coordination of a variety of policymakers and also regulators, not only at the union level, but also at the state level. The fact that there has been now, in the last decade, a creation of a fully integrated internal market that used to be divided, the demonetisation, the introduction of the GST has helped that and reduced other types of friction.
Building an infrastructure that is union-wide, that reduces the logistics and the cost of transportation is also very important. Those policy choices, of course, are more challenging in a democracy than they are in autocracy, but as we know autocracies make mistakes. In China, Xi Jinping is not just the president, he is like an emperor and last year he made massive mistakes in the management of Covid, bashing their private sector, not dealing with financial imbalances and so on.
While democracy is more messy, you get much more consensus for your policy choices if it is through a political process where you can convince people of the right reforms, because reforms may take longer and occur more slowly but they become more sustainable and more resilient over time and that is why a strong, vibrant democracy with a market system and the provision of public services or variety of things to the middle class and the poor is the right economic approach and that is the one that has been taken by India successfully.
Read More at https://economictimes.indiatimes.com/markets/expert-view/chronic-capitalism-keeping-india-behind-restricting-growth-to-6-nouriel-roubini/articleshow/98083045.cms
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