Asian Development Bank (ADB) chief economist Albert Park was in the Capital for the Kautilya Economic Conclave. In an interview, he told TOI that the agency is keeping close tabs on global crude prices to assess the impact of the escalating conflict in West Asia on the region and advocated that trade and investment channels should be kept open. Excerpts:
How do you see the developments in India over the last three-four years? Is there a sense of complacency on the economy?
Govt is very focused on development and growth and they are trying to understand the costs and benefits of various economic policies in a pragmatic way.The pragmatism is leading to good outcomes as we see significant govt investment in infrastructure, efforts to reduce regulatory burden on firms and improved ease of doing business. The goal is to promote economic activity, raise productivity, promote more investments, and create more jobs.
Is there a need to work on stepping up the growth rate and what needs to be done given that jobs are a major concern?
Our projection is of India growing at 7% this year and 7.2% next year. It is the highest growth for any economy in Asia. It may be possible to grow faster but the main thing is not to focus on any number, just continue to think about how the basic environment for business can improve. All the fundamentals are good, India is enjoying demographic dividend and there is a lot of positive sentiment among consumers and investors.
Employment is an important issue. The good thing is poverty and inequality have reduced. If you try to create more jobs for less skilled sectors, then you will need to support more labour-intensive manufacturing and sectors where you have comparative advantage. The success of Tamil Nadu and Gujarat is the right way, and we should think how more states can do it.
Is it possible to create the same number of jobs like earlier, given higher mechanisation and digitisation?
There may be some truth to that, but I am not sure if it affects our strategy, labour-intensive sectors still create a lot of jobs. Even as employment opportunities in manufacturing have a lower ceiling than in the past, opportunities in the services sector have increased because digitization is making services trade much more feasible. India has benefited from that… the only concern is that they tend to be more skill intensive. India should be pushing on all fronts. There are a lot of synergies between manufacturing and services.
There are fears that the excess capacity may find its way into the rest of the world, given that there are fears of subsidies being given?
There is no rule about how much you should be producing in a global economy. If you think it reflects unfair trade practices, we have the WTO principles to guide us on what justifies countervailing or anti-dumping duty. Countries, rather than politicise trade, should stick to these principles and do their due diligence and impose what is appropriate.
Do you see a shift due to the China Plus One strategy, including to India?
We have seen shifts in FDI and trade flows. Countries that benefit the most are also the ones that are very competitive producers. Countries with a good investment environment have benefited, Vietnam, India, to some extent, Mexico due to proximity to the US. India and Indonesia also benefit from being big markets. It’s an opportunity, especially, if it gives a foothold into new sectors, semiconductor chains, anything related to green transition. For India to maximise the gains, it needs to provide a very attractive investment environment, which can be improved over time. Just giving subsidies is not going to be sustainable.
India has put checks on investment from countries with which it shares land borders, a move aimed at China, citing security reasons. There have been suggestions that easing investments can help reduce the trade deficit. How do you see it?
Security is a non-economic factor and govts must decide their priorities. From an economic standpoint, you should minimise restrictions. I wish the US and EU also took the view that if the trade balance is not good, allow Chinese firms to invest and produce. It creates more local employment and technology transfer.