Indian economy cannot grow at medium term rate of 8-10 per cent without growing its exports rapidly, Arvind Subramanian, Chief Economic Adviser to the finance ministry said on Saturday. He said India needs to use a combination of manufacturing and services exports to achieve higher Gross Domestic Product growth.
“I think India cannot deviate from the historical experience that in order to grow at 8-10 per cent you have to export rapidly. I think the notion that we can use our domestic market to grow at 8-10 per cent medium term sustainably, history is against that model,” Subramanian said at a panel discussion at Advancing Asia Conference organised by the International Monetary Fund and the finance ministry.
“Where I think India can be unique is instead of growth being led by low skill manufacturing. I think it is going to come about with a combination of manufacturing and services. .. Manufacturing alone is going to be little bit difficult because of what is happening in technology and so on, but I think we could have a uniquely Indian model which is export-led but not necessarily exclusively manufacturing focussed,” he said.
Indian economy is expected to grow at 7.6 per cent in the current financial year and the government has projected growth of 7-7.75 per cent in 2016-17. Subramanian said concerns such as the US thinking of scrapping H1B visas used for high skilled employees could come in the way of services-led export growth for India.
“If you have more services led growth, the politics of that will be very different. My concern is that Donald Trump, in last debate, he said H1B whatever it is, I use it but I don’t like it. I want to scrap all H1B. That’s very worrying for export led growth going forward. Going forward will the politics of say middle or high scale intensive products be very different or how it is going to concern us,” Subramanian said. Trump is candidate for the Republican nomination for US President election in 2016.
While Subramanian suggested a mix of manufacturing and services exports to improve India’s growth, the government’s Make in India initiative mainly emphasises on the need of boosting manufacturing-led exports growth.