The Indian economy has been slowing, now at 5-6 percent range, and will need quite a bit of policy-change reforms, in a difficult world environment, to be successful in the decade ahead,” said Martin Wolf, Chief Economics Commentator, Financial Times. He was in conversation with The Indian Express.
Observing the country since his early days as a World Bank economist in the ’70s, he called India’s economic reform policy “inconsistent, not sufficiently positive”, and its three engines — trade, credit and government-spending — “pretty weak”. He said, “We’re going back to what my friend (economist) Raj Krishna called the Hindu rate of growth, which is 3-4 per cent. That will be a catastrophe because that’s a per-capita growth of 2 per cent and then India’s catch-up story would end.”
He cautioned, “India is de-globalising, not back to what it was before but more than the world is; owing to policy choices: increased protection and decreased attention to export competitiveness.”
Calling attention to three indicators for future planning: “Long-term performance, the Covid-19 impact, and the challenges ahead”, he said, in the long run “credit, trade, fiscal policy, will all be constrained”. Credit-to-GDP ratio has been slowing (after 2010) despite no financial crisis, there are “bad loans” in the banking sector, demonetisation (in 2016) was a “crazy” step instead of “radical financial restructuring”, trade ratios have been “falling rapidly” since 2013-14.
Wolf added that India’s GDP growth at purchasing power parity from 5 per cent (in 1990) to about 15 per cent (by 2025, IMF forecast) has been “pretty well” but incomparable to “China’s spectacular 5 per cent (1990) to 35 per cent (2025) growth story”. India’s “steady growth” (6 per cent a year) peaked at “close to 9 per cent in the early 2000s” but saw “a real collapse” last year. “Among the developing countries, India had a really, really bad negative hit (Bangladesh did astonishingly well),” he stated.
With the US-China relationship deteriorating, India should “seize opportunity” and “reopen the economy”, become a trade-growth hub, raise international competitiveness, start green revolution, reform education, labour markets and financial sector to be the “fastest-growing economy, at 8-plus per cent, in 20 years”.
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