Summers bullish on India

MUMBAI, JANUARY 17: The stock markets are not the only ones who are bullish on India. US Secretary of Treasury Lawrence H Summers, who is ...

MUMBAI, JANUARY 17: The stock markets are not the only ones who are bullish on India. US Secretary of Treasury Lawrence H Summers, who is on a visit to India, has predicted a 10 per cent economic growth, provided the Indian government policies are conducive enough to ignite the explosive economic growth by creating world-class infrastructure and plugging subsidy loopholes.

Addressing a Confederation of Indian Industry CII meeting here today, Summers said the economic developments in India have the potential to transform in two decades not only India, but the world economy and the US has great stake in what happens here. 8220;The 6.5 per cent growth rate that India has achieved in recent years is impressive. But 10 per cent growth is well within India8217;s grasp. At that pace, Indian standards of living would be five times higher in 2020 than they are today,8221; he said.

Besides, 14 per cent of GDP that might have been flowing into India8217;s growth industries was instead spent on ill-targeted public subsidies. On reasons why India saves itself from East Asian melt down, Summers said it reflects India8217;s policy of very limited international financial engagement. 8220;It seems to me that India8217;s lack of reliance on short term capital flows, low level of external debt and small share of trade in economy have played a role. But over a time, when one need to to the economic opportunities available in India, greater involvement in the global capital market will need to play a role,8221; he emphasised.

8220;With a strong commitment to openness, to a more efficient and competitive financial system and a new role for the state that works more to complement market than exclude them, I would expect India to be one of the largest economies in the world in less than a generation,8221; he said.

The challenge, he said, is to reconcile three widely shared objectives 8212; realising the benefits of trade and integration; support of public purpose in areas such as promoting the environment, regulating financial risk and assuring worker and product safety and allowing sovereign governments to make their own choices and public policies in place that will work for them. Summers said at the global level 8220;the US8217; agenda is to promote free trade, sovereignty and serious issues with respect to common problems.8221; The challenge with respect to trade, environment and many other issues will be striking the right balance between all the three objectives, he said. 8220;The difficulties of doing this were pointed up in the recent WTO meetings in Seattle,8221; he said.

Summers added that discussions of international integration used to be the preserve of the industrial countries, but with the balance of power now shifting and nearly all of the growth in the world8217;s labour force taking place in developing countries, it will be especially important to make these nations a larger part of the discussion. This has been reflected in the financial sphere with the creation of the G-20, in which India has an important role.

Summers said the best way to address the issues of labour and environment would be to open dialogue between various countries as the world charts course for further the World Trade Organisation WTO. Labour exploitation and environment are questions that must be up for discussions. 8220;The labour standards in one country could be detrimental to the interests of workers in other countries,8221; he said.