He appreciates the economic policies of the Narendra Modi government which he feels are conducive to supporting sustained growth over the next few decades.
Q: You have argued in the book that the long-term future of the emerging & developing economies is and will be in the hands of their vigilant
political leaders. What confidence does India’s present political leadership inspire about its ability to steer the country forward?
A: This is a big issue and the biggest challenge to India’s growth story. I am encouraged by the fact that finally some of the elections in India are beginning to be fought on the basis of economic development. In many ways, the record of the present government in India is a big test.
PM Narendra Modi won a landslide victory by promising to focus on economic development and making the government work. If his government is able to deliver on this promise, it may be the harbinger of a new political era in the country in which India’s political leaders—at all three levels of our federal system—will steer the country forward to its destiny that Pandit Nehru dreamed of at time of Independence.
Q: The book talks about a number of favourable factors that would drive the growth prospects of emerging and developing economies provided these continue to follow the economic policies that will help them avoid the middle-income trap. India is a lower middle-income country. Do you feel that India’s current economic policies are well designed to achieve that purpose?
A: I think, overall, India’s policy framework is quite good. It is conducive to supporting sustained growth over the next few decades. We do need a few urgent reforms that both the last and the current government have advocated but have not been able to legislate so far: the GST; labor markets reform; further reforms of the banking sector and so on.
The biggest constraint in the economy still is infrastructure and that must be tackled with even greater urgency and on a sustained basis. There is also the need to focus much more on cleaning up the air people breathe, the water they drink, public sanitation and so on.
Until India is able to effectively implement its well-meaning policies, it will never realise its economic promise. So the mantra must be: implement, implement, implement.
Q: The book The World in 2050 says that China, India and United States (in that order) would be the three largest economies of the world by 2050, accounting between them half of the total world GDP ($338 trillion). How far would the common man, especially in India and China, benefit from such economic growth?
A: On the whole, an average Chinese and an average Indian will benefit from such an anticipated growth in their countries’ economies, just the way an average American would be expected to. Indeed, of the three countries, the rise in the per capita income will be the fastest in India, the next highest in China and the slowest in the US.
This is simply because as the countries become richer—by catching up with the global productivity frontier—the speed of convergence and therefore, growth rate slows down. But talking about average per capita incomes is not enough. What China and India must strive for is inclusive growth and not just growth alone.
Q: The book espouses that “the next round of world trade negotiations will focus much more on the protection of domestic consumers rather than domestic producer and that they encourage global production network (supply chains) rather than national production as in old trade regimes.” Does that mean that countries should be happy in being a (mere but essential) cog in global supply chain? And does Prime Minister Modi’s call to global manufacturers to come and “Make in India” fit into the new order that your book foresees?
A: Prime Minister Modi’s call for “Make in India” is consistent with the idea of global value chains.
Indeed, if India aspires to be a major manufacturing power in the world, more and more Indian companies must actively build and participate in the global supply chain as some major globally known Indian Brands like Tata and Mahindra are already doing.
Protection of the health and the well being of domestic consumers is actually a good cause. In theory, as the home of 1.25 billion people or almost one sixth of humanity, India should be strongly in favour of this objective.
Q: Does the conclusion that China, India and the United States would be the three largest economies by 2050, in some way reinforce the narrative that democracies tend to be slow achievers of economic growth?
A: I see a different narrative in this story. Both, the US and India, are vibrant democracies and we anticipate both countries to stay that way. The next two largest global economies are likely to be Japan and Germany. They too are long standing democracies.
Implicit in our scenario is the assumption that well before 2050 China too, will make a major political transition. As regards democracies, we do not see a democratic governance system as a hindrance to economic growth. Instead, it is a great strength for the longer term political and social stability and cohesion. Having said that, sustained economic growth must also have well functioning, effective, clean governments and public institutions at all levels. This is where India has much work to do if aspires to become one of the three largest economies in the world by 2050.